For Gates, It's Entertainment

Few gasps were heard as Microsoft's chairman unveiled a media-focused lineup in Las Vegas, but he's convinced consumers will bite

Microsoft (MSFT) Chairman William H. Gates III kicked off the annual Consumer Electronics Show in Las Vegas by insisting that software -- particularly Microsoft's -- will drive adoption of the latest breed of consumer gadgets. The speech, Gates's annual attempt at crystal-ball gazing for consumer technology, touched on several soon-to-launch Microsoft products. More than ever, Gates says, consumers want to customize their entertainment experience.

Gates hopes the core of that experience will be Windows Vista, the next version of Microsoft's ubiquitous operating system due out by yearend (see BW Online, 11/18/05, "Microsoft's New Word: Accountability").


  Gates showed off the operating system's powerful graphics capabilities that create facile ways to move from one application to the next. Vista will also include simple photo-editing capabilities that should make it a snap to crop pictures and eliminate red-eye. And it will give parents tools to restrict their children's game play to age-appropriate titles, as well as set time limits for computer use.

Gates believes consumers will increasingly buy new goods and services as software makes them more compelling. "It's not just software for the PC or software for the phone or software for the video game," Gates said. "It's software for the user." It's already becoming easy to find the music that suits your taste as well as create digital slide shows. The next leap: making it a snap to shoot movies and TV shows around the house.

To that end, Gates gave a preview of the next version of Microsoft's Windows Media Center software. PCs that run this operating system connect to a cable jack and can store video as well as send it off to TVs throughout the house. Last year, Microsoft's partners sold 5.5 million Media Center PCs. Gates showed off a new device, a hardcover-book-size version from Averatec that will cost under $1,000 and come with a TV tuner when it debuts this spring.


  Microsoft is among a slew of tech titans -- from Intel (INTC) to Hewlett-Packard (HPQ) -- jazzing up products with the aim of transforming computers into a hub of home entertainment. Many are touting their wares at this year's CES. Not to be outdone, consumer-electronics stalwarts such as Samsung and Toshiba (TOSBF), are showcasing their latest and greatest gadgets, too (see BW Online, 1/3/6, "TV Madness at CES").

The sexiness in Gates's presentation came when he and MTV Networks (VIA) President Van Toffler unveiled Urge, an online music service. It will enable music fans to download or subscribe to more than 2 million songs. To help promote the service, pop star Justin Timberlake joined Gates and Toffler on stage. Timberlake said he plans to work with Urge when he releases his next CD later this year.

Verizon Wireless also used Vegas as the backdrop for the launch of its own music download service, V Cast Music (see BW Online, 1/5/06, "What's That Ringing in iPod's Ears?").


  For technical wow, Gates touted new high-definition capabilities in Microsoft products. Later this year, the company will launch a new drive for its Xbox 360 game console that will allow users to play high-definition videos in the HD DVD format.

While a competing format, Blu-ray, has plenty of momentum, Gates believes the feature that lets users download a copy-protected version of a movie to their PC hard drive for viewing whenever they want -- something Blu-ray can't do -- will give the HD DVD technology an advantage (see BW Online, 10/20/05, "DVD Wars: Last Hope for Peace?").

The speech lacked some of the punch of previous Gates CES presentations. It featured no demos that elicited gasps, such as last year's preview of TV-programming delivery using Internet technology. But for Gates, the spark lies in using software to make consumer gizmos ever more appealing.

"Even though this year is going to be amazing, you'll see acceleration in the future as the power of these systems, the natural ease of use, gets better and better with that software centricity," Gates said. For the world's biggest software maker, that would provide plenty of spark indeed.

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