Bill Gates, Robbie Bach: 2007 International Consumer Electronics Show (CES)
Jan. 07, 2007
Transcript of keynote remarks by Microsoft Chairman Bill Gates and Robbie Bach, president of Microsoft Entertainment & Devices Division, at 2007 International Consumer Electronics Show, Las Vegas, Jan. 7, 2007.

Transcript of keynote remarks by Bill Gates, chairman, and Robbie Bach, president, Entertainment & Devices Division,
Microsoft Corporation
2007 International Consumer Electronics Show (CES)
Las Vegas, Nevada
January 7, 2007

BILL GATES: Well, good evening. I've always loved coming back from Christmas vacation, you're nice and relaxed, and you come right into the most managed environment ever, seeing all these thousands of companies delivering on the promise of the Digital Decade. It's always been fun to come here. I love giving the keynote. In fact, people ask me, are you going to keep doing it, what's the plan there? And the answer is, yes, next year I'll give the  be involved in the keynote like I always have been. After that, I'm not sure they'll want to invite me, because I might talk a lot more about infectious diseases than great software. So if they want me, fine, but they've been warned what they would hear about.

It's amazing to see the progress over the course of the year, and truly the Digital Decade is happening. We see it everywhere we look. We see it in photography over 2 billion digital photos were taken this last year; 65 percent of homes are using digital cameras. We see it in the Internet adoption, higher and higher penetration on a worldwide basis, and more and more activity there, whether it's buying and selling, or whether it's planning, or being creative, the Internet connected up to the Windows PC and other devices is taking over things that would have been done without it before. Over 40 percent of U.S. homes now have multiple personal computers. And if you look at young people, the new generation, they actually spend more time on their Windows PC than they spend watching TV. Now that's a pretty dramatic change.

We see portable devices proliferating, a higher and higher part of the growing PC market. We see the connections, both through Wi-Fi and 3G getting to the point where you can get information wherever you want to go. And we're just scratching the surface. More and more can be done because as this marketplace is extended, the number of startups, the R&D budgets of the established companies, all are investing in this global market to do better and better work.

How do we look at that, what are some of the metrics that we have here? Well, we have incredible devices with very high fidelity. Think about cameras, six megapixels and up. Think about these high definition screens that when you buy it you just drool looking at that picture, it's such an improvement over the classic TV screen that you used to have, and now it connects up to your high definition cable, to your PC, to your games, all those experiences taking advantage of that incredible visual capability. Network bandwidth has gone up very dramatically, we're avoiding that being a bottleneck, even as we're sending high definition signals around. The processors are now opening the memory capability up to 64-bit, and that's a transition we're making without a lot of incompatibility, without paying a lot of extra money. Software, the old 32-bit software can run, but if you need to get more space, it's just there.

The graphics resolution is letting us think about representing reality on the screen. So when you shop, you won't just see a list of things, it will be that environment, either the stores that really exist, or the stores that would exist if it was designed for you personally. So we're seeing that in games, we're seeing that in virtual reality, that this presentation richness that all these great devices deliver, because of the graphics chips and the screens, and the development tools, is really quite phenomenal.

Storage space, people aren't talking gigabytes anymore, they're talking terabytes of storage, or petabytes of storage, where really that doesn't hold us back at all, even with the largest databases. So we have amazing hardware. I love walking around the CES floor seeing, okay, who's got the biggest LCD this year, who's got the biggest plasma, who's got the biggest hard disk. So those are an element of the equation of what we need to deliver on the promise of digital decade.

That alone is not enough. There are some key things missing, and in particular the key thing missing is the connection. Delivering on connected experiences requires more than just great hardware. So consumer electronics has been defined to be a much broader industry. As Jerry alluded to, the content people now need to think about how they create around this environment, how they connect into it. It's an environment where people want to do things across multiple devices, working with many other people.

I want my music when I'm in the car, when I'm at home, when I'm in the living room. I want that to be simple. I want my family's schedule, and the ease of updating it, from the phone, the PC, just touching something on the refrigerator. I want to collaborate with people. I want to have the experience connect up to people at work, as well as at home. So we can't just say consumer, because the experiences span into that business environment.

So delivering on connected experiences, where people are being productive, doing new creative things, where they're sharing with each other, where they're mobile, where they're just playing games, that is the key element that's missing, and something that we've all got to deliver on to take full advantage of that hardware, and deliver on the promise.

Now, for Microsoft this year it's a big, big milestone, because the products we've been working on for many years that are foundational products are now moving into the marketplace. First, of course, that's Windows Vista. It's been many years of hard work with millions of people giving us great feedback on that. This is by far the most important release of Windows ever. It's also the highest quality release that we've ever done, whether it's security, or testing, or usability, all of these things we have learned a lot, driven by the feedback that those hundreds of millions of users are able to provide to us.

Vista and the PC continue to have a central role. All these other devices are very, very important, but they've got to work together. As we look at the rise of user generated content and tools of creativity, that is happening on the PC, and yet those have to be available and acceptable on all the different devices. Vista is a big project, and rather than talk about the features I just want to talk about what we've been through to pull this all together. You'll be discovering features as you go forward, because of the depth that's there. A good example of that is I had a friend come up and say, hey, I didn't realize parental controls were built in. I just have to think about buying software, paying for that, I'm not sure I can configure it the right way. It's a lot more immune from tampering, a lot better, when it's just built into the system from the very beginning.

The process we've been through over this year, there was a beta 2 got out to over 2 million people. The release candidate, which was our last chance for feedback, got out over to 5 million. We had a lot of in-depth things where we went in and sat and interviewed people using Windows Vista in family situations. We did that in seven different countries. We did incredible performance simulation, getting over 60 years equivalent of performance testing with all the common mix of applications that were out there.

So a big investment, in fact, the biggest investment ever put into a piece of software. Why? Because it's by far the most used piece of software, and any improvement we can make there not only can save time for people, but can enable everyone who builds on top of it to do some pretty fantastic things.

Having a Microsoft Office release at the same time is fantastic for us. Last time we did that was back in 1995, that was sort of the UI of 32-bit generation, just like this is for the 64-bit generation. So the fact that people can think about moving up to those at the same time really will simplify a lot of the migration, and take out some of the hesitation that's often there when you only move one piece at a time.

With Office it's got a new user interface, it's got new ways of connecting up to Office Live services and SharePoint, and again, very broad, very deep, but the discoverability of the richness is advanced dramatically by that user interface. We've observed over 1 billion sessions of people using this new version of Office. So we know for sure that they are  all those features they used to ask us about that we had but they couldn't find, now they are finding those features. So that makes us feel great, because the new user interface was actually a risk, a leap that had to be taken, had to be taken at some point. Now we've taken it, and the feedback has been fantastic on that.

Windows and Office, of course, will connect up to services, services from Microsoft and services from other companies. In our case we talked about Live services, the ability to share files, to connect your e-mails, connect your schedule up into the Internet and so they can flow to your other devices, or flow to other people's, as well. So a lot innovation would be taking place to connect Windows up more and more through those services.

Today we've got literally hundreds of millions of people, whether it's instant messaging, or doing the e-mail capability, and so as we expand those things, building on that very strong base, we can get, I think, most Windows PC users viewing that as an integral part of the experience.

Already the idea of updating their machines, providing them with better software and security improvements on an ongoing basis, it's a well-defined part of the Windows experience. And more and more services come along. So we've come a long way from the idea that this is just a product you get one time and it stays the same. A huge part of that value is the ongoing work that we do and connect up to you through that Internet connection, providing free services, and some add-on services, as well. So that really creates and environment, Windows, Office and those services and third parties connecting up and building on that.

A great way to understand why we're so thrilled to have it out is to see a demonstration. So let me ask Justin Hutchinson to come up and give you a little look at Vista and I'll bet for most of you you'll see at least a couple of things that you're excited about that you've never seen before.

Thank you. (Applause.)

JUSTIN HUTCHINSON: Thanks, Bill.

Hi. Tonight we're going to give you a glimpse of Windows Vista, and we're going to show you a couple of things that we haven't shown publicly before. Now, Windows Vista makes it easier, safer, and more fun to use your PC. And as Bill just mentioned, Vista, Office, and Windows Live will come together to deliver amazing connected experiences. So let's take a look.

One of the first things I notice when I use Windows Vista is how easy it is to find all my information on the PC. Last night I was working on a file, I can't remember where I saved it, but if I just go here and type in the first couple of letters of the item I'm looking for, Windows Vista will look across all my programs, Web sites I've visited, my files, my folders, even my e-mail to bring me back the results I'm looking for. Windows Vista will also not only look on this PC, and this is something we haven't told you before, I can set it up to search every Vista PC on my home network. So Windows Vista is not about searching, it's about finding.

So here is the folder I was looking for. The first thing you'll notice, if you're new to Vista, are thumbnail previews. I have previews here that tell me, give me a hint of what's in this file. And if I want to see a larger preview, I can simply open this preview pane, and Vista will show me the contents of every file in this folder. So here's the document I'm looking for, and in preview pane I can see that I made a mistake last night. I saved the wrong document. This is an invitation to something special we're planning tomorrow night at CES, and making a mistake like this before Windows Vista would be a problem, but thanks to a new feature called Shadowcopy in Windows Vista, I can restore previous versions of this document with just a couple clicks. So when I click restore, you're going to see this document on the right revert back to the original. Just like that, Vista reverted back to the original and it got me out of a jam. It's better than going back in time. (Applause.)

So Windows Vista gives me a safety net, and it lets me worry less about making mistakes on my PC. So here I have the document, and it's still pretty rough looking, but using the new Microsoft Word in just a couple clicks I can actually make this dramatically better. Notice as I scroll over these themes, I get a preview of exactly what the changes are going to look like, and as a finishing touch, why don't we format this photo. There we go, just like that. In a couple clicks, I've taken this document from something that was pretty rough looking to something that looks like it could have been done by a professional.

Now I have a link here, and this link takes me to the location of the event tomorrow night, and it's perfect because I don't know Vegas that well. I'll open this up, and this will launch Windows Live Search. Now Live Search will give me information about the location of the event, it will give me driving directions, phone numbers, but that's not what I'm going to show you. What I'm going to show you is the Virtual Earth 3D technology that's built into Windows Live. And this is pretty cool to demo using a mouse and keyboard like I'm doing here, but it's more fun to use an Xbox 360 controller. I can plug any Xbox 360 controller into any Windows Vista PC to play all my games, and I can also use it to fly around Las Vegas here. (Applause.)

This is fun. So you see here a virtual 3D map of Las Vegas. Not only can I fly around, I can actually drive right down the street. This is pretty fun. It's also practical. So if I'm new to town, I can get a sense of where everything is, get a sense of my landmarks. We can also lay down real time traffic information  I want to make sure I don't hit the Bellagio there  real time traffic information, and that lets me decide not only  that lets me see not only what streets I want to drive down, it also tells me the quickest way to get there.

So the best part about this demo, this is live right now on Windows Live. You can go use this tonight. That's just a real quick example of how  no clap? (Applause.) Great example of how Windows Vista, Live, and Office come together to deliver some amazing connected experiences.

That was fun. What else is fun on the PC is Media Center and Windows Vista. Media Center is where I can kick back, I can listen to all my music, I can watch and record live high definition television, download movies, and tonight we're going to show you a new experience called SportsLounge. SportsLounge was developed with Microsoft and FoxSports.com, and it's a dream if you're a sports fan, or have a sports fan in your house. Here I'm watching a live HD feed of a football game. Up top I'm getting real-time information, and real-time scores for every sports program in my channel line up. And across the bottom here, I'm getting real-time alerts about my favorite players, about my favorite teams. I can queue up, SportsLounge tells me what's on later, and I can queue it up to record programs. So I know I'm going to work during the BCS title game tomorrow night, Media Center will record it for me automatically. I can get in-depth scores for games that are in my channel line up, or not in my channel line up. And if you love fantasy sports, you're going to really dig this one, I can set SportsLounge up to track all my fantasy teams, football, basketball, baseball and hockey. It will update me on all my players' stats, and I can set up alerts. So if someone is coming up to bat, someone just made a big play, Media Center will send me an alert, and I can automatically tune the channel. It's great, it's a dream if you're a sports fan. (Cheers and applause.)

We're also proud tonight to talk about some new content partnerships in Media Center. Showtime, Nickelodeon, Starz Vongo service will all deliver on demand video content and video services to Media Center customers. Now in Media Center I just showed you how you can enjoy it in full screen with a mouse and keyboard. You can also use a remote control. I can also shrink this down, you're watching live high definition television while I'm going about my business using my PC. Now SportsLounge, Media Center, high definition television, and these rich on demand video services are great examples of how Windows Vista will take entertainment on the PC to the next level.

What else are people doing for fun on the PC? Well, photos. We know that close to two billion photos were taken last year, probably everyone in this room has taken a handful of digital photos. And in Windows Vista the place to edit and organize all your photos is Photo Gallery. Here I have all my pictures, and all my digital videos that I've taken with a digital camera, or a camera phone, but I don't want to leave them on my PC. I want to be able to burn them to a DVD. DVD Maker in Windows Vista makes it simple to share my memories. Here I've added not just my photos but digital video to this DVD I'm going to burn. I click next, I can select from a handful of preinstalled themes, and when I click preview I can see exactly how this DVD is going to look when my friends and family pop it in their home DVD player, just like that. (Applause.)

So let's talk for a second about Windows Vista Ultimate. Ultimate is the flagship edition of Windows Vista, and it gives me everything I need to have more fun at home, and be more productive at work. Now one of the cool things about Ultimate is that Microsoft continues to download features to me on a regular basis, and we call these new features Ultimate Extras. An example of one of these is this technology from Microsoft Research called GroupShot. Now my problem with photos is not necessarily technology, it's not that I can edit them, and organize them, or share them, I can't take a picture to save my life. I'm always cutting people's heads off, or I'm catching people, like in this case, with their eyes closed. So here I have two pictures. In this one her eyes are closed, in this one his eyes are closed. What I want to do is put both of these pictures together into one good picture. So GroupShot is going to let me do that. I simply select here, take the good part of this picture, I go back here and take the good part of this picture. Now GroupShot didn't fix these pictures, it created the picture I wish I would have taken. Pretty cool. (Cheers and applause.)

So what else are people doing with photos? Well, we know that people love to personalize their desktops with all their pictures. And with every version of Windows we ship a whole batch of new themes and wallpapers. Well, a new Ultimate Extra called DreamScene in Windows Vista takes that to the next level with full motion desktop. (Cheers and applause.) And just like with any picture on my PC, I can go to any video and set that as my desktop background. Awesome. (Cheers and applause.)

So you've just seen how Windows Vista is going to make it easier, safer and more fun than ever before to use your PC. We have 22 days until launch, that's it for me. Thank you very much. (Cheers and applause.)

BILL GATES: The strength of Windows has always come from the ecosystem around it. Of course, the incredible software applications that people build, the breadth of devices, the neat types of peripherals that are unique to the environment, the variety of great hardware, and now more and more even services that connect up either online or consulting services, where people have really learned Windows and built solutions that take advantage of it. We've done a good job now of reaching out to all our partners, and showing them Vista, giving them a chance to get ready, and it's been very gratifying to see them rallying around this opportunity. We've got over a million and a half devices that are compatible. And it's sort of a mind-blowing number of device IDs all now working there. We've got a lot that are doing unique things with the Vista environment, backup devices, video devices, DVD devices, a lot of rich capabilities where we're showing off those hardware advances for the first time.

When we think about software developers doing applications for Vista, there's many things that that means. It means in some cases doing 64-bit applications, or doing Sidebar gadgets, or taking the search APIs and exposing the items in their files at a more granular level into that search capability. It means visualizations, not just games, but lots of applications using the latest DirectX Version 10 capability. We're calling our rich new form presentation that we call Windows Presentation Foundation. And so every new version of Windows has had a dual nature, great capabilities for end users right out of the box that they get the benefit, and it lets them drive the volume of that platform up, but also enablement for hardware and software partners. And it's those two things going together that have constantly driven the phenomena around the Windows environment.

One thing that we're very pleased about is the way that people have stepped back and thought about new Windows PC design based on these features. Now in many cases they came to us and we put the right feature into Vista, or we did the feature and we went to them and encouraged them to do something very innovative. A good example is touch screen. Touch didn't used to work very well because your fingers would be too big. Well, in the software we've come up with a way to let you target in a rich way. And so now HP with their Touch Smart selecting photos to print, and doing lots of things with touch, it's just so obvious that you wonder why touch hasn't always been there as one of the great ways of doing interaction.

Toshiba with their Portege has done all sorts of neat things that you'd expect for a leading edge portable. They've taken the ability to have what we call a Sideshow alert, put that on the side of the machine so you can see information, even when the device is closed. They created a document station that actually uses high bandwidth wireless, ultra wideband, so you don't even have to plug in to get your video display. It just sends the DVI signal across that wireless connection.

Sony with some great Media Center packaging. Medion taking this Ultra Mobile, the small screen concept, making that really a great second PC that you can carry around and do reading, and media type things. And so we're expanding a wider variety of design points. We drawing on the strength that comes from lots and lots of great hardware partners that have stepped back, bet on Vista to be successful, and done neat things with it. And so they deliver on these experiences. They let people work together in new ways.

Here, the partners are going to keep surprising you, but the ones that I showed specifically are actually timed for the Vista launch. And so right then there's something very dramatic, but every month people will be building things, whether it's the large manufacturers, the system builders, things that take the Vista phenomena and actually drive it forward in a new way. So let's take a look at some of these new Windows Vista PCs.

(Video segment.)

Speaking of great things that our partners have done together with us, I'd like to talk about a product that's new for us, entry into a new space, and we think a very important space, and it's a project we worked very closely with HP on, and that is defining what we call a Windows Home Server. So let's take a look at the concept here.

(Video segment.)

You probably recognize that format that HP is using to talk a lot about the neat empowerment things they're doing. This Windows Home Server is for homes where you've got either multiple PCs, or Xboxes, the case where you want to have your storage available at all times to the different devices. This is a product that will come out in the second half of this year. HP will brand it as the HP Media Smart Server, and it's the Windows Home Server software with their enhancements that will run on top of that

What are the features? Automated backup, it goes and finds the PCs, brings the information up and makes sure that it's all stored here up on the server. We've got connectivity, connectivity to, of course, all the different PCs, but the Zune, Xbox, and remote connectivity. If you're somewhere else coming in and getting your files, having access to them in a very secure way, that's set up for you, no complexity in terms of how you have to get involved with that.

Finally, if you want to grow the capacity, you don't have to think about volumes, or different devices, or names, or things like that, you literally just plug the new storage in, and it's got quite a bit of expandability, and automatically the software will see that storage, move the data around, so that any drive problems you run into it makes sure that you're not losing information. So you can get up to literally terabytes on this device.

We've got HP as the lead partner, but also AMD, Intel, and Inventec and lots of others are building hardware reference designs. Since it's a software-driven device each of the partners will be able to do some unique things running on the server tier, so even more richness as you look at the variety that will be out there.

So we think it's a category that that can explode in importance. We think it takes a real emphasis on great simplicity and so that's what we think we've got here entering into the category, of course, and a lot more we'll do as we get in and see the feedback from the users there.

I'd say a very big part of connected experiences is connected entertainment. So to talk to you about mobility, gaming, TV, movies, music, is the person some people think has the most fun job at Microsoft, and that's Robbie Bach who is the President of Entertainment and Devices Division. So let's welcome Robbie to come on out. (Applause.)

ROBBIE BACH: So Bill talked about connected experiences, and I want to talk today and expand on that and talk about connected entertainment. Now, connected entertainment really has two parts to it. The first is about content, whether that's music, movies, TV, games, we want people to be able to get their content whenever and wherever they want, on whatever device they want to put it on. The second part about connected entertainment is it's about community. In the entertainment world people want to share their content, they want to share their ideas, they want to have community entertainment experiences.

So our challenge is bringing those two concepts together in a powerful way. Now, you don't just do that by having great hardware, or by having great software, or by having an innovative service. You do that by combining those three things with an integrated concept of hardware, software, and service that can deliver connected entertainment. So what I want to do today is talk about connected entertainment in the context of our work in music, in mobile phones, in gaming, and in TV and movies.

So let's start with music. A year ago at CES Bill Gates introduced, along with executives from MTV, MTV's Urge music service. And that was a very exciting announcement for us, and a product that's been very successful. We are continuing to be committed to that product and others like it from the 350 partners who are helping us deliver a platform for music around the world. We think that platform is alive and well, and will continue to grow.

Now, this year in 2006 we did add a second part to our strategy, which is the introduction of Zune. We're very excited about what we've been able to do with Zune, and we're very excited about what we've been able to do with Zune this first holiday. In our segment of the MP3 category we are the number two player already. We are on track to ship and sell a million copies of Zune. And whether it's the great screen we have, the wireless connectivity, the FM radio built in, or the combination of those things that are driving it, Zune is off to a great start, and it's just going to get better.

The service is going to continue to expand. We're going to continue to improve to software and the hardware, and the community of music around Zune is going to continue to grow. This is a place where we are deeply committed to being successful, and you're going to see us in this space in a leadership position in the years to come.

So that's music, now let's talk a little bit about mobility and mobile phones. This is an area where we've made tremendous progress. This year we have some of the hottest selling phones in the marketplace, and the cool thing for me about those phones is it's not just about phone calls, although we do that great, it's not even just about e-mail, since that was the next round of things people wanted to be able to do, but it's also about IMs, it's about movies, it's about TV, it's about music, it's about connected entertainment on my phone.

So the features we're delivering in these exciting products are bringing that to market. If you think about Cingular's Blackjack from Samsung, Cingular's Treo from Palm, the T-Mobile Dash from HTC, and Verizon's Motorola Q, those four alone are leading, cutting edge designs that are driving tremendous market share advances for Windows Mobile.

In 2007 you're going to see that continue to grow, with new software and services continuing to build content and a community, as well as bringing out business productivity that we've always been known for. All of these things are reasons why today Windows Mobile excels, and why we outsell Blackberry in the market. (Applause.)

So that's mobility. Now I want to talk a little bit about gaming, and I want to start with Games for Windows. Windows Vista, as Bill discussed, is critical for our effort in this area. It will revitalize the gaming market with Windows. I should remind everybody here, the PC and Windows is the number one gaming platform in the world, 200 million people every month play games on Windows. So it is a leadership platform, and it is going to continue to grow.

Windows Vista is going to expand that dramatically, by making it more powerful with DirectX 10, and key graphics technologies that are being built into the product, by making it easier to use so that the process of buying a game, putting it on your machine, and playing it is dead simple, and making it safer with family settings, where parents can really control what their kids are doing, and make sure the content is appropriate for their children.

Now, one of the cool things about Games for Windows is it's about hardcore gamers, for sure, but it's also about casual gamers. This is a very broad ecosystem, what I'd like to do now is show you a short video that gives you some context for how broad it is, and how cool the next generation of gaming on Windows Vista is going to be. Let's roll that video.

(Video segment.)

So Games for Windows is an incredibly growing market, and you can see that it's a market that includes things at your desktop, on the go, wherever you want, there's a gaming platform on Windows for you to be able to use and get great effects with those games. But, of course, Games for Windows, while it is our leading and largest gaming platform, it's not the only gaming platform Microsoft has. Our second is Xbox 360. And I'm very excited about the progress we've made to become the leader in this next generation of gaming. We have sold through December 31st 10.4 million consoles across 37 countries around the world. That's a half a million units a head of our projection. (Cheers and applause.) In some ways the data that's more interesting is when we do the survey data, the majority of those owners of Xbox 360 are new to the Xbox platform. That tells you how we are expanding the market, that tells you how we're growing, and how we're becoming a leader. And when you look at games, and the attach rate of games, the number of games sold per console, and the number of peripherals sold per console, we are setting records on Xbox 360 every step along the way for a console at this stage in its lifecycle. So this ecosystem is alive, burgeoning and growing, and really setting the pace for what's going to happen in the future.

Now I talked about games attach, and clearly as we go forward games is what this is going to be about, and Gears of War from Epic Games and Microsoft is setting the pace. In the first eight weeks, we sold 2.7 million copies of Gears of War. That title is now a Halo-like franchise that continues to drive hardware in a very positive way, and we think it's an evergreen property that we're going to be able to leverage for a long time. But it doesn't just stop with Gears of War. We have 160 titles on the platform today. That number by the end of 2007 will double to over 300 titles, games like Dance Dance Revolution, Guitar Hero II, and there's a new game from Microsoft called Mass Effects, and of course Grand Theft Auto 4, all coming to Xbox 360 this calendar year.

Now when you talk about games and Xbox 360, and you talk about the year 2007, there's one title that will be the story of 2007, and that title, of course, is Halo 3. So let's take just a little sampling of what Halo 3 will bring this year.

(Video segment.)

(Cheers, applause.)

ROBBIE BACH: So you can all finish the fight on Halo 3 coming in 2007.

But in some ways more important you can carry that fight to Xbox Live where people will be playing today Halo 2 and soon Halo 3 in a really exciting environment.

And Xbox Live has made tremendous progress over the last 12 months. We're now the largest social network on the TV. The network of people playing Xbox Live has now reached 5 million members, with an amazing gaming experience but also the ability to communicate with each other and build their own social networks. That is an exciting level of activity unprecedented and unanticipated even two or three years ago.

Now, the key thing we're focused on with Xbox Live is continuing to expand that community, and what we want to do is take it to a whole new level. And so we said, gosh, we have the largest gaming platform in the world on Windows and Windows Vista; let's take the live experience and bring it to Windows.

And so what I want to do now is demonstrate the live experience on Windows, and for that I have Lisa Sikora on stage, and she's going to take us through a demo of Live on Windows. Lisa?

LISA SIKORA: Yep. Thanks, Robbie.

So, here I've got my laptop, and it's running Windows Vista. Now, I do everything with this laptop. It's my work, it's everything.

ROBBIE BACH: Sure.

LISA SIKORA: Now, I do like to take breaks though at the odd time and actually play games. Now, at home we also have our Xbox 360, and, in fact, my husband loves to get online and play on Xbox Live with his friends. And now I can join him in those games right here on Windows Vista. So let's show you how this works.

So, I'm going to start up a game of Uno here. And Uno is one of my favorite games actually, and, in fact, it's one of the top downloaded games on Xbox Live today.

ROBBIE BACH: That's right.

LISA SIKORA: So, it's a very social game. So, I'm going to jump into multiplayer game here, and I am going to see if there's somebody out there who wants to play with me.

ROBBIE BACH: And now you're doing this using the Xbox 360 controller running Windows Vista?

LISA SIKORA: The Xbox 360 controller. You've got to love it.

Now, everything that you see here is very similar to what you see on Xbox Live, but it's all been customized for Windows Vista. And you know what, for me it's drop dead simple. I love this.

Now, here I am, I'm in my game lobby, and I'm Hurricane. That's my gamer ID, that's how people identify me in my live community.

Now, let's check out this. So, here's the live guide. Now, it looks exactly like you would see on Xbox 360 and all the same community features. Is that cool? Now I'm going to go into my friends list, and here we go, I've got not a lot of friends.

ROBBIE BACH: Yeah, we need to get you some more.

LISA SIKORA: I know.

ROBBIE BACH: We've got to work on that.

LISA SIKORA: I'm working on it, I'm working on it.

So, here we've got Ice Monkey. Now, Ice Monkey happens to be Albert over here on the couch, and he's playing Geo Wars on his Xbox 360. Now, the fact that I can see where my friends are and what they're doing right here on Windows Vista, now that's pretty cool for me.

So, let's go and see if Albert wants to jump into a game of Uno with me. So, I invite him to a game, and boom, invite's been sent over to Albert.

ALBERT PENELLO: Thanks, Lisa.

I'm going to go ahead and accept Lisa's gamer invite. And just like I'd expect on the Live service on Xbox 360, I can quickly exit the game that I'm playing and join hers.

Uno is a great game, but it's just one example. With titles like Shadow Run and Halo 2, this is going to open up a whole new world of friends for me, whether they're playing on Windows Vista or playing on Xbox 360.

ROBBIE BACH: Guys, thanks a lot, great for showing that to us. (Applause.)

Now, you say that's Uno and it's a simple concept, but it applies to both casual games and more serious traditional hardcore games. And that's the concept of reaching out to those 200 million gamers and providing them with an amazing Live experience.

This will build a worldwide service that spans platforms and creates great communities. This will roll out on the Live services this summer.

Now, today on Xbox Live we've seen about 3 billion hours of gaming. So, Microsoft isn't just a productivity company, I want to be clear about that: 3 billion hours of gaming. And I'm very excited to see where that will go as soon as we bring Live on Windows into play.

So, now we've talked about music, we've talked about mobility, we've talked about what we're doing in gaming. I want to switch tack and talk about TV and movies. And really in this space the big news obviously is high-definition and how fast that is taking off. If you went into a retail store this holiday season, high-definition TVs were the thing to buy. It was an amazing year for HDTV and for that process and that platform to get going.

And I want to talk about four ways for you to get high-definition movies today on the Microsoft ecosystem. Now, the first of those is through our HD-DVD player. This comes that you can buy for Xbox 360.

Now, I want to point out we've been making as many of these as we possibly can, and they continue to sell out. Demand for this product is incredibly high.

Perhaps the bigger news than that, though, is that the HD-DVD format has been the top selling format this year. And that's a combination of the fact that it's had the most movies, it's been the most affordable, and it's had the most interactive and compelling interactive features with our technology that we've put into that product. So, this really creates a great environment for people who want to use the disk space environment to access and interact with high-definition movies.

Now let's go to the second way in which you can get that high-definition experience, and that, of course, is on Media Center. Bill talked about there was a demo of Media Center before. The data behind that data is pretty impressive. This holiday 80 percent of PCs sold in the United States were Windows XP Media Center PCs. We have now passed 30 million copies of Media Center sold worldwide. So this is now a market that is absolutely at scale. We are seeing tremendous momentum in this space.

And when you network that PC with your Xbox 360 for high-definition TV, you can get all the experiences you want: music, movies, cable TV, high-definition content, from Media Center streamed to Xbox. We call it Media Center Extender on Xbox 360, and it's a very popular product. We're continuing to see that. It comes with Xbox built-in, and we continue to see that expand and roll out. You don't need an extra box, just connect it up and go.

So that's the second way you can get high-definition content into the Microsoft ecosystem.

Now, the third way is with Xbox Live video, and this is really a very exciting thing we introduced in November with a number of content providers, over a thousand hours of content. And it's really simple, because your Xbox is already on the Internet, and it's connected to a big TV. And with that thousand hours we're adding today Lion's Gate to the mix to create even more content and provide even more content to Xbox 360.

So, what I want to do now is I want to turn it over to Lisa, and she's going to give you a quick demo of how simple it is to get a movie up and running. Lisa?

LISA SIKORA: Thanks, Robbie.

You know, I love to watch movies, and Video Marketplace has become the easiest place for me to download great high-definition movies and TV content. So let's have a look at this.

So here I'm going to go into my TV shows, and going to check out some networks here. Now, we've partnered with some of Hollywood's finest, and I can download TV content from all of these great networks, a ton of them in here, check them out.

And now in terms of movies, wow, we've got a huge movie lineup. So, if you can see here, I've actually already downloaded Warner Bros Superman Returns, and it's on high-def, and it's ready for me to play whenever I want to.

ROBBIE BACH: Well, that just gives you a sense for how video is easy to get to Xbox 360, and we have had tremendous response to that from our Live customers.

Now, the final area where we can bring high-definition to our platform is what we call IPTV. Now, two years ago we demoed IPTV at this show, and really gave one of the early first looks at what IPTV could deliver.

Today, we are now in market with five providers: AT&T, British Telecom, Deutsche Telecom, C-Com in France, and Swisscom. We are doing great work with those companies to roll this out to consumers, and we're also working with 11 other customers and a number of others who are in trial or evaluation.

This market is going to continue to grow, and over the next three or four years is going to become a major part of the TV delivery ecosystem.

So, I want Albert again to take us on a quick tour of IPTV as it ships today. Albert?

ALBERT PENELLO: Thanks, Robbie.

The IPTV demo that you see here is going to unlock the potential of your TV. IPTV, the first thing you'll notice about it is that it's fast. I hate waiting. And with our instant channel zapping, no more waiting a couple of seconds for the channel to change. I get instant gratification.

Another great feature is our improved channel browsing. With our picture-in-picture feature I can actually see what's on the next channel before I change over. This is going to be the next generation of channel surfing.

Now, IPTV delivers everything you'd expect from a great TV experience. I can watch and record my favorite TV shows in standard and high-definition, I can order videos and movies on-demand, or I can quickly search for my favorite programs by actor, title, or director.

Now, I know that some of you may have seen IPTV in the past, but what I can guarantee that none of you have seen is IPTV running on an Xbox 360. (Applause.)

I'm going to bring up the Xbox guide, and I'm going to go ahead and accept this game invite for Gears of War. The bringing together of IPTV and Xbox 360 is going to give me all of the amazing next generation features of IPTV and the rich connected experience of Xbox Live. So I'm going to be able to get game invites, but what's really cool is using a headset I can actually talk with my friends while we're watching TV.

Now, I'm going to start up Gears of War here, and for me, being able to play games on an Xbox 360 and watch TV as an enthusiast, Xbox 360 now does everything I want in my living room. I can play the best next generation games, download movies and TV shows, connect to my Windows PC and access my music and my photos, watch HD-DVDs, and now experience next generation TV programs with IPTV.

This is everything I want, it's all in one box, it's all on Xbox 360.

ROBBIE BACH: Thanks, Albert. (Applause.)

Now, the thing I want to point out is that IPTV on Xbox 360 allows our service providers to really differentiate their TV experience, because now on one box not only can you get an amazing TV experience through IPTV, but you do get all that great gaming experience that is Xbox 360.

This will be available through service providers this year, holiday 2007, that experience available to consumers.

So now that brings us full circle on connected entertainment. We talked about music and the strides we've made there, both on our Windows ecosystem world and in Zune. We talked about Windows Mobile and the progress we've made, and the leadership position we now have, and the strength of our product offering there. We talked about Xbox 360 and games on Windows, and what we're doing to build an incredibly exciting gaming environment across those two systems with our Live service. And we talked about the work we're doing in TV and video to really give customers the breadth of options they want to get the video they want on their system.

The exciting thing about that for me is more choices for consumers, great software, great services, the ability to take their content wherever they want it whenever they want it, and share it with their friends. We're going to deliver connected entertainment over the coming years, and I think it's going to be a very powerful experience.

Thank you very much. (Applause.)

BILL GATES: Our ambition is to give you connected experiences 24 hours a day. We admit that when you're sleeping we haven't quite figured out what we're going to do for you there, but the rest of the time, the minute you get in the kitchen and look at that refrigerator, pick up your phone, hear the alarm clock tell you about the traffic; whatever it is, we want you to have the information that you're interested in.


And in thinking about that broadly, one area that comes up that clearly demand special work, and that is thinking about connecting to the car. Now, over time the kind of entertainment you have in the car is you're going to want the same great things that you have everywhere else.

But the car is special. You've got to have things that are simple. If you want to deliver to the driver you have to think about incredibly simple commands, safe ways to get that driver involved.

A lot of people spend over an hour and a half in their car every day, and so they want it to fit it, they want to get at their information and their content and have those capabilities.

And so we've been investing in this, and we've had a very key partner who's been willing to pioneer this with us, and we're just making a significant announcement in that overall vision today. And so to help me with that, I'd like to welcome Mark Fields, the president of the Americas for Ford Motor Company, to join me on stage. (Applause.)

MARK FIELDS: Hi, Bill.

BILL GATES: Welcome, Mark.

MARK FIELDS: Thanks.

BILL GATES: Well, it's super to have you here. Tell us a little bit about how you're thinking about the new capabilities.

MARK FIELDS: Well, you're right, Bill, we're absolutely looking forward as a company and together. And the technology we've developed together is doing exactly that. We talked about this morning in Detroit.

The new thing is a fully integrated, voice activated, in-car communications and entertainment system for mobile phones and digital music players. And it's a Ford exclusive, and we're really excited about that. It's a Ford exclusive technology driven by Microsoft Auto software.

So what Synch does is it totally integrates like never before all of your electronic devices, like your cell phones, Zunes, iPods, all the things that are in your pockets when you get in your car, right into the vehicle, and seamlessly.

Now, with Synch, what it means is you have access to the full capability of your Bluetooth phone, and it's just a voice command away.

So, Synch is unique in that it means never, never having to download your phone book ever again. It downloads every personal setting, like personalized ring tones and three-way calling right through the vehicle's audio system.

And drivers can place and also receive calls, and also text messages through the audio system. They can even maintain a call phone conversation while entering or exiting a vehicle. How many times have you gone up to a vehicle, get into the vehicle, got my Bluetooth, I'll call you right back? You never have to do that again.

And Synch also allows users to have their text messages actually read aloud to them through our new text-to-speech technology, which even translates Internet slang like LOL and other expressions, like smiley faces.

And most exciting -- most exciting, it has the ability to be a full entertainment platform, as it accepts nearly all portable music players and most USB storage devices. It even accepts Flash and Zip drives. And through is voice recognition software it can even create personalized play lists with a simple voice command, and nothing on the market can do that.

And because it's fully upgradeable -- and this is really important -- owners will never have to worry about whether their car is compatible with the latest phone or music player that hits the market. And we all know how fast the marketplace moves these days.

Now, in the past, Synch is the kind of feature that probably we would have introduced probably on luxury cars, but we're going to roll it out quickly and affordably, because Synch's market potential from our perspective is absolutely huge.

And Synch is going to be available on a dozen -- a dozen Ford Motor Company products this year, including our new Ford Edge crossover, and the new Ford Focus, which we introduced earlier today in Detroit, because right now the auto show is going on, so we did the press conference this morning with about 3,500 journalists, and it was really exciting.

So, Synch gives us the opportunity and the incredible opportunity to dramatically improve the appeal, the capability, and the value of our vehicles, because delivering more products people want is absolutely key to Ford's success going forward. And working with Microsoft, it's this type of technology that's going to help us do it.

BILL GATES: Well, it's been a great partnership getting to this first product. And now since I've personally been involved and worked with Mark and his team, they've been a great partner, we've got a vision of what this can do today, and even some work we're doing on how we can carry this forward. So it's a real milestone. We're not leaving the car out, we're connecting you even there, and we're going to have Ford cars leading the way showing you how to do that.


So, thanks, Mark, great to have you here --

MARK FIELDS: Thanks, Bill, appreciate it.

BILL GATES: -- and exciting to see how that works. (Applause.)

Well, so far in this keynote we've only talked about products that are either shipping now or shipping this year. I wanted to close by taking the timeframe and moving out a little further and talking about how all of this will change and come together in the years ahead. Think of the home in four or five years. Think of what connected experiences will mean as you get further out. After all, there's some incredible breakthroughs that can make a big difference here. Speech, which we talked about using in the car, you'll use that to interface with your phone and even with your PC, not replacing the keyboard or touch or pen, but simply complementing those things.

The ability to have a camera on your PC know what you're doing, if you're paying attention, to recognize who's there, to do the right thing, incredible capabilities that will come through that.

And so those kind of hardware things, combined with software, can drive new experiences.

One way we get a sense of this and share that is we build a futuristic home on our campus. We call it our Microsoft Home of the Future. And we're just finishing the new version of that, and so I thought I'd take some key pieces, the really exciting elements of that, and show you a couple of the scenarios there, and give you a sense of why we continue to be so excited about connections achieving richer and richer goals.

I'm going to start out here away from home. I'm just here at a bus stop. Of course, I'm very familiar with bus stops. (Laughter.) And I can see this nice screen here telling me which bus is coming when. Now, my phone knows my location, and so when I just sit here, it tells me the bus is coming, so I get that information. I can even look on a map and see where that is.

Also based on where I am it knows things I might be interested in, and so it tells me about a nearby restaurant that meets the profile of the type of restaurants that I'd be interested in. And here I've even got a special offer. I can see that I get a little percentage off, and I can take that coupon that's being offered to me because I'm in this area, and store that away, and so I'll be able to use that when I actually go and visit there later on. I also get the ability now to browse in and see their menu, make reservations, all those kind of neat capabilities.

Now, I get a little notification here that at my home somebody has run the front door and they're trying to deliver a package, and so I can take a view through my camera, see who's there, and if I want to go ahead and say, yes, I accept this package, and send my digital signature, I'll just click and do that. Then sure enough, I get this nice icon that shows that I'm verifying that it was me who authorized that so that delivery person can say, yes, they were allowed to go do that.

So here I am just with my phone doing a lot of rich things, location based, connected up.

Now let me move to my kitchen, and here I am. It's another place you can imagine I have deep expertise to bring to this scenario. (Laughter.) And I need help here in the kitchen. Well, what's one of the big advances that will make that possible? Screen technology, projecting onto walls, onto surfaces is going to be quite inexpensive, and so it will be very pervasive. So this surface, although it's just a normal surface, we can project onto it, we can use voice to drive this.

And so I get the package that was delivered to me, and it was this wonderful little food mixer, and I think, gee, I want to -- [computer voice] -- so it notices I put that up there, and sees that I've never used it before, and, yes, I would like assistance. And so it brings up some options.

Then I've got a little ingredients here. I've got my flour, and it notices that with the RFID, and brings up recipes that might be appropriate to that. Here I see a couple different choices, and I think, hmm, what are my options? How about healthy? Show me what's in recipe two here. Okay, and so now it's even got the full list of ingredients, it's checked off the one that it sees that I've got with the flour there, and so I can go and get the other things. When I'm ready I just say, show me the directions, and, of course, it will go and display that. It's even nice enough to give me this view of a sense of how big I need to make this as I'm rolling up the dough, and so it can even be interactive in helping me move along. And it's just a little bit of software in that kitchen environment.


Now let me move on to another location. Here I am in a fairly typical bedroom, and I've got this nice mobile PC that I can carry around, lets me control things and do things in this bedroom environment.

So, when I start out, I see I've got kind of a cool scene that I picked here, and I can actually pick out a music group that I like, that I browsed and found, and I say, hey, let's take that and select that picture and go ahead and put it up there. And so I can combine different things. This represents my personality, my room, but, of course, it's being done by using this nice display capability that's there on my wall.

So if I want to think, hey, let's go get something else, I can click along here, and I think how about that aquarium, that looks pretty good. Let's choose that instead. Of course, it's kind of neat, I can learn about the fish or just have that as a soothing background. Maybe I want to switch to something else. Let's see what I've got. Hey, this is pretty neat. I've got racing sense, and so it's going -- and this is actually from my Xbox 360 here, so I can go ahead and navigate along, play this thing up on the wall. That's pretty cool. It's got the sound and everything.

I'm having a lot of fun here in my room doing exactly what I want, but then I notice that I've got to remember what's going on today, that my sister's going to pick up grandma, and I realize, okay, I'd better get things ready, I don't want to just be sitting around like somebody who plays these games all the time. Let me see what type of environment will be like for grandma when she's actually going to come and stay here. (Laughter.) It's a little different than what I picked. In fact, I've even got this nice little video camera back at grandma's house, and so that's her dog there, and when she comes she'll find it neat. She can even see if her dog is okay, and I'll watch that.

And so it really becomes part of the environment. The environment really is so different because you've got these digital screens, and you've got this way of interacting that's very, very simple.

And so the idea of connected experiences can go way beyond what we've got this year. We can take these incredible improvements in the hardware, we can take the new type of content that's even being designed for interactivity, we can take this powerful software, building on the work that you're seeing this year, whether that's Vista or Office or all the great third party things connecting up to the devices, we can take that and go to a new level.

We need a lot of feedback from users. We need a lot of great research and make the reliability, the security, the simplicity of these things really great, and so that means there's some fun challenges ahead for the software and hardware business. And every year we come here and we see an immense amount of progress, the incredible competition that's driving the prices down, getting all these things to work in new ways.

And so let me just thank all of our partners, and thank all of you for your support, and say how excited I am for all of us to see how this develops the fulfillment of the vision of the Digital Decade. Thank you. (Applause.)

END

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