Remarks by Bill Gates

Streaming Media '99

San Jose, Calif., Dec. 7, 1999

MR. GATES: Good morning. It's exciting to be here and talk about the fastest moving part of the whole digital world today, the incredible advances taking place in streaming media. We have some neat new things to show today, because this is an area we really believe in. We're investing very heavily, and it's going to become a mainstream part of the PC and digital device experience.

Of course, the vision of the PC goes back now about 25 years. When Paul Allen and I started Microsoft, it was our view that we could create a tool that was very empowering, that would let people create documents, and communicate in ways that were never possible before. Of course, back then the idea that you could have digital video seemed incredibly impractical. It was hard enough simply to deal with text-based documents as we got into the 1980s, dealing with graphical fonts, and still images were really the cutting edge.

But the vision there included the idea that with the advance in chip technology, and breakthroughs in communications technology, there really wouldn't be any domain of knowledge, any type of information that you wouldn't be able to access through the computer. And so, it's fantastic to see that all coming together and allowing the PC to be a more versatile tool than ever.

Every year for the last five years, the PC sales have really surprised all the analysts. Volumes have been beyond the predictions, and in the United States today, over 50 percent of homes have a PC. And the predictions are that this is going to continue going up pretty rapidly, partly due to the lower price that we've got with the powerful hardware, but also because the range of uses is going up substantially. Things like photos and music are becoming applications that draw people in who might have thought that a PC wasn't for them.

Most importantly is the way we're taking that video and audio and combining it with the richness of the Internet so that it's easy to find things, and it's easy to create whole new content experiences that draw on the interactivity.

There are so many different milestones in this business because it's really happening so rapidly. If we look at the latest version of Windows, which is our Windows 98 Second Edition, over 91 percent of those users are in the Internet and using the Internet about 40 hours a month. So those numbers have come up considerably.

About a little less than half of Internet users go out and use streaming, and the fact that it's not 100 percent relates to the fact that, in terms of getting the caching in place, getting the ease of use down, getting people up to higher bandwidth, there's still quite a bit to be done there, because this should be just mainstream Internet activity. If you go to a news site, there should be a streaming video there that's talking to you about the latest highlights.

So far, we've got about 15 million people who've bought music online. There are probably more people who have listened to music online than have bought music online, and so it's really imperative now that we make it easy for people who want to get legitimate access to the information. Certainly, in the software business, one of the great things we've done that has brought piracy rates down is just made it easier to buy the software, and so we're certainly working in partnership with the music industry to make sure all that infrastructure gets into place.

Digital rights management is a deep area on its own, and we've got a lot of work integrating that into the software, and so that it's really automatic and really very seamless. College students have been a place that we've learned to watch very carefully because, of course, the Internet itself exploded on college campuses, and it was really our people going out and doing recruiting on those campuses that were coming back and saying, hey, there's something very profound here, and we're going to have to adjust our software strategies and really empower the whole Internet experience in a much deeper way than we recognize.

And so, today we keep really close tabs on all the neat things going on in college campuses. And music is basically taken for granted now. It's a primary way that people are going out and doing this. In fact, on some campuses, it's really to the exclusion of most of the other ways that people used to work with music.

And then, finally, these digital cameras advanced at a very rapid pace. This year at Comdex we could see the high resolution, better ease of use and, of course, some of those digital devices now are not just still image devices, they also record audio and digital video and make it easy to download that as well. So, we've got an explosive set of scenarios that people are really dying to get access to.

The whole Internet revolution is driving forward with such incredible speed, you can hardly today pick up a magazine and not have it writing about the latest startup or the latest neat thing that's going on. Very different than the PC revolution in the early days, when we really had to go around to the magazines and say, hey, look, you ought to pay attention to this. And it as almost an obscure activity that a small set of people were really promoting. Today it's the mainstream. There's not a CEO that I meet with who isn't interested in understanding what should their dot-com strategy be. Even the TV shows out there have got a lot of Internet stuff in it. In fact, I brought a little clip that shows some of the things that are being talked about on the Internet on TV. So, let's take a look at that.

(Video shown.)

MR. GATES: So, Microsoft looked at its vision, the vision from 1975, that had remained unchanged for 24 years, and this year we decided that it was important to update that vision, partly because the idea of the PC as an empowering tool is really a very accepted thing, and we wanted to talk in our vision about going beyond that, allowing people to get information on a wide variety of devices, and getting all those devices working together. Again, it's something where a lot of great software will have to be created, new user interfaces, new ways of making things happen automatically without the users having to get involved. So, the vision, and hopefully this one will last 24 years, is to empower people through great software anytime, any place, and on any device.

Now, as part of that, we've created a real focus on what we're doing in streaming media. And if you think about our role here, it's to make sure that everyone has the enabling software, whether it's application developers, or content developers, or people building Web sites, we want to make sure that software isn't holding this back. We see the digital media activity on the Internet defining a whole new generation. In fact, if you take two things together, the arrival of XML as a way of exchanging standardized information on the Internet and the arriving of streaming audio and video, you can really see that it is quite a transformation. It will be completely upwards compatible, so we'll have the evolution that allows us to draw on the incredible investments that have been made. But the experience will be very, very different.

And so, it's building this in, and defining a new level of interactivity, that really drives the work that we're doing. There are so many devices that are being created here. Every week there's a new one introduced. One technology we're very, very bullish on is wireless networking. Not only will that be inexpensive in the workplace, so that you'll be able to carry around a tablet-like device, or a small PDA-type device, and have your information up-to-date, but also in the home wireless networks will have incredible bandwidth. In fact, the whole way that you'll distribute high quality video from one room in your house to another room will almost certainly be over the wireless network.

So, if you have a PC or any device that's storing your library of music or videos, you'll have easy accessibility anywhere you go in the house. Wireless will also be available anywhere you go, but you won't have quite the same bandwidth in any location as you'll be able to have at home or at work. So that wireless explosion will be a defining enabler that will drive many of those scenarios.

Another key theme here is personalization, making it easy for people to get exactly what they're interested in, making it easy for them to format the player in the way that they're interested in, and share with other people comments on the things that they like, and be able to mail around or publish for other people exactly what they think they ought to know about.

When we say any device here, we include, of course, the TV. We include the digital electronics you'll have in your car, and the digital electronics you'll have in your pocket. Around your home, you'll have a variety of inexpensive screen-type devices which you can use to do home control, selecting video or audio sources, or simply to display images, things like having the pictures from your latest trip come up on the refrigerator, or the family schedule. That ought to be very easy without having to especially go in and program that device, it should just let you pick what you're interested in and have that show up anywhere.

So, our role in this is very analogous to what our role has been in the entire PC industry. We see ourselves enabling an incredible number of people to pursue what they do best. And so, in the same way that we enabled all the PC hardware manufacturers to go out there and build an incredible variety of machines, here we're enabling all these different device manufacturers. In the same way that we enabled software developers to write literally tens of thousands of applications, here we're working with the content creators of all types.

And so our goal in this is not to be a media company ourselves, not to be the publisher of the information. Rather, our goal is to provide the infrastructure for everyone who is doing that. And in the same way we had states that we could take a very high volume, low price approach to the operating system software, again, here with all this digital media technology, with the tools, the things that allow you to do this at incredible scale, and with incredible reliability, again, we see the volumes being large enough, really quite explosive, that it makes sense for us to invest very, very heavily in the R&D, despite the fact that the enabling software will be very, very inexpensive.

So, we call this our Windows Media Open Platform. And over the last few months, you've seen announcements of a number of these partnerships, things we're doing with other companies. In fact, I would like to take this opportunity today to thank all of the new partners who are being announced today. I won't go through and read the entire list, but you'll see I've got them in three different categories, people doing consumer devices, most of these are music download devices, or chip companies, or set-top box companies who are our key players in those spaces. New infrastructure and service providers, people who are really thinking through the issues of, how do you get that bandwidth delivered end to end, how do you go all the way from wherever the streaming content originates and make sure that you get a very high quality experience down at the user's device. We're certainly big believers in broadband and helping everybody who is investing in that area to really provision their networks in a rich way, and direct those users to the latest streaming media content that's available there.

The biggest category by far here, of course, is the content people. People who are now taking advantage of our formats, and putting up neat, new things that weren't available before. And so, we're going to continue to grow this list. This is really how we measure ourselves. These are the early years, and the partnerships we build today will define the success that we have in the years to come.

Now, you can take this streaming media and think of it in two domains. You can think, what's the value of this in the workplace, and what's the value of it for the consumer? I think both of these are very profound, and literally will reshape how people do things. In the office, just think of the meetings you go to, and what percentage of those if you could just see a little snippet, little clips of what happened in that meeting, you might be able to avoid the time you spent there. Or think of trying to keep everybody up-to-date about what the strategy is, people all over the world, and how expensive it is to fly people around and have people who often don't have the latest information. And so, how can a company really stay true to the vision of information at your fingertips?

Well, the answer is that they've got to have a streaming media infrastructure, and they've got to take the meetings, the presentations, the information, and not only have that online, but have it online in a very interactive way. We think that will revolutionize how people spend time in the workplace by bringing streaming media and Microsoft Office together into a combined vision.

So let's spend a second and look at the requirements in this space. Well, people want to save time, they want to stay up to date, they want to share things with their customers, but not inundate the customer with things that the customer might not be interested in. And they want to do this in a way that doesn't require huge investments. And so you can look at this as a learning tool, you can look at it as a communications tool, or you can look at it as a marketing tool, so that when somebody is wanting to find out about your product you present it in the best possible way, by having up on your site streaming media type presentations.

Now, digital media in the workplace is something that's already happening today. And yet it's only about 9 percent of companies that we go out to are taking advantage of it. Even though it's 9 percent, I'd say they're just scratching the surface. We're tried to make ourselves a model of this activity by having all the key meetings easily available, and people are coming up with lots of ideas once that tool is in place of how they could use it in ways that we really wouldn't have expected. And so we're really pushing this as something, and really excited to see the payback that the pioneers are getting here. I'd be so bold as to say that over the next three years the majority of companies will decide that having streaming media capability for the information they share, internally and externally, will be of critical importance.

Let me now ask Dave Fester to come on out and let's show some examples of what we'll be able to do for knowledge workers.

MR. FESTER: Hi, Bill. So, as you said, many companies are using streaming media today in their organization to enhance enterprise communications. And, you know, we certainly use that at Microsoft where we've had executive presentations that you have done to our entire workforce, and that's been great. We're also had a number of product rollouts internally at Microsoft. Well, HP has been doing something very interesting. They're a global company and they've been working with Network 24 to devise this interactive Intranet solution. So let's take a look.

So today you can go up to their briefing room, and on their briefing room you can give, or get live presentations or on demand presentations of product roll outs, or streaming concepts right at your desktop. So I'm going to go ahead and view the Webcast right here. So what we see here is the video and we see it's synchronized with PowerPoint. What's nice about the solution that Network 24 built for HP is it's an Interactive solution. So the presenter is live here, and she's going to be talking about the Omnibook. And you'll notice that the slides here are going to, in fact, automatically change to give me a level of interactivity. So in this example they're asking me if I've read the prebriefing materials. So I'm going to say, no, I haven't done it, haven't had time. I'll go ahead and submit that. Those are collected in the SQL Server database in the back end, she can view those responses and, in fact, adjust her talk live based on the people that are viewing the content. Additionally, I can submit a question at any point in time. So I might say, is this available today? I'll go ahead and submit that. So she can, again, adjust her talk based on the questions that I have and take that appropriately. At the end of the Webcast I can also take a survey. So I'll go ahead and click on the survey. Hey, maybe it helped me with my product knowledge? Yes, I'll go ahead and agree, and submit that off.

Now, that information goes, as I said, into a SQL database. So as the administrator, I could also go take a look at what the responses were, who logged in, what bandwidth they came in, what were the responses and so forth. So this is what the administrator would see. So this is on the Omnibook, and the briefing room. And I can proceed to take a look at the attendance, first of all, who was live, who was viewing it on demand, what people came in at certain bandwidth, so we see broadband, or ISDN, or even a modem. I can also take a look at the surveys. So we notice that 66 percent did not read the prebriefing material, so that gave her an opportunity to enhance the content based on what was coming down. So that's pretty good. That's what HP is doing today, a good interactive solution with streaming media.

MR. GATES: One thing I think that we're really going to be able to surprise people with is, once you have this video in digital format, there's a lot of rich things you can do with it, with the right software. In fact, we've had our research people thinking about digital video for quite some time. And I want to show a little bit here, some stuff that's not shipping yet, but that we'll have out in the future, that lets you deal with this video in different ways. Imagine that somebody gave a presentation, and that you knew you were interested in part of that presentation, but not the whole thing. So let's go ahead and call that up. What we've got here is actually Nathan Myhrvold, and he's giving a little bit of a talk about how software is always expanding.

So you could just watch this like people do today. You could start at the beginning and watch it all the way to the end. What if you didn't quite have enough time? You can see this presentation is about six minutes, what if you only wanted to spend two or three minutes? What we've done is we've created a skim capability, so let's listen to this at 150 percent and see what that sounds like.

MR. FESTER: So the one thing that's interesting is, when you play that back in an advanced speed, normally you'd hear the video presenter or the video, in fact, speed up as well. So what's interesting about this is, in fact, it preserves the pitch rate of the presenter. Let's go back to the beginning, it's at 150 percent.

MR. GATES: What happened there is that the software took the pauses and actually was able to spread the audio out across it. So even though you're watching at 150 percent, you're still able to hear everything that goes on. Now, once we get up to about 200 percent, somebody like Nathan, it gets a little tougher to hear what he's saying. We can do more than just increase the playback speed, though. We can also skim the materials. So, for example the software has noted exactly where the slides are changing, it notices where there's long pauses, where the pitch in Nathan's voice goes up. And so it's been able to mark different places on the video to show where the new slides come in, and so you can skip around that way, or you can simply pick a skim level. It's a six minute presentation, if you pick normal of course it's six minutes, if your skim level is low you can see five minutes, if we pick medium we see two minutes. So let's just go ahead and play that, and you'll see that what it does. Of course, if there's anything during the skim you see that you think is interesting, and you want to see it in depth, you can just click and see the full set of information there.

So, the basic idea is that a meeting that's recorded in digital form, or a speech, you can get at the part in the show you care about a lot more easily than if you have to sit there during the live presentation.

Now, another part of that that we want to show is the idea of annotations, being able to mark a video so you show the parts that are of particular interest, show the parts that relate to various topics. Let's say it's a speech that somebody has questions about, somebody can go in and put their question into the part of the speech that they're interested in.

So, let's call that up, this a video environment, just like you saw in that HP example, but here we've added in the capability that as you're watching it, you can see the annotations that have been made on the video, that's what this lower left-hand window is, that lets us navigate and as we navigate in, we'll see the annotations that are already there. We can also create annotations of our own as we go through this.

MR. FESTER: I might jump to performance improvements very rapidly. I might like to see some of the questions that are related to the performance improvements. So, when I click on questions, it will actually show me a list of those questions, and those are questions that have been directly tied to certain video segments within the overall video. But I know that you're doing the keynote at the upcoming Professional Developers Conference. I think it would be a good idea to showcase some of the performance improvements that we're doing for Windows 2000.

So, what I'm going to do is, I'm going to go out there and create a new private note. I'm just going to call this "perf," and I'll send this to you in email. And I'm going to annotate that video, I can put any type of text that I want to. And I'm going to pick a part of the segment that I think is particularly interesting for you to view so that we can make those points in your next keynote. So, I'll send about that amount of video, and go ahead and click okay. What happened is, it sent a link to you in email. Let's go ahead and open up. You can imagine now in your office looking at your email, here's the email that you got. And if I simply click on that link, it opens up the video segment that I annotated. It directly went to that point in time inside of that video segment so that you can learn just the information, or understand the information that we need to in the performance improvements.

MR. GATES: In the same way that the Internet has allowed people to go out and find text information, you'll be able to find the parts of the video information that's of interest. And you'll see in email the same way that people that are sending around Word documents or spreadsheets, they'll be sending around these links to very rich video. We think there is a direction here that makes digital media in the workplace something that really can save a lot of time and money. In fact, I think in the HP example, they found that the travel they saved in just a few months more than paid of the system. I think there's a study out about that. That is a great showcase example.

MR. FESTER: Okay.

MR. GATES: All right. Thanks, Dave.

MR. FESTER: Thanks a lot.

MR. GATES: Well, let's now move to the other domain we talked about, and consider how this is going to change the way that consumers deal with entertainment. Of course, music today is in a variety of formats. You've got to keep your discs around, remember where they are, catalogue those, pretty much listen to the entire disc when you put it in, and it's different in different places, the car, the stereo. And the PC is just beginning to be a part of that. The PC is coming into the picture partly because it lets you go out to the Internet and find the information, it makes it easy to organize the information and actually have playlists that you'll be able to select and connect to. And then you have all the great radio innovation that's taking place right now out on the Internet. So, in a way the PC, for these Internet lifestyle people, the younger generation, is becoming the way they really think of dealing with music.

The way we see this advancing is, we see all the devices either by connecting up to downloads, or perhaps even in a richer way through a wireless connection, they'll all be able to go to your master library of rights and music that connect back into the Internet, and give you at any time, without finding the media, or moving it around, and in a totally personalized way get exactly the music that you care about. And there's so many neat, new things going on in this space. We had a lot of choices of what to demonstrate here, but Dave and I picked a few things that we thought would just show the trends and the improvements that have been taking place.

MR. FESTER: I think the first thing that you want to do is, we're running the browser on my PC, and I simply want to go out there and acquire some music. So the PC is a great place to store and acquire and find the music that's out on the Web. So, I'm going to go ahead and go to the Rioport home page, and I can pick any one of the songs that we see here. I'm going to go ahead and pick Martina McBride. And when I pick that, it gives me a little bit of information about Martina McBride. What I'd like to do is, I would like to go ahead and download that directly to my PC. Well, I'm going to have to pay 99 cents for it, so I'll just simply log on.

MR. GATES: Not bad.

MR. FESTER: Not bad, pretty cheap. I'll go ahead and submit that. When I do that, it brings it down to my PC, digitally unlocks it because it has digital IT management on it, and starts to play it. So, here we see the song played in the Rioport audio manager. The audio manager allows us to play the songs, it allows us to categorize the songs, copy additional songs from my CD or even transfer them to devices. This is a player and jukebox that was build on the Windows Media SDK and, in fact, there's a number of players that have been built on the Windows Media SDK. It's something that you can easily get from the web, and many players have been out there, like Winamp, or Sonique, or jukeboxes like Music Match.

I would also like to show a technology demonstration of the next generation media player that Microsoft is also working on. I'll just switch over to this machine here. We have a mouse here. Okay. Well, I guess we won't show that right now.

The concept is, we were going to play Sarah McLaughlan running in our player, but I think the next thing that we want to do is, we can play our music in a very, very rich way, but how can you also take that music with you. So, I think you saw some of the announcements that we made at WEbnoize where a number of devices are coming out with native Windows media support. So with native Windows media support on these devices, you get two hours of play time versus MP3 where you'll get one hour of play time for the same quality.

So, here's an example of the Diamond Multimedia RioPlayer, so there's a number of devices that we have here. One that's also interesting is the new I-Jam player. So, I'm just going to put these here so that you can see these. Here's the Creative Labs Nomad II. We announced today, along with Thompson RCA that the LYRA, the next generation LYRA will, in fact, support Windows Media as well. And at WEbnoize we showcased the Sony Music Quip to have Windows Media support as well. So these are many devices that you can simply put Windows media files on them, take them, play them wherever you are, in the bar, or in your home, or in the sports place, anywhere you'd like to play your music, you can take that with you. Very simple.

MR. GATES: I think we've got the player here, if you want to just give us a quick glimpse of that.

MR. FESTER: I would. So, let's take a look at Sarah McLaughlan. This is, again, a prototype of our next generation player. The first thing that you notice here is that you see the actual album art inside of the player, but I also have some additional things that I can see, like level bars, these are some nice visualization techniques that I can apply, like wave bars, or spikes, or 3-D panes. So I can experience my music in a fun way. So maybe late at night, I really enjoy that even more.

I can also open up my equalizer. So, here I can quickly go to different presets that I might have based on the different types of music that I might listen to, and I can adjust that appropriately. We can bring up the volume a little bit. And of course, I can adjust those manually as well. When I'm done, I can just simply tuck that away.

So, this illustrates the whole concept that you can simply build unique players on top of our Open Windows Media SDK. There's a variety out there and we're obviously hard at work on one as well.

So, not only can I play this music on the portable devices, I'd also like to be able to extend that same music that I have on my PC to other areas in my home. So, today, Sonic Box is announcing the Sonic Box IM Band Remote Tuner. This allows me to, in my house, play all of the tunes that I have on my PC in any room that I have inside my house, the living room, the kitchen, wherever I like. And what it does is, it plays my play-list out of there, or I can also play the Internet radio. So, let me just turn that on. How does it do this? It's got a little device that connects to my PC in the USB port and transfers or transmits the songs across any stereo that I might have inside of my house. So, what we're listening to right now is that same play-list that's off of my PC. Here's Martina McBride that I downloaded, and we're simply listening to this in my living room across the stereo. Turn up the volume a little bit, so I'm remotely turning that up as well through this device. And I'll just switch through my play-list very rapidly. From the convenience of my living room, I can listen to the songs that I might have on my PC that reside in my den.

I can also switch this very easily and simply go listen to Internet radio. So, I'm going to listen to Q101 which is in Chicago, right here from San Jose, and listen to the World Wide Web of Internet radio that's out there and available today.

The next thing that I'd like to quickly show is, how can you extend that even further. So many people have used a Compaq Flash before. Well, we can simply copy those same songs to the Compaq Flash. Again, this is a 64-meg Compaq Flash. I can store about two hours on it. And we've got a technology demo of the next generation car radio from Microsoft, the AutoPC. So, I'm simply going to take this Compaq Flash, pop it into the reader, and power on my car radio. I'm going to switch over to the Compaq Flash player, press enter, and it's going to start playing those same tunes. And I'll turn up the volume.

So, again, the whole concept is, you can extend your PC play-list to a number of devices, portable devices, any room in your house, and now to your car, and Windows media is playing on all those.

MR. GATES: Good work. It looks like it will be easy to get music wherever you go, and exactly the music that you care about.

Well, now let's touch on video. Video, of course, has been an even bigger challenge because of the bandwidth and storage sizes involved, but I really think here we're also on the threshold of really explosive growth. The PC historically was associated with lower resolution video. When you'd go to trade shows over the last 10 years and somebody thought it was amazing that they'd have a little video at all. Well, this year we've gotten the quality of the codecs up to a level where it really is TV quality or better, and now we're getting the interactivity and the personalization is being brought into the picture.

And so, what we see is that all these different devices, whether it's the digital set-top box that will support streaming media, or the digital cameras that will be acquiring personalized content, or the PC, they'll all work together with digital video. And you'll have the ability to edit that video, title that video, share it with other people very easily, and to have the video be essentially annotated video so that if you want to get more in-depth information on a sports show you're watching, or know about the Web site that relates to the music video, all of that will be embedded, and so you'll get rich functionality that the classic TV video experience would not have provided.

Now, we've got some real firsts that we want to show in this video area. So, Dave, what can we show people about how video is moving into the mainstream?

MR. FESTER: Okay. So, I'm going to give the first public demonstration of Internet streaming media down to a cable set-top box. So, this is one of many, this is a General Instrument cable set-top box. And these will be primary devices in the home that content providers can now target their additional content. So what you do on the PC, you can now have an additional audience and reach on the television that are running the cable set-top box.

So, let's just go ahead and open this up. This is a set-top box that's running Windows CE. And I'm going to enter in -- again, this is a technology preview -- I'm going to enter in the infamous TCP/IP address, something that all of you do every single day, and just press enter.

MR. GATES: We're streaming over an IT network. I think this really underscores what was said about people not being limited to any number of channels, because from that set-top box, you'll be able to go out and get all the video that's being published on the Internet, and see it exactly when you want to.

MR. FESTER: So, I would like to show you an additional thing. You talked about broad band today. And Microsoft is introducing a new place on WindowsMedia.com. So, many people have gone up to WindowsMedia.com and have experienced radio and music and downloads and movies, but we have a new section today called Broadband. When you go up to Broadband, you'll see our Broadband Guide. But one of the first things that people are wondering is, well, if I don't have a cable connection, or if I don't have DSL, how do I get it? So, the first thing that we can do is, we have a little guide here that you can just simply enter in your zip code, and click go. And it will immediately show me all the cable or DSL providers in my area that I can quickly sign up. So, I can call these guys today, and they will come out to my house and give me access.

Once I have access, instead of just going to a typical Web page to show me today's highlights, we'll have right on the Broadband Guide a little video stream that allows me to see today's highlights running Windows Media. So that quickly I can see the highlights that I might have of the day, and those will change every single day.

At the center of this Broadband Guide, you notice a large remote control, and these feature the featured content providers directly here on your remote control. And, of course, you can go program those to your choices, or you can take a look at your history.

I would like to show you one in particular, which is Launch.com. Launch.com has been a great broadband provider for some time, and they offer a number of top music videos on their Web site, in fact, today. And you can go out to their Web site and see music videos on demand, any point in time.

So, normally today if you watch music videos on the television, you have to wait for your video to come around in order to see the one that you like. But my daughter is an example, she really likes Britney Spears, so she can simply play Britney Spears at any point in time many times during the day, sometimes too many.

The one thing that Launch.com has done is, they have inserted and ad at the beginning of their video, so this demonstrates a new business model that many people can do to promote and add advertising value on top of the video. Let's go ahead and bring that into full screen. So, you get high quality content directly down to your desktop any time you want it.

MR. GATES: What kind of data rate is that?

MR. FESTER: I believe this is 300k plus.

MR. GATES: Super.

MR. FESTER: So, as I'm traveling around the Internet viewing particular sites, another company called Engage has a profiling technique. This is an anonymous profiling technique. So, as I go to sport sites, like ESPN, or MSNBC Sports, or baseball or football, I can browse those particular Web sites, but Engage, in the background, is, in fact, collecting this profile information anonymously about what I'm doing on that particular Web site. And they can collect this anonymous profile, and then proceed to offer a targeted ad directly inside of there.

So, let's go to ZDTV. So, imagine I've gone around to a number of sports sites, and I then proceed to go to Internet Tonight from ZDTV. And when I click on that, because I as interested in sports sites, and it knew that, it automatically inserted a targeted ad about Gatorade directly inside of the video before it starts playing. So, again, new business models and new opportunities. And now I'm on Internet Tonight.

Let's go back. One of the other interesting companies that have been producing some very high compelling content on the Internet is Entertainer. So, let's go ahead and take a look at their Web site. Today, I can log on to the Entertainer Web site -- I'll just go ahead and do that real quick -- and see full length featured movies on demand, directly on my desktop at any point in time.

So, I'll go ahead and click on movies and what's new, and you'll see here that they've profiled three new movies, and they start previewing the first one, which is The Matrix. I'll go ahead and put that into a little bigger screen here. Now, once I've seen the preview, I can get more information about that particular movie. So, it came out in 1998, it's 140 minutes, it costs me $4 roughly. So, I'll go ahead and watch it. So, I'll watch it now. I'll assume I've already put in the charge card and all the information appropriately. And then that's streaming down to my desktop on demand. So, I can now, in the convenience of my house, simply watch any movie that's out there that Entertainer makes available. What's nice about this is, I can also fast forward to any point in the video. And I have also controls, if I need to, if I need to stop and go take care of something and come back.

Additionally, not only can I see movies, I can also experience some music. So I'll just go to the what's new here, take a look at music, and top 40. They've got a number of music videos out there, so Sting recently released his music video, and we see here Sting's video. So, again, on demand at any point in time, very high quality content, certainly based on your broadband connection. Okay. So those are some of the things that you'll be able to experience right on your desktop today, if you go to the broadband guide, you'll immediately see that content today.

An additional piece that we've been working on at Microsoft is a new set of technology that's going to be in the next version of consumer Windows that will ship next year, and it's a product or a feature that we call the Windows Movie Maker. The Windows Movie Maker, this is the first time we're going to demonstrate this publicly, allows you to easily take any of your home movies and quickly transfer those to your PC. So like you have the music jukebox today, where you can pop in a CD and transfer the contents to your hard drive, and keep those in your category -- in your library and categorize those, you can also do that with movies.

Let's go ahead and open up the Movie Maker. I can organize my movies, I can record them if I need to, but once I have those into my PC, we'll see those as my collection. So I've got a number of collections that I have, where I've transferred my home videos directly to my PC, and I keep them there. And so my grandmother's birthday is coming up, she's about 85 years old, and she's really excited about the fact that I went to Hawaii, and she really likes to be involved with my children, so that she can see them. And you'll notice here that I've got my collection of Hawaii, and I'd like to share that video with her.

The first thing that came up, however, when I clicked on the Hawaii collection is Windows Movie Maker automatically categorized the shots inside of that overall video tape. So we have shot detection inside of there, that allows you to automatically detect when I turned on or off the camera, or, in fact, changed particular scenes. So as we see that, I can just simply drag over a scene at any point in time, and start playing that particular scene. So this is out on the balcony of the place we stayed at in Hawaii. And if I'd like to include that in a video clip that I might show my grandmother, I'd just simply drag it down to the story board down below.

I'd also like to grab another little scene, as an example, one thing as I come down to the bottom you'll notice, I have a little black screen. Unfortunately, sometimes with the video camera I can point it down to the floor, and I accidentally press the record button. I don't know if any of you have ever done that, but you can easily just simply delete that out of your collection, and it's easily gone. Now, my grandmother really likes flowers, I'm going to go ahead and grab a flower here, drag it down. But, I think grandma would also really like to see my new daughter Rebecca. So I'll go ahead and bring Rebecca down into the video clip. I've also taken a little digital still that I can include at the beginning of this overall postcard that I'm going to send her. So it says, happy birthday, Grandma. Let's go ahead and play it.

This is all stored compressed, that's why it makes it so easy to work with the video. And it's real time editing. So I'll go ahead and stop that. One of the things that I need to do, I think, grandma would probably be more interested in seeing my daughter first, then maybe the flower, and I think I'm done. So once I'm done with that, I can quickly publish that out. So you can get all your videos in, edit them very rapidly, and then share them with friends and family. So I can publish this out to a file or a file server, if I have, or I might just simply send this in email, or I might even post this out to the Web. I'll go ahead and just save it real quick. And we'll finish it out.

Now, when grandma receives the email that says, here's the video that you have, or here's a link to a Web site, she can simply go out to that Web site, double click, it will automatically fill it with a nice Web page, and there's the video. So again, Movie Maker makes it very easy for you to take your videos online, and quickly and easily share those with anybody around the world.

I also would like to take that same video, and move it to a little portable device, so I've got the Casio E-105 Cassiopeia, that's running Windows CE, and I've moved that video. Let's me just zoom in a little bit here. Hopefully you can all see that, zooming a little bit more. Let's go ahead and play that. Okay. So there's that same video running on the Casio player, as well. So I might share it on the web, but it's also kind of nice when you're in live person with grandma to simply say, here's the video right here on this little device. So the whole goal is to take Windows media on a number of devices, and this is an example of that.

MR. GATES: Cool.

MR. FESTER: Great, thanks.

MR. GATES: Thanks, a lot.

So all the great things you see going on with audio, the customization, the ability to annotate, send it around, those same things are happening with video. And the cheap digital cameras, the higher bandwidth connections, and some of these software tools that we're going to build in as standard activity centers into Windows will make that a lot easier than it has been.

I mentioned several times that getting this broadband to work end to end is a big part of this. And it's impressive the number of companies that are focused on doing this. The map of the United States we have here shows the different cities that we have broadband partners, cable and DSL companies, that have attractive offerings, with end to end broadband. In fact, today we've got I-Beam and Interview Online as content distribution networks. And what they do is they go out and take any streaming media that's going to be watched a lot of times on a delayed basis, and make sure that their caching servers out in the different regions have been pre-populated with all of that content. So that if you have that high speed connection, there's no bottle necks between you and actually watching those videos and getting the full bandwidth there. So it's efforts like this that are really going to come together to make this a mainstream scenario.

In fact, we have a lot of people saying to us nowadays, can this digital media infrastructure support the kind of audience size that we see in the world of cable and TV? In fact, there's a lot of neat software work that's going on that will make that possible. First of all, the ability to have multicast streams, so you can have lots of people connected up to a single stream. And the increase that we have in the number of streams that we can bring out of a server. In fact, a lot of the server manufacturers are pre-configuring their machines with all the right things, including the software we provide. Today it's typical with a well-configured server to be able to get 2500 simultaneous streams. That's a huge increase from what was possible just six months ago. But, we do see in our road map over the next couple of years that we'll be able to raise that fairly dramatically, and get up to these very, very big numbers.

A big focus for us has been the reliability. People don't want their videos interrupted, and so we're building the infrastructure so you can manage it, putting redundancy in where necessary. So that if any machine goes down, in a way that's completely transparent to the person who is watching those screens, you'll be able to have that constant experience. We're getting a lot of great feedback from the people doing these networks, what they need for the manageability software, and so that's another area of heavy levels of investment, so that they can manage the loads that they have, spread the work around between different machines, and make sure that their service levels are very, very high.

So I'd say, in summary, I don't see anything holding back this industry. All the different skill sets that need to be engaged to drive this forward really are jumping in, and doing their best work. Some of the enabling elements are going to improve very radically in these next 12 months. Top of the list for us, of course, are the new shipments of Windows. Millennium, which will include the movie making capabilities, a feature that we saw, and of course Windows 2000, that should go final in the next month, and has got the latest media capabilities just built in, so that nobody has to do the installation of that. The ability to connect up these devices with Universal Plug and Play, the wireless networks, standards around what are the formats on USB and 1394, starting to bring in voice capability, so you can simply tell your PC, or tell your little player device exactly what music or videos you're interested in. That's based on research that we and other people are doing, and will really be a standard PC feature over the next couple of years.

Getting broadband out there may be the toughest of all the things I've talked about, because that requires building infrastructure, because that requires the right regulatory environment. If we get outside the United States, things are by and large moving a little bit slower than they are here. So we're really bootstrapping off of all the people who are connected up at work, and who are connected up in the educational environment, now driving that more than a million homes here in the U.S. to be the pioneers there. I do see very rapid growth in those broadband connections, and a lot of the investments we're making are to help people drive that forward as fast as they can.

At the end of the day, what it's all about is the content. We are simply a tool provider to allow that to happen, whether it's the super popular content that millions of people watch, or just the home videos that only you and your relatives would care about. It's our commitment to provide the software to make that all very, very easy to get to. And we're very excited to be working in partnership with all of you here.

Thank you.

(Applause and end of event.)