CES '08: Gates' swan song reveals 10M XBL members

LAS VEGAS--As has been the case for years, the Consumer Electronics Show kicked off Sunday with a keynote address from Bill Gates. For over two decades, he has loomed large over the consumer electronics industry, thanks to the dominance of his company's PC operating software--and, by default, PC games.

Since 2001, Microsoft has also been a player in the console space courtesy of the Xbox and its successor, the Xbox 360. This year, the latter platform is of particular interest, given a swirl of rumors that Microsoft would use the event to introduce an enhanced 360 with a built-in HD DVD drive.

Breaking with its traditional wall of silence, Microsoft adamantly denied to GameSpot that it was making such a console. However, speculation lingered that an HD DVD-equipped 360 could be in the works, which would be courtesy of Microsoft licensing its console's operating system to HD DVD-maker and Sony archrival Toshiba.

Nevertheless, excitement was in the air as 1,000-plus attendees took their seats in the Venetian Resort & Casino's Grand Ballroom to hear Gates' speech. Many had waited for hours in a series of stuffy corridors outside the expansive hall, surrounded by flexible barriers manned by the same stern, polite, and massive bodyguards who were omnipresent at Gates' surprise Electronic Entertainment Expo 2006 appearance.

ABC, MGM on XBLM
Unlike virtually every E3 address, Gates' CES keynote started exactly on time, with a flashy multimedia display touting the convention's luminary speakers and 140,000 attendees. But just as Consumer Electronics Association CEO Gary Shapiro took the stage to introduce Gates, Microsoft sent out a press release touting one of the highlights of his speech: The ABC and Disney Channel television networks would be releasing high-definition video content via Xbox Live Marketplace. The offerings will include such popular shows as Lost, Desperate Housewives, Grey's Anatomy, Hannah Montana, and High School Musical.

The news was surprising because the two networks' parent company, Walt Disney, releases high-definition video only on Blu-ray Disc. Blu-ray's main competitor, HD DVD, is supported by Microsoft, whereas Blu-ray Disc was created by Microsoft's rival Sony. Sony also owns the film studio MGM, which announced today that it will be releasing some of its most popular classics--including Dances With Wolves, The Terminator, The Silence of the Lambs, and Rocky--on XBLM. The shock announcement means that, via proxy, the PlayStation 3 maker is releasing video content on the Xbox 360.

GATES' GOODBYE
Before the news could sink in, Gates took the stage to reminisce about technological developments since his first keynote address in 1994. He touched on such subjects as the increasing penetration of mobile phones, which have hit an estimated 40 percent of the US market.

"The first digital decade has been a great success--but this is just the beginning," boasted Gates. "There's nothing holding us back from the next digital decade."

He then addressed his decision to stop working at Microsoft full-time in July via a comedic video short. The several-minute segment was surprisingly good-natured, showing him working out with Matthew McConaughey, and dropping rhymes in Jay-Z's recording studio. "Let me get this straight, Jay. You can retire and unretire?" he joked with the hip-hop mogul, who has quit--and rejoined--the music business several times.

Then it was on to calling singer/philanthropist Bono (pictured above), whom Gates asked if he could join U2 because he got a high score on Guitar Hero. After that, the executive auditioned for a role in the next Steven Spielberg film and asked to be both Hilary Clinton and Barack Obama's running mate. "Who is this? Bill? Bill Clinton?" asked an incredulous Obama. Finally, after some ribs from Microsoft software architects--"Bob the Paper Clip from Office? All Bill's idea!"--the segment ended to uproarious applause.

A WINDOW INTO WINDOWS' FUTURE

Gates retook the stage to give some predictions for the "Second Digital Decade." He foresees high-definition displays everywhere. Not just for videos and games, but in a variety of new applications, including 3D virtual maps and 3D virtual social-networking devices. He then said he expects the information that these devices will provide will be taken for granted because of how instantaneous and convenient it will be. Once users' IDs are established, they will have access to all their information, which will automatically be tailored to their context or location.

Naturally, Gates feels a key building block of the next digital decade will be the Windows platform. As such, he ran down the numbers: PC sales grew by over 13 percent in 2007, with double-digit growth predicted for next year. He said that since it went on sale last year, over "100 million people now use Vista." Now over 420 million people use Windows Live, with 20 million using Windows Mobile--a number he expects to increase as mobile phones and devices grow more popular.

Gates then introduced Mika Kramer, director of Windows Client Mobility, for some comments on how the software has simplified her life via having one ID over various platforms. She showed off how the Windows calendar can overlay and check for availability between friends, and invited Gates to a snowboarding party. Gates then took the stage to show off a tabletop-size tablet with a PC-style interface that allowed him to design his own custom snowboard by touch, Minority Report-style.

Next, the outgoing executive announced that Microsoft's MSN network had been chosen by NBC as the sole Web-based video distributor for the 2008 Beijing Olympics. All broadband video from the event--some 3000 hours' worth--will be available via MSN, using Microsoft Silverlight multimedia technology. NBC and Microsoft are already partners in the MSNBC cable television network.

GAME TIME
Then, at long last, it became game time. Robbie Bach, the chief of Microsoft's Entertainment and Devices division, took the stage to tout his wares. He began by doffing his hat to Windows and the PC, which "remains the biggest gaming platform by far." Though he said Windows Vista was a "fabulous platform for gaming," he did not mention any specific numbers.

The subject quickly turned to the Xbox 360, which Bach reminded has shipped 17.7 million units worldwide to date. From January to November 2007, the console generated $3.5 billion in revenue, which the executive claimed was over $2 billion more than the PlayStation 3 and $1 billion more than the Nintendo Wii. He said the "spend on Xbox 360 games was more than the spend on the other two [platforms] combined." Bach asserted these numbers made the 360's 2007 performance the "biggest year ever in gaming history."

Bach also revealed some figures about the 360's online network, Xbox Live. He said the service now boasts over 10 million subscribers, which is "six months ahead of schedule." He said the boost was courtesy of the addition of over 2 million subscribers over the holidays, when Xbox Live experienced widespread problems. Bach studiously avoided any mention of the problems, Microsoft's apology, or the subsequent lawsuit filed against Microsoft over the outages.

Bach then returned to the aforementioned MGM and ABC deal, saying Xbox Live Marketplace has twice as much high-definition video content as any cable network. With today's deal, some 35 film and television studios support the service. He also announced that, after Microsoft introduced the Windows Media extender service with the Xbox 360, it licensed the technology to Hewlett Packard and Samsung. They will introduce their own Windows Media Extender devices later in the year.

360 IPTV...in UK
Finally, it was on to the matter of IPTV for the Xbox 360. At CES 2007, Microsoft announced it would be introducing its IPTV service, Microsoft Mediaroom, to the Xbox 360 by the holidays. Then, last October, it said that the service would launch sometime in 2008, when it would announce partners that would offer the service to 360s.

Today, Microsoft announced the first such partner--which will be of major significance only if you live in the United Kingdom. Though Microsoft Mediaroom for Windows has 1 million users via service providers such as Deutsch Telecom and AT&T, British Telecom is the only service provider now confirmed to have plans to offer the service via the Xbox 360. Sometime later this year, BT will begin selling IPTV-equipped 360s as "set-top boxes." No service providers for the US or any other territory were announced.

BIG ROCK ENDING
Bach concluded by talking about Say and See, a voice-command search service with GPS-enabled Windows mobile phones. Bach then brought Gates back onstage for more Amazing Creswell-like predictions. The outgoing executive pulled out what he said was an experimental device that used to show off some technology in the works at Microsoft. He pointed the device at Bach, whom it recognized via facial recognition. After reminding Gates that Bach owed him $20, the device then located a nearby restaurant by recognizing landmarks from a street-level view via a fake Las Vegas skyline.

Then, at last, was the semi-grand finale to Gates' keynote address. After showing a new file-organizing interface for an unnamed Vista successor, Bach challenged Gates to a Guitar Hero III match for the aforementioned $20. He brought out a ringer, the svelte Guitar Hero champion Kelly Leone, who played a few simulated lines of Guns-N'-Roses' "Welcome to the Jungle." Gates then brought out his own ringer--former Guns-N'-Roses guitarist Slash. With Gates, Bach, and Leone all mock-rocking next to him, the current member of Velvet Revolver blazed out a real rendition of "Welcome to the Jungle," closing out Gates' tenure as CES' main keynote speaker with a blazing heavy metal finale.