Gates ‘Soft sell

Tech titan rolls out red carpet

Bill Gates is trying to become Mr. Hollywood.

Gates came to Los Angeles on Tuesday, making a glitzy pitch to put Microsoft at the center of the growing digital entertainment universe.

Speaking to a packed house at the Shrine Auditorium, the software giant’s founder put on a Hollywood-style presentation complete with multiple sets, integrated product marketing and a celebrity appearance by Queen Latifah.

Coming three months after the company appointed TV vet Blair Westlake as its Hollywood liaison, the purely entertainment-focused event with Gates shows how seriously the company is taking its place in digital media. At stake is the multibillion-dollar future of Hollywood: Microsoft wants to put Windows applications at the center of entertainment, both behind the scenes and in consumers’ homes.

In an interview, Gates explained that media is one of the tech company’s top long-term priorities, taking a growing percentage of its R&D budget compared with the revenue it produces.

“We see some upside for advertising revenue streams, subscription revenue streams, the next generation of Xbox and other home devices we think are going to be very good products for us.”

Homing in

But with a number of new products ready and major manufacturers using its software, Microsoft is making its first big pitch to create the digital home today.

In his “digital entertainment anywhere” presentation, Gates showed off new versions of Microsoft’s Windows Media Center software to manage television, movies and music in home computers, as well as numerous portable devices for listening to music and watching videos.

Many of Microsoft’s top partners, from computer manufacturers like Dell to content providers such as Movielink, were on hand to latch on to the publicity.

While the company has sold Windows Media Center since 2002, it has thus far sold it to only about 1 million early adopters, and its 70-plus portable music players combined lag behind Apple’s iPod in market share.

At a bigger level, Gates’ goal was to promote what the company calls PlaysForSure and competitors might call “Everything Windows,” a new logo Microsoft partners will start placing on products to show they’re compatible with Windows Media content.

Company’s promoting it as a way for consumers to ensure there won’t be compatibility problems between devices. If successful, it will help Microsoft dominate digital entertainment at every stage and cut out competitors like Apple and RealNetworks.

“What we’ve got here is an ecosystem,” Gates said to the crowd. “It’s got a platform, it’s got partners, and it’s got lots of choices. It’s not just digital music but digital media.”

Upping studio presence

Speaking to reporters afterward, exec emphasized that Microsoft is working behind the scenes to lure studios and labels to use Microsoft software and digital rights management technology to handle their content and make Windows part of the process as early as possible.

“The level of dialogue between us and the studios is much higher than it has ever been, and that includes (CEO) Steve (Ballmer) and I talking with the heads of studios,” he added.

Gates said one of his primary concerns is advancing the market for Internet movies, where Movielink and CinemaNow have lagged behind online musicstores in large part because of the late windows for video-on-demand and restrictions on how long consumers can keep files they download.

“We still don’t have the breadth of videos we think we need and the dates for Internet availability there should be,” Gates argued. “But we’re on a path to get them more comfortable with that. We’ve got to have more content, and that’s our challenge.”

Looking to the future, Gates spoke about his push for subscription-based models. The company’s new digital rights management software allows devices to manage entire libraries of content that consumers rent, rather than buying songs and movies individually. If successful, subscriptions could transform the economics of the entertainment industry.

He also hinted at just how entrenched Microsoft hopes to be in the delivery of digital media, discussing the company’s work on a service called TV2. It would deliver personalized, high-definition video streams over the Internet to consumers’ homes and enable new forms of advertising tailored to the viewer.

“That is an amazing thing,” he said of the future product. “But it’s over a period of many years because the infrastructure of cable and telcos has to be built out.”

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