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FROM THE HOLLYWOOD REPORTER: Out of the mouth of Gates

5 Sep, 2002 By: Staff Reporter


As chairman and chief software architect of Microsoft Corp., William H. (Bill) Gates is the most famous name in the digital world. The company he co-founded in 1975 had revenue of $25.3 billion for the fiscal year ending in June 2001 and employs more than 40,000 people in 60 countries. In 1998, Gates handed Steve Balmer the reins in order to spend more time with hands-on developers and others that shape Microsoft's future, an effort the company supported with $4 billion for research and development in the current fiscal year. Gates spoke with The Hollywood Reporter's Chris Marlowe to explain how technology and entertainment affect each other and the consumer.

The Hollywood Reporter: Windows Media 9 Series is being called the next-generation digital media platform. What does that actually mean, and what are the implications for the entertainment industry?

This really is a very exciting and significant release. Our goal in designing Windows Media 9 Series was to create a platform with significant new areas of opportunity for the industry and one which dramatically enhances the richness and usability experience for consumers. Right now, with the DVD, the film industry is in the middle of the fastest media adoption cycle in history. The Fast Streaming and new audio/video technology in Windows Media 9 Series can provide the film industry the opportunity to deliver high-quality streaming previews of DVD titles, with full surround sound, that starts playing instantly when the user clicks to play the stream. That sort of experience and instant enjoyment can help stimulate retail sales of DVDs. In the distribution and exhibition area, several independent filmmakers already have embraced the new platform to present their content on full-size digital cinema screens. They selected Windows Media 9 Series for its ability to deliver high-resolution video and multichannel audio at relatively small file sizes. This, combined with the robust and renewable security offered through Windows Media Digital Rights Management, makes Windows Media 9 Series very attractive for future theatrical distribution and exhibition scenarios, where shorter runs and more targeted distribution plans become profitable. These advances are exciting for the industry as they enable filmmakers to put their money where it belongs -- into producing the best film possible -- rather than needing to spend every penny available to go out and market it. We are also working with the music industry on providing secure subscription integration into the latest player, multichannel streaming audio and much richer experiences with music on the PC and with home theater systems. This gives content owners new flexibility in extending their reach to a multitude of devices -- securely and with the new business models needed to embrace Internet users. And all of this, of course, is great for the consumer. People will experience dramatic improvements with their digital media playback on the PC with instant-on/always-on streaming, which will provide them with a more compelling and enjoyable TV-like experience on the Web. There also have been incredible innovations in the audio and video quality, bringing true surround sound to the Web for the first time, as well as high-definition video. And there are many more cool ways to use and customize the player.

THR: Microsoft is involved with companies like Intertainer, CinemaNow, pressplay and Full Audio. Are content subscriptions the way of the future? What is Microsoft doing to counter recent challenges from RealNetworks, which has established its name in IP-delivered content and released a new universal format player?

Gates: Subscription services are a great way for music labels and movie studios to expand their distribution and reach new audiences through secure channels. We work closely with a wide range of emerging music and video services who tell us their top needs are to deliver an integrated, compelling experience to their customers and for technology that works in support of their business models. The technology foundation for these services needs to deliver the best possible audio and video quality at the lowest possible cost, to do so securely and to provide broad reach in terms of the size of their potential customer base. With Windows Media Player 9 Series, we've worked hard to provide seamless access to a variety of third-party services right from within the player itself. The user gets a great experience that fits right into how they use the player for other tasks. And for the owner of the subscription service, Microsoft has helped link them directly to their customers to expand their business opportunities. This is a winning combination for the services and for users.

THR: There are several pending moves to control technology. For example, the FCC has set an Oct. 30 deadline for developing a broadcast flag that would set limits on how consumers can use digital entertainment content. There are also the Berman technology countermeasures bill, the Consumer Broadband and Digital Television Promotion Act (formerly the SSSCA) and even parts of the Digital Millennium Copyright Act. Should lawmakers be involved in these matters, and can laws achieve the legislators' purposes?

Gates: There are places where good legislation is critical to the protection of intellectual property. We're strong supporters of the Digital Millennium Copyright Act anti-circumvention provisions. At the same time, we believe the challenges and opportunities associated with content protection are best met through the marketplace with private-sector initiatives. The private sector is in a great position to bring new copyright protection technologies to market, and there are strong incentives to do so. Microsoft is committed to creating technologies that will protect all types of digital assets, and we've invested over $250 million to date toward this goal and have a large ongoing effort. We are working collaboratively across the IT, broadcast and entertainment as well as other intellectual property-based industries to come up with technology solutions that protect content, promote the availability of works and address legitimate consumer expectations.

THR: Apple's purchase of eMagic was its latest acquisition related to professional production tools, moves that strengthen the perception of Mac as the platform of choice for professional media creators. Is this perception accurate? What, if anything, does Microsoft have planned for this market?

Gates: Our strategy at Microsoft is to deliver platforms that offer the industry the best and broadest range of tools to choose from and which make it easy for companies in the business to use when building their own solutions. We're already seeing a great response to this: For example, before Windows Media 9 Series was even in beta, some of the biggest names in video and audio acquisition and production -- Accom, Adobe, Avid, Steinberg Media Technologies, Thomson Broadcast Solutions and several others -- announced support for 9 Series audio and video technology. So while this clearly is a competitive environment, I'm excited about the success we've had with leading software vendors in the pro space, and it speaks to the quality of our product offerings.

THR: The Pocket PC platform and Windows XP Media Center Edition seem to be centers of innovation at the moment for Microsoft. How will they impact the relationship between consumers and entertainment? What else can we expect? Will these technologies change the nature of entertainment?

Gates: There is definitely momentum around Pocket PC and the Windows XP Media Center Edition. At the core, it's all about the user experience, and I think the enthusiasm you're seeing is because we are delivering smarter and more natural user interfaces, better sound and video quality, more content choices and easier and quicker access to a user's favorite content no matter where they are. You may want to watch a short streaming video clip on your Pocket PC or perhaps enjoy TV, your favorite DVDs and music on your Windows XP Media Center Edition PC. Maybe you just want to listen to your favorite music while driving to work or out jogging. For these and other scenarios, we're delivering a platform in Windows Media 9 Series that creates opportunities for companies to build their own business models around the delivery of content and services. Ultimately, I'm not sure technology will change the nature of entertainment as much as it will change the nature of how entertainment is produced and consumed.

THR: Microsoft has increased research and development spending on its .NET initiative to connect devices, applications and people through the Internet. With the price of storage and processing speed dropping, is it still important? Why? And in particular, why should the entertainment industry care?

Gates: Today, information is stored in what are essentially "siloed" locations and devices which are not connected, or if they are connected, information sharing isn't easy. The idea behind .NET is to use XML Web Services, which are based on open standards, to create more efficient, easy and seamless connections between people, their devices, information and businesses. .NET and XML Web Services have significant implications for the entertainment industry, enabling the delivery of high-quality, secure content to a wide array of devices that people use for accessing content from their PCs, home theater systems, phones, Pocket PCs and a multitude of other devices. For example, with the Windows Media 9 Series platform, any time someone puts a CD or DVD into their PC or presses "Guide" on their media center PC, they connect to a Web service that provides a wealth of information about relevant content, including album or movie art, song or chapter titles, TV listings and a lot of other information that is specific to the entertainment that they are playing. Another example is the "Services" tab in our new media player, where we provide users with easy, seamless access to a variety of digital media services from other companies. Ultimately, I'm a believer that the more ways people have to easily enjoy entertainment media -- whether it's music or video -- the more they value it. And that is an opportunity I think the whole industry can get excited about.

THR: You have returned to working very closely with developers, which seems to have restored your sense of wonder. Is this perception accurate? Do you see any parallels between technology and entertainment when it comes to qualities like the creative impulse and the ability to inspire awe?

Gates: Absolutely. What I love about working closely with the development teams is the opportunity to turn creative ideas into innovative technology solutions. Just as movies entertain and move audiences, the creation and acceptance of technology has its own set of plot twists -- often with uncertain or surprise endings. The idea that we can create something that enables and inspires others to realize their full potential keeps the creative juices flowing and is certainly what gets me and a lot of other people at Microsoft excited about coming to work every day.

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