Ballmer CES Keynote: Xbox Live Steals the Stage

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The Consumer Electronic Show (CES) in Las Vegas is opening today and the opening keynote is designed to set the tempo for the annual show. Microsoft CEO Steve Ballmer took the stage to a packed audience and laid out what we might expect from Redmond this year.

Windows 7 is doing great according to Ballmer, due to the largest development process in history. Microsoft used 3,000 software engineers to bring Windows 7 to final form, worked with 50,000 partners, and had over 8 million beta testers to make sure that Windows 7 was ready for release in 2009. It is the OS that can work on screens of all sizes, from handheld slates to massive displays like that used in the keynote address.

The focus of Ballmer’s talk was directed more to the new philosophy that the consumer wants Windows on every screen in the house. It was clear that Microsoft is dropping the Tablet PC product name, in favor of the hot “slate” name that has been pushed into the media by the Apple tablet rumors. Ballmer didn’t mention Apple at all during his lengthy keynote, perhaps an unspoken acknowledgment of the competition Microsoft is feeling from those in Cupertino.

Ballmer demonstrated three slate computers that are in prototype stage, the primary focus being an unnamed slate from HP. The device looked to be a simple slate with few controls on the gadget, simply a touch screen for interaction. This slate is scheduled to hit the market later this year. It was clear from the demonstration that the media buzz about this mystery slate probably overshot the reality. It is simply a slate running Windows 7, without a keyboard. Nothing truly earthshaking. We saw a far more interesting slate yesterday from Lenovo.

A large focus of Ballmer’s keynote was the Xbox Live ecosystem, and it has definitely turned into one of huge proportions. Xbox Live will work with games, of course, but Pay TV is expected to provide a huge market for consumers. AT&T – runs on Microsoft Mediaroom software, and it all works seamlessly with Xbox Live. There is a concerted effort at Microsoft to get Pay TV totally integrated with Xbox, with all the revenue that represents.

Xbox Live will see the release of a new genre of game that Microsoft deemed the Psychological Action Thriller, in the form of a game dubbed Alan Wake. This game will tread in the waters of a new revenue model for games, with episodes being released over time that consumers can get through Xbox Live.

The entertainment business will be huge for Microsoft, with over 100 million songs and games having been downloaded to date. Zune video is now available in 18 countries, and that should continue to grow in 2010.

Microsoft is going to debut a new Xbox Live gaming ecosystem this year that focuses on retro arcade console games from the past. Over 1,000 games will be released over the next few years, and Live members can pick them up to build personal arcades. The goal is to provide a social network aspect to these personal arcades, with members able to invite others to play in their virtual arcades.

Microsoft is expecting 2010 to be the biggest year ever for Xbox Live. This was reflected in the amount of time spent during the keynote discussing these new efforts. There is a massive effort to merge TV consumption with gaming, and Xbox Live is Microsoft’s ticket to bring MS technology to every screen in the house.

Bringing the content to all screens includes the small screen of the Windows phone. Ballmer was proudly carrying the HTC HD2 around the stage during the keynote. He pointed out that Zune content and Xbox Live content will soon be appearing on the Windows phone screens. No timetable was given for this effort. Interestingly, that was the only Windows phone that was shown by Microsoft, despite their intention to release Windows Mobile 7 late this year. WM7 was not discussed at all, a rather telling example of where it fits in Microsoft’s overall strategy.

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