Steve Ballmer and Robbie Bach Keynote: International Consumer Electronics Show 2009

ANNOUNCER: Ladies and gentlemen, please welcome Chief Executive Officer, Steve Ballmer.

STEVE BALLMER: So this is CES. Well, thanks. It’s a real honor for me to be able to deliver this opening keynote at CES this year. It’s really become something of a tradition, I would say, for Microsoft to deliver this opening keynote. Bill Gates did that for the first time almost 15 years ago, and practically has done it every year since. With his transition this past year from day-to-day activities at Microsoft, as most of you know Bill is now devoting the majority of his time to helping people around the world, especially children in Africa, and I hope you’ll join me in applauding Bill for the incredible work he’s doing on behalf of society across the globe. (Applause.)

Since this is my first time at CES, I’ve got to admit I’ve gotten a lot of advice and a lot of questions. I thought I would share with you just a few of the messages I’ve gotten today. They come from quite an eclectic group. But from Bill Gates – Bill said, ‘Make sure, Steve, you’re at CES, not that other convention in Las Vegas.’ And I don’t understand the one from Jerry Yang, but he said, ‘Why do you keep ignoring my friend request on Facebook?’ I’m ready, though, and I’m here.

At Microsoft, we’re continuing to drive innovation to really make a difference in people’s lives. And it’s in this context tonight that I want to spend some time with you talking about the economy, our industry, and the work that we’re doing at Microsoft as a very proud member of this industry. Since Microsoft delivered its first keynote here there have been incredible advances in information and communications technologies, advances that have fueled remarkable change and remarkable prosperity. These advances have helped to create a global economy, raise average incomes in many countries, and lifted millions of people into the middle class for the first time.

Today, our world, our nation, and our industry face some really big challenges – all of us, we’re all feeling it. And its impacts will likely be with us for some time, for quite a while. As this recession ripples across the globe, it feels like we’ve entered a period of reduced expectations, a time when we may be tempted to temper our optimism and scale back our ambition. But no matter what happens with the economy, or how long this recession lasts, I believe our digital lives will only continue to get richer. There really is no turning back from the connected world and the pace of technological advance bringing people closer together.

I believe that companies and industries that continue to pursue innovation during tough economic times will achieve a significant competitive advantage positioning themselves for growth far more effectively than companies that hold back. That’s why Microsoft continues to focus on R&D, investing more than $8 billion last year alone. And we will continue to invest more than ever. Why do we continue to invest, and why do I continue to strike this optimistic chord? Because at the end of the day, it’s the power of ideas and innovation that drive us forward regardless of the economic environment. And the opportunity we possess, we in this room, to truly change people’s lives though technology has not diminished in any way, and is in some sense more powerful today than ever before. There is so much more opportunity ahead of us.

When I think about that opportunity, in my mind I frame it in three main areas. The first is the convergence of the three screens that people use every day, the PC, the phone, and the TV. Microsoft’s original vision was to put a PC on every desk and in every home. Today only, only a billion or so people have a PC, and that means that there are more than 5 billion people who have never owned a PC. So we have a lot of work to do to make computing more accessible, and more affordable to everyone in the world.

And things like netbooks, and efforts like One Laptop Per Child, will continue to democratize computing for the next 1 billion people. But now it’s no longer just about the desktop, but really about a broader vision. Technology is converging upon three screens, the phone, the PC and the TV. And they’re really evolving together into a single, seamless ecosystem of any time, anywhere computing.

Over a billion mobile phones are sold each year. And certainly in emerging markets it’s often the first computing experience for many people. Mobile phones are becoming more capable than ever, and over the next several years smart phones will make up over 50 percent of the mobile phone market.

The last screen is the oldest, but in some senses the least evolved, and that’s the TV. For more than 60 years the TV has been the center of family entertainment. Resolution has gotten dramatically better, but the capabilities have largely remained the same. Over the next several years we will see TVs become more sophisticated, and more connected. And the boundary between the PC and the TV will dissolve.

The second major area is really in how you will be able to interact with your computer, and other devices in a more natural way. In the next couple of years the computer will be able to hear you, and see you. Natural user interfaces will become mainstream in every device, and speech, gestures, and handwriting will become a normal part of the way we interact with computers, with TVs, and with phones. We’ll still use a keyboard and a mouse when it makes sense on a computer, but the UIs will evolve to be more intuitive, and more natural.

The last area of opportunity is what I would call connected experiences. Today much of the stuff that we all care about fits in silos across your PC, your phone, the Web. Your experiences are disconnected when you move from one to the other. Increasingly, those barriers are going away. And the cloud, the Internet cloud is connecting all of your devices together seamlessly. In the future you will be able to connect to information and people you care about instantly across any of those screens.

In many ways connecting all of this together is the last mile to creating real breakthroughs for consumers. By bringing together the PC, phone, and TV across the cloud, we can really create a seamless experience that makes a significant impact in people’s lives. The linchpin for bringing all this together for you should be Windows. I believe Windows will remain at the center of people’s technological solar system. It will work across all three screens seamlessly. It will increasingly accept natural input, and it will tie all of your information together through the cloud.

When I say Windows I’m sure you think about PCs, even though we are extending to the phone and to the cloud. The choice, the power, and the value of the PC is unmatched, and better today than ever. Windows has become the language that over a billion people speak in every country, and every culture around the world. But Windows is really nothing without the innovative hardware it runs on. We have worked hand-in-hand with PC and phone manufacturers to try to bring together the best hardware and software into a great experience.

I’m super excited about the cool hardware that we and our partners have coming out. And I thought we would have a look at some of those cool phone and PCs. So why don’t we roll this video please.

(Video segment.)

As you can see, and I guess many of you agree, there are really very cool, and very powerful PCs at many price points at an incredibly great value. At this time economically, when people are struggling to make every dollar count, and looking at alternatives carefully, the choice, I think, that offers the most power and most value for the money is the PC. And that’s why, as we say, ‘I am a PC.’ (Applause.) And proud of it.

I want to talk today also a little bit about the future of Windows, where we’re going. Looking back, there were three things that I think really made Windows and the PC successful. First, the PC enabled the best applications and let them work together. Second, the PC enabled more choice in hardware. And, third, the Windows experience really helped us all work together. It was the recognition that there was a whole industry of innovation that we could help enable and bring together that was really the special sauce of Windows.

We have a bigger opportunity now than we did even 25 years ago as an industry to make a difference in people’s lives. We are committed to continue to break down the barriers that exist between the information, the application, and the devices that people use. Microsoft is transforming what Windows is from a PC operating system to a connected platform and experience across the PC, the phone, the TV, and the cloud. When I think about the future of Windows I really do think, as we say in our marketing, of a life without walls.

The PC operating system though, of course, plays a critical role in this. I’m really excited about the progress that we have made with Windows 7. We are on track to deliver the best version of Windows ever. We’re putting in all the right ingredients – simplicity, reliability and speed, and working hard to get it right, and to get it ready. Windows 7 will make every day tasks faster and easier. Windows 7 should boot more quickly, have longer battery life, and fewer alerts. Windows 7 makes entertainment better with a new Media Center experience, and the ability to easily access your media across PCs and play it on other devices. And Windows 7 enables cool new user interface things like touch.

Today I’m excited to announce that we are releasing the beta of Windows 7. Our TechNet and MSEN customers can get Windows 7 right now. (Cheers and applause.) And even better on Friday, just two days from now, we will make the beta available worldwide so that users can come online and try out Windows 7 on their PCs at home. I encourage you all to get out and download it.

The next thing I want to talk about is where we are with Windows Live. Windows Live has become an essential companion to Windows and your PC. It is our cloud solution for communicating, sharing, and keeping your life in sync across the PC, the phone, and the Web. Today we have three big announcements that we’re making on Windows Live.

First, we’re announcing the worldwide availability of the new Windows Live Essentials that includes Windows Live Messenger, Windows Live Mail, and the Windows Live Photo Gallery. It’s final. It’s free. And it works on Windows XP, Windows Vista, and the new Windows 7 beta.

Second, we’re announcing a partnership with Facebook that will deliver the best social experience to our over half a billion Windows Live users. You can now connect Facebook with Windows Live. The updates you make on Facebook, and the photos you share will automatically also be published to your Windows Live network if you want things configured that way.

Third, we’re announcing a partnership with Dell to preinstall Windows Live Essentials, and our Live Search on all of their consumer and small business PCs worldwide. Dell will be the first major PC maker to preinstall Windows Live Essentials on all of their consumer PCs.

This combination really gives, I think, people just a fantastic out of the box experience when they buy a new personal computer. The Windows Mobile platform continues to evolve, to extend the PC experience to the phone. I’m excited about our momentum really delivering great new devices for consumers. We have already over 11 different Windows Mobile phones that have each sold over a million units. And over the past year we’ve brought to market over 30 new Windows mobile phones offering more choice to more users than any other mobile platform in the market. And last, but certainly not least, our partners have sold more than 20 million Windows phones over the course of the last 12 months.

I’m also thrilled to announce a new long-term partnership with Verizon, to offer our Live Search on all Verizon wireless phones in the U.S. Search on the phone will be similar, but somewhat different from searching on the PC. And search will become an even bigger part of the overall mobile experience, which makes me very excited about this partnership with Verizon.

Again, we’re at the start of transforming what Windows is, but we’re making very strong progress, and I’m proud of what we’re in the process of delivering, across Windows on the PC, in the cloud, and on the phone.

I’d now like to invite up on stage Charlotte Jones. Charlotte is going to give you a demonstration of Windows 7, Windows Live, and Windows Mobile. After Charlotte concludes and shows you some of the things that we’re doing to span the PC, the phone, and the Web, Robbie Bach will come on stage and talk a little bit about television and connected entertainment. So please join me in welcoming Charlotte Jones. (Applause.)

Demo: Windows 7 beta, Windows Live, Internet Explorer 8 beta

CHARLOTTE JONES: Thanks, Steve.

Hello, everyone. Get ready to see the new Windows 7 beta. I’m also going to show you some Windows Mobile and some Windows Live, because it’s these three parts of Windows together that create that life without walls that Steve talked about. Together they help you streamline the things you do often, they help you manage your scattered digital contacts, and they help you move gracefully between the PC, Web, and phone.

Let’s take a look at my desktop. Does this scattered desktop look at all familiar to anybody? We know that the typical user has between five and 16 Windows open at a time. So with Windows 7 we make it easier to move between them on the taskbar. I have two Internet Explorer Windows open right now, each with multiple tabs, and I can use Windows 7 preview to move between those sites and then I can select sites, or close sites right from here. It’s quick and easy.

When I want to clear the clutter, watch this. Click down in the lower right corner of the screen, I can hover my mouse over that corner and peek through my documents to the desktop. And then I can click to go there. So these are the kinds of intuitive navigational elements where Windows 7 helps you move around your PC quicker and easier.

We also know that users like to compare two documents or sites. I know I do it a lot when I’m comparison shopping online. So let’s go shopping. Were going to look at a Nikon camera, and I’ve got two to three Windows here I want to compare. So I want the camera, because it works great with Windows 7 right out of the box. I want to look at the specs on these two, it becomes really easy. Snap one to the right half, snap the other to the left half, and now they’re both in focus for you. (Applause.) I know. Now something you do a lot is so much easier.

Now I pin applications I use a lot to the taskbar. You can see I use a lot of applications, but I want the ones I use often to be right there for me. I’m going to pin Windows Media Player, now it shows up even if it’s not running. And I can open it in just one click. So easy access to my favorite things saves me a click.

Taskbar is great for launching programs, but a little thing we call jump lists help you just go straight to a specific place within an application. So with my one right click I get the jump list for Windows Media Player, and it gives me recent songs I’ve listened to. The jump list for Word gives me recent document I’ve been working on, and the jump list for messenger, common things that I do in Messenger. So no more hunting around for the things I was just using, or just doing. Two clicks and I’m at it again.

So you’ve just seen five very simple features that are great examples of how Windows 7 makes it easy to move between the things on your desktop, saving you time and making it easier to do what you want when you want to.

Let’s look at something, at an example of where Windows 7 actually takes a complex task and makes that a lot easier. We know that 50 percent of U.S. households have more than one PC. Now, I know a lot of the people in this room have probably been home networking your PCs for years, but you probably had to set up a home network for your parents, and your friends, and your neighbors, too, because for most consumers setting up a home network is way too complicated. But, in Windows 7 there’s a feature called home group, and it sets up a home network very easily. So I set up a home network, and it didn’t take me a whole Saturday to do it, in three steps and two minutes I was accessing my other PCs and devices.

So now when I take my work laptop home to work late into the evening on very important stuff – did you hear that, Steve? – now I have access to my other home devices. I can… my husband has the best music on his PC, so I can navigate to his PC just like it’s my own hard drive and pick some music. I’ll find something that’s a little rocking for tonight, just to keep you guys interested, and then I can either play that music on my PC, or with “Play To” I can send it to the Xbox in the living room. Way cool. (Applause.)

So notice I could also send my husband some music in his office. There are a lot of partners that are already set up great to work with home group. So now with home group I can access the things I need, when I need them, across my PCs and devices.

So let’s switch over to this touch screen, so I can show you how we’re making a big investment in touch with Windows 7. Notice how some of the same tasks I was just doing with a mouse can also easily be done with touch. We built touch into the DNA of Windows 7, so that it’s easy for our partners to create great touch-enabled applications.

Here’s one example of a cool multi-touch application called Surface Globe, with a single touch movement I can turn the globe, but I can use multi-touch to zoom in on a particular location. So I’m going to zoom in even further until we get to Manhattan and look a little closer at midtown, now actually get closer and the buildings start to come into view. It becomes really interesting, I use another motion to tilt the globe. So I can actually see the sides of those buildings and I could move through midtown Manhattan now from a street level.

So we’re really excited about touch with Windows 7, because we know that when we make it easier for our partners to build great touch-enabled applications, consumers get more ways to interact with their Windows PCs. There is so much more in Windows 7 I could show you, but I’m running out of time. So I encourage you to visit the Microsoft booth on the floor at CES. You can see more Windows 7, and you can play with our touch machines yourself.

So life without walls, as Steve talked about it, means that you should be able to connect with the people and the stuff that’s important to you, whether you’re on your PC, or on your Windows Mobile phone. The new Internet Explorer will hit new Windows Mobile phones this year, with it I can not only find my favorite YouTube video, but I can also watch it, because Flash is built right in.

So now I have anywhere access to such video classics as ‘Hamster On a Piano,’ or ‘Cat Flushing Toilet.’ And I can also do some slightly more productive tasks like check in for a flight, or buy movie tickets, or do banking transactions right on the mobile browser.

I switch to this Samsung Omnia to show you how Windows makes it easy to both create great content, and share it on the Web. This phone has a five-megapixel camera in it that also takes great panoramic shots. So notice how as I move the camera, as I turn it leads me to where I should point the camera wit that little yellow box, and then it takes the picture for me, and then it stitches it together really quickly. That’s great. I could also adjust or crop the picture right on the phone. But you guys look pretty good, so I’m going to go ahead and post it up to Windows Live so I can share it online. And now everybody who couldn’t get a ticket to this keynote can feel like they’re in the room.

I just did some cool things on my phone. But because my phone runs Windows it was so easy to share that content online, and that’s the key. Let’s put the fun devices aside, and let’s look at your life on the Web. Windows Live brings Windows online, and the experience gets even better when I use Internet Explorer 8 as my browser.

So Windows Live is about communicating and sharing. And you may have already used it to send e-mails, to IM with friends, or to post photos on a space. But we had a lot of users talk about being overloaded by the time they spend going to multiple places online just to keep in touch with one set of friends and family. So with our newest release, we’ve made Windows Live into a place that also brings social updates on the Web to you.

Let’s take a look. A good place to start is at home.live.com. Here you can see I have a lot of different content. I have access to my e-mail. I have some headlines. But my favorite part of this page is the What’s New feed, because it gives me updates on what my contacts are doing right here.

And I noticed that my colleague Chris, who is on his way down to CES, has changed his status message to this very intriguing phrase in what looks like Russian. Now here’s a way that Internet Explorer 8 makes it easy for me to figure out what my friends are doing. I highlighted the phrase, and I get this accelerator box right next to it. If I click the accelerator box I get some options for things to do with that text. I’m going to translate it using Windows Live. And I’m guessing that it’s Russian, so we’ll go ahead and change the language. We’re going to change it from Russian to English, and I find out that it means “what happens in Vegas stays in Vegas.” I hope so. Notice that accelerators give me an inline menu for things that I commonly want to do with content in any Web page.

So let’s get back to Windows Live. In my What’s New feed, I can also see that my sister has posted our holiday photos. So I’m going to click through to the photo album. Now you can see that these are photos, and with one additional click I can actually put them into this beautiful Silverlight slideshow where the background changes to match the composition of each photo. It makes it a lot more fun to look at these, and to show them off to people.

So the What’s New feed has tipped me off to the things my contacts are already doing at Windows Live. But the What’s New feed also tells me what my contacts are doing online. Notice the variety of updates in this feed from places like Twitter, Flickr, Yelp, we have over 50 partner sites today, and the list is still growing. You can get all of your favorite sites’ updates right here in one What’s New feed. And as Steve mentioned, our newest partner is Facebook. So pretty soon when you post a new status message at Facebook, or you share photos there, they’ll show up in the Windows Live What’s New feed. It truly brings all your personal updates together in one place.

So from this home page we make it easy to click through and drill down on the services you use the most. So I’m going to take a look at Hotmail because I want to show you how we’re making e-mail just a little bit more social. I have an e-mail from my other colleague, Lon. He’s here at CES and he wants to know where we’re going for dinner tonight. So everything I showed you on Windows Live so far you can do today.

Since we’re at CES, I’m going to show you one feature that’s coming soon. Now Lon wants to know where we’re going to dinner, and I already made a reservation at Nobu. So I’m going to have to open up another browser window, go to Live Search, enter in the restaurant name, get to the site, find the address, copy the address, come back to the e-mail and paste it in. Right? That’s how it works. Hard to believe, but I think we’ve found a better way. So I’ll reply to Lon, and notice that there is this Quick Add pane over on the right here, I go to restaurant search, it requires that I can spell, I type in Nobu Las Vegas, and I get the address right here, and one more quick on insert, and it’s into the e-mail. (Cheers and applause.)

So Quick Add is coming soon and it brings the content that you want into the conversations you’re already having. Let’s send this out to Lon, and take a look back at what you can do with Windows Live today.

So this is the confirmation page for Lon. You can see that I get updates on Lon right here. These are the top updates on Lon from my What’s New feed. So we’re not only bringing partner sites into the What’s New feed, we’re taking that feed and putting it into all of the services that you use the most. So it’s in Hotmail, it’s in Messenger, it’s on the home page, and it’s on your phone via Windows Live for Windows Mobile. So now I can truly keep up no matter where I am.

So we’ve look at quite a lot of things here. But because Windows Live is about communicating and sharing, I can’t leave this stage without showing you one more thing. It’s my favorite new feature in Messenger. So I’m going to chat with my husband just to tell him how things are going here in Las Vegas. And you can see that I’ve recorded a video user file, which is kind of fun because it just shows my buddies a little bit more of my personality. But my husband knows that I’m a woman of many moods, so a little feature called Dynamic Display Pictures helps me communicate those moods even better. I’m going to put in a happy face to show Scott that things are going well. And notice my user file changed to match the emoticon. I’m kind of sad he’s not here, so I’ll give him a sad face. And I want to keep things interesting, so I’ll give him a little wink. And my moods don’t have to be static, but to send you guys off right, I’m going to send Scott, and all of you, a little bit of love – I’ll give you kissy lips. (Applause.) So that makes the communicate part of communicating so much fun.

Now, everything I’ve shown you, all of that is Windows. It’s about making the everyday things easier with Windows 7, about browsing the Web faster with IE8, it’s the anywhere access that Windows Mobile gives you, and it’s bout bringing more of your digital life together in one place on Windows Live. Life without walls, kissy lips, and have a great time in Las Vegas. (Applause.)

(Video segment.)

Robbie Bach: Connected Entertainment

ANNOUNCER: Ladies and gentlemen, please welcome President of Entertainment and Devices Division Robbie Bach.

ROBBIE BACH: Let’s give it up for Tripod again, ladies and gentlemen. (Cheers and applause.) Proof yet again that the Mars and Venus thing is alive and well.

So I want to pick up a little bit where Steve left off on talking about three screens and the cloud and cloud services, and in particular talk about that in an entertainment context, and I’ll also spend the majority of my time talking about the TV.

Now, connected entertainment isn’t just about connecting your devices, although that’s certainly important, it’s as much about connecting friends and family. It’s about creating social experiences that bring people together, because entertainment is absolutely at its best when you share the experience.

So we’re going to talk about that in the context across our business. And before I do that I’m going to start a little bit with just a review of what went on in 2008, and what we achieved in connected entertainment in 2008.

Now, when I was here last year I had a Ford car on stage. And we announced the work we’d done with Ford around Ford Sync. We’re continuing that great work with Ford and they, in fact, are launching a new version of Sync this year with a version of TellMe built into that product that enables you to deliver information services directly to your car. And I hope that all of you will join CEO Alan Mulally tomorrow for his keynote to see more of that product. We won’t have any car coming on stage today, but it really is an exciting example of the momentum we’ve created around Sync.

Zune, as well, had a great year. We won critics over with features like Mix View, and critical success with Zune Social. And, in fact, Zune won a lot of reviews this year as a product and as a service. We doubled the number of people on Zune Social to well over 2 million, and continue to build the idea of a social experience around music.

We also drove a lot of innovation with subscriptions. This is a great way for people to experience music, discover it, find new music. And we added a great twist just this fall by enabling you then to keep 10 songs per month if you sign up for a Zune Pass subscription. There’s been lots of innovation in what I’ll call the mobile space, whether it’s in auto or with Zune.

Now as we turn to the TV, Steve mentioned Media Center and Windows 7 – we’ve had a great year on Media Center, as well. We now have over 10 million unique users a month using Media Center to access entertainment on their PC. And the amazing thing to me is that the average session time on Media Center is about 90 minutes. And when you see what we’re going to be able to do in Windows 7 with Media Center I think it really is going to change your perception of the entertainment experience you can get on a Windows PC.

But, of course, our work on the TV goes beyond just Media Center, and it includes Media Room, our IPTV product. We now have nearly 2.5 million people worldwide who are subscribers to services provided through Media Room, whether that’s with AT&T, British Telecom, Deutsche Telecom or others. That’s a growth of over 250 percent from last year. And the pace of innovation on that IPTV platform is accelerating. This year AT&T delivered Total Home DVR, which enables you to record a show once, and play it back on any TV in your household. In fact, AT&T’s U-verse service was voted by JD Powers as the best TV service across the United States. That’s really a testament to the great work they’ve done, and the work we’ve done with Media Room.

We’re also extending Media Room with something called Media Room Anytime, and we’ll do this work with SingTel, and this is the ability for you to literally go backwards to watch your favorite show from a previous day, or a previous week, and search and find those shows.

And finally in Media Room we are dramatically expanding the application platform, so that partners like the PGA, Top Gear, and others will be creating interactive applications that will appear on your TV. These applications will really merge what you might think of today as a Web experience with what you think of as a broadcast TV experience, into one interactive entertainment experience.

So, I think you’re going to see a lot of progress on Media Room, and we’ve made a lot of good progress in 2008.

Now, of course, we turn to Xbox, and Xbox had a spectacular year in 2008. This was, in fact, not only our best holiday season on Xbox, but our best year ever for Xbox sales since we shipped the first Xbox in 2001.

We now have over 28 million consoles in market in 36 countries around the world. We have the industry leading attach rate, which means there are more games bought on Xbox than on any other system. And now that we’ve reached the point where we’re sub-$200 and under 200 Euros, this is where the majority of consoles get sold in a generation of consoles. So, we think you will continue to see accelerated momentum on Xbox.

Now, of course, Xbox isn’t just about the console and about the game; it’s also about Xbox Live. We now have over 17 million members worldwide on our Xbox Live service. That’s 70 percent growth in 2008. And, in fact, in the last three months of 2008 we added 3 million members to the service. So, really a positive performance for what we’re doing on Xbox Live. (Applause.)

So, that gives you a good wrap on 2008. Let’s take a look now and talk about a little bit about 2009 and what we see coming, in particular on the TV.

Now, I’m going to start with Halo. Halo is clearly Microsoft’s biggest entertainment franchise. We have sold over 25 million units of Halo titles. And Halo in many ways redefines the way you think about online game play on a console.

Let me give you a statistic that is really quite stunning. An average Halo player across all 25 million of those people plays 150 hours of Halo on Xbox Live. So, it really is sort of the defining application for social gaming.

And this year is going to be a blockbuster Halo year with two new titles in the Halo universe. The first of these is called Halo Wars, which is the first T-rated version of a Halo game, and this is a strategy game. So, this will expand the universe of people we reach and expand the style of game play. This will be available at retail starting February 28th.

And also for the first time ever the Bungee team is making available a downloadable demo of Halo Wars starting on February 5th.

So, make sure you get out and look at Halo Wars; that’s going to be very exciting.

The second Halo title will ship this fall. This is a title called Halo 3 ODST. You should think of this as being a more traditional Halo game in the action packed style that you’re used to, with new characters, new scenarios, and new events taking place in the universe.

All of this on Halo is coming in 2009. (Applause.)

Now again let’s transition to Xbox Live. In November, we launched the new Xbox Experience, and this was an opportunity for us to create a fun, social and simple way for people to get engaged with Xbox, and to access even more content. And since we’ve done that, there’s been a dramatic increased focus on movies and TVs and music on the service. And, in fact, our downloads on Xbox Live are up 60 percent since we launched NXE.

In particular, we see it taking place in the area of what we think of as a social network, of people meeting their friends and experiencing entertainment together.

The data so far in its first five years, Xbox Live has had 10 billion hours of game play and social interaction on the service, and it is a very exciting place for people to go play.

Now, with the new Xbox Experience we expanded that to include avatars. This enables people to create literally a virtual person, a virtual you in the universe. And since that’s happened, the social activity has expanded. Since the new Xbox Experience launched, users on average have added 33 percent more friends than they were adding prior to the NXE launch. So, we see this as a really exciting opportunity to continue to expand Xbox Live.

But we’re not going to stop just with what we did with the new Xbox Experience. We’re going to continue to evolve with new content and new opportunities. And, in fact, this spring we will launch something called Primetime, which is a channel on Xbox. And the idea behind Primetime is to create scheduled programming, so that you can go at a specific time, find friends, and experience live events.

Demo: Primetime on Xbox LIVE

What I want to do now is give you an example, the first example of an event on Primetime, which will be the show 1 versus 100. This is a live game show where Xbox Live members can play online against others.

So, I’m going to go over here, going to grab my headset on a demo. So, I’m going to get the headset on here.

ANNOUNCER: Tonight, it’s survival of the smartest as the mob goes head to head with the one in a winner take all competition.

Let’s welcome our host.

HOST: Thank you. Here’s how 1 versus 100 works. You’re now in our game show here on the Xbox Live Primetime where you can play on the big stage or play along from the crowd. You can even team up with friends and family. It’s all live and every question counts.

Robbie, welcome and thanks for having 1 versus 100 join you here on the big CES stage!

ROBBIE BACH: It’s really a pleasure to have you here.

HOST: Let’s see who you’re playing with, or should I say against. On your team I see we have Action Jackson, Rocker Chick, and Big Bill. Now, remember, it’s every man, woman and child for themselves.

The mob is ready, so let’s play 1 versus 100.

Which school won the 2009 Tostitos Fiesta Bowl? Was it Ohio State University, was it University of Texas, was it University of Phoenix?

Okay, Robbie, you and the mob lock in your answers now.

Are you a big college football fan?

ROBBIE BACH: Oh, yeah, I love college football.

HOST: All right, everyone has locked in their answers. Let’s see how you did.

Robbie, you got it right! Well done! Glad to see you’re smarter than your friend Big Bill.

ROBBIE BACH: Don’t tell him that.

HOST: How did the mob do?

Let’s try another one. In the Curious Case of Benjamin Button, who plays a character that ages in reverse? Was it Johnny Depp, was it Brad Thompson, was it Brad Pitt? Use your controllers to answer now.

All right, Robbie and the mob have finished. Okay, let’s find out who saw the film. Robbie, you did it again. How did the mob do? Wow, only four got that wrong. This is one movie going mob. Robbie, you’re on your way to winning big.

ROBBIE BACH: Excellent. Thanks a lot for giving us a good review on 1 versus 100. Thanks very much.

HOST: It’s all about the mob. It’s fun and social, and you don’t just watch, you can play and win. 1 versus 100: The fun starts on Xbox Live Primetime beginning spring 2009.

ROBBIE BACH: So, that’s a great addition — (applause) — that’s a great addition to Xbox Live that comes this spring.

Xbox Live and Netflix

Now, we’re not stopping obviously just there. We’re expanding into the video marketplace as well, and continuing to expand our video efforts. We now have 45 movie studios and TV network partners worldwide on Xbox Live who are providing video content to our customers.

In the U.S. in November we added Netflix to that list, and this has really been a fabulous addition for us.

Now, what you can see here is the Netflix queue that I have, and I’m just going to go into 30 Rock — and turn on my controller here. So, let me go into my Xbox queue here. I’ll go into 30 Rock. Wait for a response; there we go. There we go. So, now I’m into this. Let me go back. You can see this is where we are. We can queue these titles. We can go back and forth. I’m going to select 30 Rock, and I’m going to go down and take episode two, and now that title is going to come up, I’m going to play that title, and it’s going to stream that in real time.

So, what you’re seeing here is a very easy way for people to get high-definition content in a very straightforward way. And our Netflix and Xbox Live Gold members can enjoy over 12,000 TV shows and movies. So, you can really see a very exciting experience very quickly.

Now, this show just comes up, and I can also decide that I want to go fast forward on this. So, I’m going to go here, and it enables me to have a way to pan through the show and actually pick the places that I want to see and the places that I want to watch the show.

This is the type of interactive control you get when you’re using a digital experience and working with something on Xbox Live and Netflix.

Now, even more interesting, if we can get the camera to come up here, I have a mobile phone here that has a new app on it, which will be available later this week on Windows Mobile Total Access, and this new app enables you basically to control your Netflix queue right from Windows Mobile. So, I can literally go through here, organize my queue. Then when I go to Xbox, it will actually play in that order in that queue. This is the idea of enabling people to provide interaction between mobile phones, TVs, and Xbox in a very, very exciting way. (Applause.)

So, that’s the things we’re doing in movies. So, now let me transition to music. Again, last year, on stage we had Slash of Guns and Roses, and he helped Bill beat me in a game of Guitar Hero. Really what’s happened in the music genre is Xbox has been incredibly successful, and we’re winning in that genre. It is a showcase for what I was discussing earlier on social gaming.

Weekend nights are turning into music nights at home, and I’ve absolutely seen this in my own household. Fans want an interactive experience with their music, and they’re getting it on Xbox, products like Lips, Rock Band, Guitar Hero, American Idol.

The numbers are pretty stunning, on Xbox Live 60 million music track downloads on Lips, Rock Band, and Guitar Hero alone. And according to our partners, Xbox Live accounts for 80 percent of all song downloads across all platforms.

And now artists like Metallica, AC/DC, Motley Crue, Bruce Springsteen, they’re using this music genre on Xbox as a way to meet their fans, introduce new music, and really expand their audience. It’s becoming another form of what we would call connected social entertainment.

Now, the final thing I want to talk about as new and innovative in what we’re doing on Xbox and Xbox Live is the community games channel. Like Primetime, this is a channel on Xbox Live that is programmed to enable aspiring game developers to create and sell their own games. And we’re really trying to empower everyone, the entire breadth of our audience, to create their own games. We will be shipping this year a new product called Kodu, and I want to just spend one second explaining what Kodu is.

It started as a way to help kids learn how to program. In fact, what it’s turned into is a way to help them learn how to program, but also now they can create their own games. And on Xbox Live they can distribute and share those finished games with other people.

And what I want to show you today is an example of a game that’s been created, we’ll do some modifications, and then you’ll watch me to try to compete and see if I can win at that game, just like I did with 1 versus 100.

Xbox Live Community Games Demo: Kodu

Please welcome Sparrow to the stage. She’s going to take us through a tour of this. Hey, Sparrow. (Applause.)

So, what do you have to show us, Sparrow. This is your game environment.

SPARROW:Yeah, this is my world. I basically took a big green bowl and turned it into this, which is not a big green bowl obviously.

So, I think it needs a little more lighting. So, let’s add a factory which will make whips, which are little glowing balls of light that produce white light really well.

So, as you can see, we have a lot of stuff in here, lots of characters, lots of choice, apples.

Anyway, so this is a factory.

ROBBIE BACH: So, you’re now editing your game.

SPARROW:Yes.

ROBBIE BACH: Okay, great.

SPARROW:We can change our color in lots of different colors. I’m going to program it so that when the timer goes off, for 10 seconds I’ll have this guy create a whip. Also I’m going to tell it for this —

ROBBIE BACH: I’m glad you’re doing this. (Laughter.)

SPARROW:— that when the timer goes off, for 10 seconds I want it to open, and that when the timer goes off, for 11 seconds I want it to close. So, let’s test that out. (Cheers, applause.)

ROBBIE BACH: It opened.

SPARROW:Yep, and it closed.

ROBBIE BACH: And it closed. Perfect.

SPARROW:And I made that. (Applause.)

Now, I also have — now, this is called — this is my tree, and it makes music, that that was the music you were hearing before, and they have lots of different options of sound, like the mystery music. (Music.)

ROBBIE BACH: Don’t let my kids see this; it could be a problem.

SPARROW:But mystery sea is my favorite.

Anyway, let’s also have a second player that if I do this — okay, I can only do one. From the game pad, so player two, elastic, you’ll move. (Laughter.)

ROBBIE BACH: Is this my player?

SPARROW:Yes, it is.

ROBBIE BACH: Now, are you making it easier for this player or harder for this player?

SPARROW:It doesn’t really matter.

ROBBIE BACH: Oh, I see, okay. Well, we’ll find out.

SPARROW:Anyway, I’ve also got a game set up. This Kodu dude makes rocks. You’re supposed to — when you bump into the rocks, you pick them up. You press A to give the rocks to the houses and they give 10 points.

ROBBIE BACH: I got it.

SPARROW:The first person to 40 points wins the game.

ROBBIE BACH: Okay. So, are we going to play?

SPARROW:Yeah.

ROBBIE BACH: Uh-oh, where am I?

SPARROW:You’re that little blue thing.

ROBBIE BACH: I’m the other dude. I’ve got to find a rock.

SPARROW:I will beat you to it. Come on, yeah!

ROBBIE BACH: Hey, wait, wait, you stole that one from me.

SPARROW: Yeah, I did.

ROBBIE BACH: Where is he? Where is the dude? Uh-oh.

SPARROW: I’ve got the rock.

ROBBIE BACH: This is not looking good. My gaming reputation is going down. Where is he? Oh, wait!

SPARROW: There he is.

ROBBIE BACH: Oh, wait, come back here!

SPARROW: Is that a rock?

ROBBIE BACH: Oh no, rock! Oh, you’re not in yet.

SPARROW: I gave it to him.

ROBBIE BACH: You gave it to him. There’s another one.

SPARROW: Uh-oh.

ROBBIE BACH: No!

Ladies and gentlemen, give it up for Sparrow. Congratulations. Thanks very much. (Cheers, applause.)

Now, that’s a generation defining experience, let me tell you. (Laughter.)

But the simple point to make is that we’re about expanding the audience, creating new opportunities for people to do social and interactive gaming.

And if you go back to where we started with connected entertainment across three screens, we really are going to connect your friends, connect your family, connect your kids, connect adults, and really drive that with cloud-based services that are going to deliver great content.

So, whether you’re playing Halo, listening to Zune, or getting beat by a 12-year old on Kodu, Microsoft will connect your entertainment experience.

Thank you very much. (Applause.)

STEVE BALLMER: If anybody thinks he threw that game on purpose, that would be wrong. (Laughter.)

Certainly I think after Robbie’s presentation you should have a sense that the TV screen in no sense will be left behind by the kind of innovation that’s coming.

When I look at the new products that we’re bringing to market, and the new technologies that are beginning to mature, I really know that we’re on the verge of the kind of technology transformation that only happens once every 10 or 15 years.

There are some key trends that are enabling this transformation. First, Moore’s Law. It has really morphed in some senses from a world where we get more speed to a world where we get more processors, and that will require those of us in the industry to take new approaches to writing computer applications that really take full advantage of that processing power. But this industry will be up to that task.

Second, screens and displays will literally be everywhere. High-definition displays will become cheaper, lighter, and more portable.

The third trend will be that PCs, phones, TVs, and other devices and the Internet will become a single play for creating experiences. We’ll be able to write applications that will automatically adjust to the capability of your device.

These trends will make computing far more useful and far more personalized. We’ll deliver software that learns your habits, understands your preferences, and predicts your needs.

If you’re a business traveler and you say, “Get me ready for my trip,” it will know what to do, what time of day you prefer to fly, and what hotels you usually stay in.

Communication will also be transformed. Communications will move seamlessly between voice, text, and video. You may not even recognize the differences in some senses. And the software will know whether to interrupt you based on what you’re doing and who’s trying to reach you.

So, there are really a lot of exciting things ahead.

Before I wrap up, I’d like to invite on stage Janet Galore to show you some of the concepts that we’re working on in Microsoft Research to really help push the envelope of how people use technology. So, please join me in welcoming Janet.

Demo: The Future of Computing

JANET GALORE: Hi, Steve. Hi. It’s great to be here. (Applause.)

So, I’d like to walk you through some conceptual prototypes around future technologies that are going to really change the way we find, use and share information. This is really centered around some educational scenarios, but think about how this could be used in all kinds of activities that you do.

So, suppose I’m a college student, and I’m taking a bunch of different classes, but I’m looking at some information for my anatomy class here, and I’ve also got this really great digital textbook that I can drill into. Here I’m looking at the skeletal system in the hand, and I can look around at different places. I can load information about the nervous system.

And as I’m clicking through here, it’s actually pulling in information from the cloud, so it’s connecting me to all kinds of information sources.

I can look at more specific information. Here I’ve got Gray’s Anatomy, and I get a different view. And if I want to look beyond the hands, I can actually zoom out and get a full 3D model of the human body. Let’s go take a look a brain here.

So, notice here again it’s loading some resources from the cloud, and it’s accessing other information sources to go deeper. Now we’re at the synapses.

STEVE BALLMER: I hope my synapses look that clean.

JANET GALORE: I’m sure they’re okay.

So, here I’ve got some information that was provided by my professor, and there’s actually an animation I can play here. So, it’s really something that I can explore and do whatever I like here. Oh, here my colleague Patrick says, check out my drawing.

So, imagine that Patrick might know that I’m actually online now and exploring this section of the model if we’re working on a project together. He’s asking me to take a look at this picture that he’s drawn over the weekend.

So, the types of social networking that we’re doing today are really going to be more deeply integrated and very useful to all the different kinds of activities.

I’ve also got a bunch of other resources. So, as we think about all the information available to us, and it can get a little overwhelming. So, what’s happened is the system has actually anticipated the types of resources that I might want to use while I’m browsing this, and according to my preferences in the studies, and they’re color coded according to what’s more relevant. So, the green is more relevant to my class work. If it’s too much, I can actually filter and just look at the stuff for my study group. Let’s see what they’re asking us to look at. This one looks kind of fun. It’s caffeine and your brain. So, this is a simulation that somebody else wrote using the models that are provided in the textbook here.

STEVE BALLMER: So, that’s my brain on Starbucks basically?

JANET GALORE: Yes. So, here’s your brain on Starbucks.

STEVE BALLMER: That’s my fourth ice tea of the day.

JANET GALORE: So, the person wrote a nice slider here, and like the other information, it’s kind of tracking, okay, this isn’t that related to my studies, but if I want to look at something a little bit more related here, this is a paper from the National Institute of Health.

So, with paper sometimes it’s hard to know if you really want to explore them. So, here again the software is helping me out. This is actually a semantic analysis of the whole paper. This map was created using algorithms from Microsoft Research, and it’s showing me how all the different concepts of the paper are related to each other, as well as to what I’m working on.

STEVE BALLMER: Just by semantic analysis of the document itself.

JANET GALORE: Yes. And so we can use that, too. If I want to go ahead and look at the text, that similar analysis can be used to highlight the paragraphs that are more relevant, and in that way I don’t even have to do that myself at the beginning. If I get a little more information about this, I can see that actually it was originally written in Japanese. So, machine translation has already provided that information for me, and it’s transparent to what I want to do.

If I want to save that as my notes, it loads it into my notes. And I’ve got this really great timeline at the top here. If I want to go back in time and look at what I was working on a long time ago, here this is back in junior high biology. This is showing me when I was looking at anatomy, okay, I wasn’t that great of an artist. I can zoom out a little bit and see the other things that I was working on, all the different subjects I was exploring, and then today here’s what I’m working on today.

So, beyond all the notes and the tests I’ve had, I also can see ahead that I’ve got a group presentation coming up, and we’ve got a meeting in the library to work on it as a class.

So, let’s take a look at how some of these technologies can help us collaborate.

So, imagine I’m in the library, and this is a Surface Computer. We’ll see a lot more of these types of natural user interfaces in these applications. And I can put my tablet down, and it’s showing me some documentation that I’ve collected, and I want to share with my study group. But not everybody wants to use a tablet perhaps, and some people will be doing a lot of computing on their phones and storing their notes and information. So, they can put the phone down, and there is some more information there that they might want to share.

I also have this great publish for review folder here. So, it’s actually allowing me to share this information with other people in my study group in a really simple way, and it’s going to synch across even the people who aren’t there, as well as their devices and so on. So, I can put that in there, too.

So, this is a really great example of some devices working seamlessly together, but beyond the devices, even everyday objects are going to become more interactive. So, I’ve got a model of the brain here that we’ve been using in anatomy class, and if I put that down on the Surface, we’ll see we have access points that are color coded in the same way, and I can drill into that and see that this has been annotated with information. So, that might have been done by my professor, perhaps other students, or by the manufacturer.

So, here this is looking at future software on kind of current hardware, but we’ve also been playing around with some new types of displays. This is actually a flexible display. It’s less than a millimeter thick, and it’s an active display. It’s very similar to the type of e-ink displays that we see in digital textbooks or digital book readers right now. So, we see these displays evolving into color displays, something that you could probably roll up into your backpack or fold and take it with you and use it perhaps with your phones or wherever you need a display.

STEVE BALLMER: So, the future of the way I’ll do reading will really be on one of these nice, light digital screens.

JANET GALORE: Well, and this could become the future Surface. It’s a possibility.

STEVE BALLMER: Absolutely.

JANET GALORE: Thank you very much.

STEVE BALLMER: Well, thank you, Janet. Appreciate it. (Applause.)

I’m not sure it makes me want to study anatomy, but it definitely would make it want to go back to school to have all that great stuff.

Despite the economy, I hope you’ll all agree with me that our industry has an incredible, incredible opportunity ahead of us. I’m certainly incredible excited to be a part of this industry and our company. I know all of you are also proud to have that opportunity.

I want to thank you not just for your time tonight but for all your support. I want to wish you a good night, and it’s been my pleasure to be here with you today. Thank you. (Applause.)

GARY SHAPIRO: That was absolutely fantastic.

STEVE BALLMER: Thank you. Appreciate it very much.

GARY SHAPIRO: You know, Steve, Bill had a very big sweater to fill, and you filled it totally. (Laughter.)

STEVE BALLMER: I’m not sure how to take that, but I’m going to leave on that. Thank you, all. (Applause.)

END