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Microsoft to Buy WebTV; Windows to Offer Digital TV Technology

Users can view TV programs and Internet broadcasts on PCs or TVs connected to PCs.

By Elinor Mills, PCWorld   

%dquotThis acquisition is the cornerstone of our long-term effort to combine the best of the Internet and the best of digital television technology,%dquot Craig Mundie, senior vice president of the consumer platforms group at Microsoft, said in his keynote speech at the National Association of Broadcasters Multimedia World Conference in Las Vegas on Sunday.

WebTV Networks founder Steve Perlman, also president and CEO, gushed over the merger like a jubilant bride. He said he was %dquotshocked and surprised, but delighted%dquot when Mundie %dquotpopped the question%dquot to WebTV Networks in February.

Under the purchase agreement, which is subject to regulatory approval, the 20-month-old WebTV Networks will operate as a subsidiary of Microsoft, retaining its Palo Alto, California, offices and staff. Meanwhile, Microsoft will include its digital broadcast architecture and NetShow multimedia streaming software in the next version of Windows, code-named Memphis, which will be in beta testing late this year, and Windows NT version 5.0.

The technologies will let users view TV programs and Internet broadcasts on PCs or TVs connected to PCs, as well as interact online, receive personalized content, and use a remote-control device. The enabling hardware will add a %dquotnominal amount%dquot to the cost of PCs, according to Microsoft.

The inclusion of broadcast technology into Memphis is not expected to delay its delivery to users or to affect original equipment manufacturer pricing. Microsoft has not made any final decisions on pricing of upgrades to Memphis, according to Mundie.

New versions of Windows will offer a common data networking capability built on broadcast, cable, and satellite services with speeds ranging from 9,600 kilobits per second to 30 mbps with satellite. Users will need to add a digital tuner card to their existing PCs when broadcasters begin to transmit digital signals.

IBM and NBC jumped in to support Microsoft%squots PC-TV plans. %dquotTV will never be the same again, and today%squots announcement is just the first step toward a larger vision of easy-to-use connected information and entertainment appliances and devices that IBM believes will ultimately be a part of every home,%dquot Brian Connors, vice president of IBM%squots consumer division, said in a statement.

%dquotWe anticipate that our digital television signal, in the future, will be received by computers as well as digital television sets,%dquot said Marty Yudkovitz, president of NBC Interactive, which has a partnership with Microsoft in the MSNBC network services for TVs and PCs.

With the WebTV acquisition, Microsoft can boost WebTV%squots client side technology with Microsoft%squots Internet Explorer browser and Windows CE operating system technology. Meanwhile, Microsoft Network and WebTV will combine efforts on providing Internet access and make money off advertising, subscriptions for different levels of service, and transactions made online, officials said.

WebTV Networks offers a Web-to-TV network service and licenses its WebTV Reference Design for TV set-top boxes to Philips Consumer Electronics and Sony Electronics. Those firms build systems that allow people to access the Internet using a TV remote control. The deal with Microsoft will not affect WebTV licenses with Philips and Sony, Perlman said.