Movie Theater Events:

Speaker 03 talks about renting over 50 movie theaters where people pay $35 to watch the same content being presented at an event. Food is also included in the ticket price. The event appears to have a broad reach and a unique setting that goes beyond a traditional conference hall.

Event Features:

Bill Gates mentions that attendees receive 12 CDs, which include Internet Explorer. The central theme of the event seems to be about “act of controls.” Bill Gates further elaborates that the event showcases the ability to deliver live web pages featuring audio, video, and rich behavioral programming.

Technological Showcases:

Bill Gates states that they demonstrated several new technologies, including a Java compiler and a Java interpreter. The event is not limited to a single product or technology but offers a comprehensive showcase of the latest innovations.

Curiosity and Site Visit:

Speakers 02 and 03 discuss visiting a location for the first time, driven by curiosity to understand how things work there. Speaker 07 offers to give them a tour. The conversation implies an exchange of perspectives and experiences.

Workplace Dynamics:

Speaker 03 describes the workplace (“Hot wire”) as a large single-room environment, which Speaker 07 states extends for miles. Speaker 06 and 05 discuss the pros and cons of such an open space, comparing it to crowded conditions in Japan and city newsrooms. The general sentiment is that while this setup worked for smaller numbers, it’s becoming a challenge as the number of people increases.

This transcript offers a multi-faceted discussion involving event organization, technology showcases, workplace environments, and the value of on-site visits for gaining new perspectives.

Unified Internet Strategy:

Bill Gates discusses Microsoft’s overarching Internet strategy, explaining that it’s integrated across all Microsoft products, including Windows, Windows NT, and Office. The Internet is not seen as a separate entity but is rather intricately linked to almost everything Microsoft is doing, even extending to multiplayer games.

HTML and Control Framework:

Bill Gates emphasizes that Microsoft has decided to make HTML browsers and control frameworks central to their operating systems. Functions like directory display, shell, and help are all built on top of this framework. Extended HTML and active control interfaces are employed for more complex forms and dialogues.

Unified Browsing:

The speaker notes that they’ve demonstrated unified mail browsing with web browsing and unified file system browsing with web browsing. These developments point toward an integrated user experience.

Server Business and Media Delivery:

The fastest-growing segment of Microsoft’s business is said to be their Windows NT server business. The company has also recently shipped Internet Information Server as a standard feature. Media servers are available as add-ons for specialized audio and video delivery needs.

Quality of Service Guarantees:

Quality of service is a significant topic in the discussion. Bill Gates talks about ATM (Asynchronous Transfer Mode), a networking technology that allows for quality of service guarantees. Such a system could enable a new level of reliability for data, voice, and video transmissions over the Internet.

Networking and Routing Protocols:

On the technical side, the discussion shifts to TCP next generation and the roles of ATM and Cisco routers in this landscape. The focus is on ensuring high-performance, reliable data delivery, with the potential for demand-based scheduling and complex algorithms to optimize performance.

Questions on MSN and Media:

The segment ends with a question about how Microsoft’s pervasive Internet strategy relates to MSN (Microsoft’s online service) and Microsoft’s media business, suggesting a broader context to Microsoft’s Internet strategy.

The transcript delves into Microsoft’s integrated approach to its Internet strategy, focusing on the importance of quality of service and technical details of the networking and system architecture required to deliver on this promise.

Four Pillars of Microsoft:

Bill Gates describes Microsoft as having four core business areas. The first three, Windows, server business (Windows NT and Mac Office), and the Office suite, constitute over 90% of the company’s business. The server business has been identified as the highest growth area, while both the Windows and Office businesses are also seeing significant growth.

Diversified Fourth Business:

The fourth business area is a mix of various smaller operations, including MSN, electronic commerce, games, and joint ventures with companies like NBC and DreamWorks. Although diverse, this area accounts for a smaller part of Microsoft’s revenue.

Productivity Focus:

The Office business is targeted at productivity applications and has been reorganized to include home-based productivity tools like Works and Publisher. Despite its strong presence in the business environment, the Office suite has not penetrated the home market as effectively.

Capital and Constraints:

Gates emphasizes that Microsoft is not capital-constrained; rather, the company’s main limitation is the ability to hire enough qualified people. The primary focus remains on developing high-volume software products.

Strategic Choices:

Microsoft has opted not to enter certain markets such as services, hardware, and most content areas. The company’s consulting business exists primarily to support its core high-volume software business. Special cases like encyclopedias (CARTA) have been profitable and will be expanded into multiple languages.

Future Orientation:

The future seems to pivot on scaling existing businesses and focusing on hiring. Microsoft aims to either be number one or aspire to be number one in terms of volume in all categories it competes in.

MSN as a Unique Business Stream:

Bill Gates discusses MSN as a significant initiative for Microsoft, different from their traditional high-volume software business. MSN aims to attract subscribers, who provide a recurring income stream. This goal aligns with Microsoft’s broader focus on recurring revenues, exemplified by their Windows and Office products.

Value Proposition in MSN:

The value in MSN is not solely in the software but also includes a wide array of content. Gates notes that while there is content in other products like Office (e.g., spell checkers, help files), the business models are distinct. MSN’s business model involves both internal and external programming budgets to create exclusive content that subscribers find attractive.

Changing Landscape of Online Business:

Gates observes a shift in the online business model from one that couples access with content to one where they are two separate purchase decisions. This change is still in progress and won’t happen overnight, but it represents a fundamental shift in how online services are valued and monetized.

Importance of Subscribers:

Subscribers are integral to MSN’s business model. Gates highlights that all the money comes from subscribers, thereby emphasizing the importance of subscriber numbers for the income stream. This approach mirrors Microsoft’s strategy with its core software products, which also aim for recurring revenue streams.

Cultural Sensitivity in Content:

Additionally, Gates notes that delivering content in multiple languages is more than just translation. There’s a need to adapt the content to reflect the differing senses of what’s important in different cultures or even offer different versions of the same events, adding an extra layer of complexity to the content strategy.

Microsoft’s Position on Content Control:

Bill Gates emphasizes that Microsoft’s primary role is not as a media company but as a tools provider. He states that they offer Microsoft Word to allow people to write whatever they want, without any control over the content created.

Business Strategy and MSN News:

Gates mentions that Microsoft did not opt to do news on their own; instead, they entered a joint venture for MSN News. He adds that they lack the scale and skill set to compete with existing media companies like NBC.

Cityscape Initiative:

Contrary to rumors, Gates clarifies that their Cityscape project is not focused on news but rather on local information and events. He argues that while they’re one of hundreds looking into local content, traditional newspapers will likely dominate due to their hybrid revenue models.

Interactive Media Division:

Gates acknowledges that Microsoft does have an Interactive Media Division but insists it’s a minor part of the company, serving as an experimental investment. He stresses that the business model for internet publishing is still unproven.

Brand and Desktop Presence:

When questioned on the impact of Microsoft’s omnipresence on desktops, Gates counters that being on 85% of the world’s desktops does not guarantee success in content or media.

Challenges with MSN:

Gates indicates that MSN is not winning subscribers just because it’s part of the Windows desktop. He reveals that the majority of MSN users didn’t even know that the service’s icon was present on their desktops.

Future Outlook:

Gates is skeptical about the potential of their media endeavors surpassing their core applications business in revenue. He points out that the applications business is already a $4 billion a year operation and that the barriers to entry in the internet content space are low but the business model remains unproven.

ISP Business:

Bill Gates outlines that Microsoft’s role in the ISP (Internet Service Provider) business is limited to offering customers “access plus content” via a partnership with UUNet. The primary focus for the next two to three years will be on this combined offering.

Access and Content Strategy:

The strategy is to continually offer subscribers more access and content, managed by Russ Siegelman, who heads MSN. Gates highlights that revenue is calculated based on subscription fees and advertising.

Revenue Potential:

When questioned about the potential size of this business in relation to software sales, Gates suggests doing the math. He is skeptical about astronomical revenue figures, stating, “There will be no content club in my lifetime with $4 billion a year of revenue.”

Profitability and Business Model:

Gates argues that the access portion of their service isn’t where they make money; it’s merely a cost. The focus is on content, and they believe it will be profitable. However, he does not guarantee success for Microsoft in this arena and emphasizes that the company makes no forecasts about its future.

Advertising and Content Clubs:

There’s a discussion on alternative revenue streams like databases sponsored like TV shows, but Gates considers this just another form of advertising. While optimistic about content clubs, he believes the market will be highly specialized and not dominated by any single player.

Comparisons with Other Media:

Gates also compares the potential of this business with existing models like cable advertising, pointing out that even the largest player in that space, ESPN, only brings in $250 million. He argues that the variety on the Internet will far exceed that of traditional media.

Final Remarks:

The conversation concludes with Gates reaffirming Microsoft’s intent to try various approaches in this space. He believes they can be profitable but does not see this business eclipsing Microsoft’s existing ventures in any foreseeable timeframe.

Microsoft’s Monetization Strategies in Media:

Bill Gates explores various ways Microsoft can generate revenue in the media business. He talks about collaborating with independent content providers as part of the MSN label club, indicating that the company doesn’t need to solely rely on its own media production for revenue streams.

Limited Position in Media Industry:

Gates acknowledges that even if Microsoft is successful in all its ventures, it will not rank among the top 10 media companies in the U.S. However, it might carve a niche for itself in the interactive media sector.

Revenue from Internet Ads:

The conversation touches on a 12-month projection of $12 million in internet ads. This shows Microsoft’s commitment to digital advertising, even though it’s a small piece of the company’s overall revenue.

Browser Business and OS:

Gates reveals that Microsoft’s aggressive push into the browser business is strategic for keeping their operating system relevant. The ability to access media through the screen is cited as an important feature users expect in an operating system.

Content Influence and Revenue Models:

Speakers debate Microsoft’s potential to influence media companies, but Gates argues that making tools doesn’t grant influence over media content or offer revenue sharing. He emphasizes that Microsoft only gets revenue from the tools themselves.

Competition and Cloning in Browsers:

When discussing browser features, Gates mentions that Microsoft aims to superset Netscape’s browser functionalities. The idea is that whatever Netscape can do, Microsoft will aim to do it better or add more features.

Standardization and Lock-in:

One speaker proposes that by setting software standards, Microsoft could benefit from the explosion of new media. Gates, however, refutes this, stating that success in the tools business grants no such benefits.

Windows’ Future and Openness:

Gates emphasizes that Windows’ success is conditional on continual updates and openness to all content. He states that the OS will remain strong only if it is open to browsing all content and charging no royalties for its use.

Overall, the discussion provides a multifaceted look into Microsoft’s strategic approaches to media, tools, and its core product, the Windows operating system.

Windows and Media Business:

Bill Gates clarifies that Windows royalties don’t include any share from the media business. Although Windows serves as the delivery platform, he does not get any part of what people spend on media content. However, if content providers use Microsoft’s MSN service, they become part of Microsoft’s business portfolio.

Changing Strategy for MSN:

The discussion highlights the change in Microsoft Network’s (MSN) business model over time. Initially, MSN intended to make money by taking a small cut from transactions. However, this strategy shifted due to the growing centrality of the internet. The current model involves investing in unique content funded by a programming budget, which they hope will attract enough subscribers to cover costs.

Shift from Middleman to Provider:

Bill Gates points out that the old model for online services acted as a middleman controlling what content appears to people. However, the new model for MSN is different. It involves offering unique content, with no control over other information a customer may access. This shift was largely due to the availability of easy-to-use tools for competitors to set up similar services, making the traditional middleman role obsolete.

Challenges in Transaction-Based Revenue:

The conversation touches upon the difficulties in making money from transactions in a digital age where costs can be undercut easily by competitors. According to Gates, no one can make a large markup in such a friction-free environment.

Impact of Telecom Legislation:

There’s a discussion about how legislation might affect the network’s openness, specifically regarding high-speed local access. Bill Gates indicates that either monopoly or duopoly could exist in this sector, making it costly for others to enter. However, he also states that Microsoft is not directly involved in the connectivity business, and it remains uncertain how these factors will play out.

Talent Attraction:

The conversation concludes with a brief discussion on talent acquisition, particularly in the area of graphics. However, this part remains largely unanswered, leaving the topic open for speculation.

Comparison with Silicon Graphics:

Bill Gates explains that Microsoft and Silicon Graphics operate in different domains: Silicon Graphics is in the hardware business, specializing in systems that combine hardware and software. Microsoft, on the other hand, is not in the hardware business. Gates suggests that the revenue models differ greatly; Microsoft makes far less money per user compared to Silicon Graphics.

Technology Advancements:

Gates reveals Microsoft’s ambition to provide superior graphics capabilities in affordable PCs, something previously only possible in expensive specialized hardware. The aim is part of the general trend in the PC industry to continually improve graphics and processor performance.

Investment in Talent:

Microsoft has invested heavily in high-end graphics talent to advance its software capabilities. Notable names include Alvy Ray, Nick Clay, Jim Kaji, and Dan Ling. These experts have contributed to groundbreaking ways of considering software architecture for graphics.

Long-Term Strategy:

Gates emphasizes that Microsoft’s focus is not on competing with Silicon Graphics. Rather, Microsoft takes a long-term view, investing in multiple areas like linguistics, databases, graphics, and security. The objective is to make PCs, and Windows in particular, robust in these various technological areas.

Real Competitors:

Gates concludes by stating that no one at Microsoft considers Silicon Graphics a competitor that they need to worry about. Their attention is instead directed towards other software giants like Netscape, Lotus, Oracle, and Novell in various domains like browsers, databases, and networking.

Belief in Social Interface:

Bill Gates talks about the disappointing sales of Bob, a software agent with a social interface. Despite this, he remains optimistic about the future of social interfaces. Microsoft continues to invest in this technology, intending to release an updated version called Bot 2.0.

Technology Underpinning:

Social interface, according to Gates, is all about building a user profile. Microsoft utilizes Bayesian inference technology to achieve this. The profile helps the software better assist the user in the future.

Role of Voice and Natural Language:

Gates indicates that voice input will become increasingly significant in interacting with machines. He also mentions the importance of understanding semantics in natural language processing, stating that translation services could be a byproduct of achieving understanding.

Continued Investment in Failed Technologies:

Gates talks about how several technological ventures have failed in the marketplace, such as PDAs and handwriting recognition. Despite this, he believes in their future potential and confirms that Microsoft is investing heavily in these areas.

Corporate Focus and Integration:

Gates mentions that while the email component of the upcoming Bot 2.0 will connect to MSN, this should not be seen as part of a broader scheme. He reiterates that Microsoft’s primary focus remains on understanding rather than translation.

Staff and Research:

Gates praises his team, citing Karen Jensen, who was hired five years ago, and mentions that the company has a robust voice recognition and natural language group. The research group at Microsoft is also working on exciting projects, although details are not elaborated.

Future Expectations:

Despite the setbacks, Gates is optimistic about the future of technologies like social interfaces. He cites the example of Windows 1.0, which also did poorly initially but laid the foundation for future success, arguing that patience—or “pig-headedness,” as he puts it—can pay off.