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Spokane, Washington  Est. May 19, 1883

Microsoft Leaps Into TV Future Merger Of Internet, Television The Goal As Digital TV Emerges

Associated Press

In a move it hopes will spur the merging of personal computers and televisions, Microsoft Corp. will acquire WebTV Networks, a company that sells systems that allow people to surf the Internet over their TVs, Craig Mundie, Microsoft’s senior vice president, announced Sunday.

The announcement came at the National Association of Broadcasters convention here.

“Earlier this morning Microsoft completed a definitive agreement to acquire WebTV Networks.”

He said the purchase price for the Palo Alto-based WebTV Networks was $425 million.

WebTV founder Steve Perlman said the two companies clicked and thought: “Let’s get married.”

“Through their efforts … we hope to dramatically accelerate the merger of the Internet and television,” Mundie said.

Microsoft’s announcement comes as the computer industry and existing TV set makers race to define what the next generation of digital TV sets will look like.

The prize: $150 billion in spending needed to replace the existing 220 million analog TV sets in the United States.

The computer industry’s vision is essentially a large-screen computer in living rooms that people use not only to get a crystal clear TV picture, but to surf the Internet and send e-mail.

TV set makers have a different vision: a wide-screen TV with superior picture and sound quality but little, if any, computer capability.

For the computer industry’s vision to work, TV broadcasters would have to transmit programs in a different format than they now use to display pictures on TV sets.

Despite pressure from the computer industry, TV broadcasters haven’t showed any signs of doing so.

Mundie’s tone was conciliatory: “It isn’t really a war to decide whether everyone should watch television on their PCs exclusively or whether they should see television on TV to the exclusion of personal computers.

“It’s really about a parallel set of evolutions to produce better PCs and better TVs,” Mundie said.

Last week, the Federal Communications Commission cleared the way for broadcasters to begin offering cinemaquality digital television to the American public.

Importantly, the action means that after 2006 the existing analog system of broadcasting dies.

That means people will either have to go out and buy new pricey digital TV sets or converters for existing analog sets to work.