Bill Gates: The Emperor Strikes Back

When you walk into your living room six years from now, you'll be able to just say what you're interested in, and have the screen help you pick out a video that you care about. It's not going to be "Let's look at channels 4, 5, and 7." It's going to be something that has pretty incredible graphics and it's got an Internet connection to it.

EW: In the current worst-case scenario, the federal government could order Microsoft to be split into several units. If that happened, would one of the so-called Baby Bills be spun off as an entertainment company?

BG: The whole talk about breaking up is really inappropriate and premature. In terms of our overall strategy, one thing I just can't be clear enough about is that we are not an entertainment company. We are in partnership with entertainment companies. We do websites where we put our partners up, and we do these great tools.

[Disney CEO Michael] Eisner has said Microsoft is one competitor he's concerned about. That just blew me away. Because we're not in this business. What he does, and all of those companies do, I have great admiration for. Picking scripts, picking story lines, all that. It's wonderful. That is not the skill set of Microsoft. That's not the direction strategy of Microsoft. We're enabling neat things and we want to see other companies do the entertainment using our technology.

EW: Thomas Edison held the patent on the movie projector, but the filmmakers were the ones who ended up building and running Hollywood. Microsoft has experimented with entertainment on the Microsoft Network (MSN), but has been unsuccessful thus far. How will you avoid Edison's fate?

BG: There's more total profit in the long run in actually building the entertainment experiences. But there's no one company that is going to dominate that. The range of tastes that people have just guarantees that there will be thousands and thousands of companies out there. If our technology does anything, it allows for there to be more variety.

EW: And how will companies make money?

BG: One of the things you have to put into this equation is what's the future of advertising...since that's the funding mechanism for all of this stuff, the opportunity to have very targeted ads. If you see something you're interested in, you literally say, "Yeah, give me more information, or call me." The value of that marketing is much higher. You don't have this funny envelope in the mail that you tend to throw away.

EW: How will that affect online commerce? What will be different about Christmas shopping 10 years from now?

BG: I like the idea of putting your Christmas wish list up and letting people share it. [That way] if somebody's going to take something off your list, other people know and you don't get three or four of the same thing. We'll just wonder how people did that in the past. Did you have to take the things back?