Some studios say they will be reluctant to give the phone companies much IPTV content if it will be locked into Microsoft's format and can't be transferred to devices relying on other protection schemes.
"I don't want my customers to have to pick a technology before they can pick content," said Mitch Singer, a Sony Pictures executive vice president and key negotiator.
Although Microsoft is seen as having a more complete technology for IPTV than rivals, the first large phone company trials of its system have been delayed because of quality issues.
But the content owners are watching IPTV's progress closely, Gates said. "They'll often say to us, 'Well, how many households, and in what year?,' and at this point nobody knows the exact number. But over the next five years, it will be definitely many tens of millions."
In the best case for Microsoft, Gates said, the phone companies will invest so much that the cable companies get nervous and invest in IPTV as well.
Whichever way it shakes out, Gates vows not to play the victim in "Son of iPod."
After learning a hard lesson in the digital music business, "we're really having to work more closely with partners in the hardware industry and content industry, to really think through the whole end-to-end experience and make it better," Gates said. "That's where we've done our mea culpa. We are fixing that."
