Bill Gates sings at CES for one last time

Bach showed a number of custom applications designed for its Mediaroom IPTV service, including one developed by TNT for covering live Nascar events.

Bach said: "I can pick car number 35 or I can go into the pits and watch car number 22."

Bach said the company is serious about the TV effort.

He said: "It's not a 'hobby' for Microsoft." A probable reference to the Apple CEO Steve Jobs once called Apple TV a "hobby".

In a deal finalised just before the keynote, Microsoft has signed on BT as the first company to use the Xbox 360 as an IPTV set-top box. Gates announced plans for the game console to act as a set-top box at last year's CES.

BT Vision, which combines gaming and Microsoft's Mediaroom IPTV service will be available to customers in the middle of 2008, Microsoft said.

On the Olympics front, Microsoft and NBC are teaming up on a site that will host more than 3,000 hours of live and on-demand video of Olympic events.

Gates said the ability to watch the events you want - either live or on-demand - is why internet-based TV is so much better than standard fare.

Gates said: "Events like this in the broadcast format just aren't as satisfying, as great as we'll make the Olympics."

Microsoft also announced deals to offer movies from MGM and TV shows from Disney for download via the Xbox 360.

On the music front, Microsoft isn't giving exact sales figures for the Zune, but is noting that there are now 1.5 million active users in Zune Social, the social-networking site that ties into the music service and player.

In automotive news, Gates will tout the fact Ford has sold 30,000 cars equipped with the Sync in-car entertainment system which Microsoft co-developed with the car maker. Ford expects to sell one million Sync-enabled cars by 2009.

Ina Fried writes for CNET News.com