Gates opens entertainment window (USATODAY.com)

Though is in town to tout his hot new 360 to the hordes in attendance at the huge Electronic Entertainment Expo (E3), his horizon extends to the Hollywood hills - and beyond.

Video games are key, but the Microsoft chairman also has his hand in much of the behind-the-scenes wrangling over entertainment and the Internet.

An online music service is in the works with MTV; Windows Media software and piracy protection is central to distributing movies and TV shows on the Net; MSN.com is partnering with industry talent to develop original Web-based pilots.

"Microsoft will talk to anybody anywhere about the ability to do any kind of transaction. They recognize their software needs to be the gatekeeper to that kind of commerce," says Michael Pachter of Wedbush Morgan Securities.

"They have made a conscious decision to get into entertainment as a Trojan horse to get into controlling access to the Internet," he says.

Gates downplays those ambitions. "We have always written software for a myriad of devices," he says in an interview after Microsoft's pre-E3 presentation, "whether it's set-top box software or software in cars or software in phones. Everything we do is about creating a platform that creates an opportunity for others."

But to see his vision of the future of games and other entertainment play out, he need go no further than his extravagant home near Seattle on Lake Washington, where a powerful PC (undoubtedly Windows) operates a DVD jukebox with thousands of movies playable on any of the multiple plasma displays throughout the home.

In keeping with the E3 theme, Gates notes that his whole family plays games, taking turns with the Xbox 360 on the 52-inch TV in the living room.

Gates likes racing games such as Project Gotham Racing 3 and Forza. ("The kids like to watch when I am doing that.") His 10-year-old daughter "is pretty good at Zuma," a colorful puzzle game. And she will be a beta tester for Viva Piata, a children's game - and TV series - being created by Microsoft Game Studios with 4Kids Entertainment (Pokémon,Teenage Mutant Ninja Turtles).

His son, 6, likes Marble Blast Ultra, which helped him learn to use the controller. "Now he can go try out football," Gates says. (Another daughter, 4, has yet to step up to the plate.)

When they vacation in Mexico or Hawaii, wife Melinda gathers players for Zuma and other casual games, downloaded from Xbox Live's online network. "She is as good as I am at Zuma," Gates says. "Some nights she's better."

And Microsoft's Live Anywhere online system, unveiled Tuesday, ties together game systems, PCs and handhelds. "You can literally stop playing Zuma in Windows, pause it, get on a plane (and) do it on the mobile phone."

Computing's biggest player digs games

Even though the world's richest man is camped out in the rock 'n' roll trappings of The Roosevelt Hotel's penthouse suite in Hollywood, Gates doesn't see himself as an entertainment mogul.

Yes, the company has a growing video game studio and hit game Halo is being developed as a motion picture executive-produced by Peter Jackson (King Kong). But that is all an offshoot of the company's core mission: to deliver content. To Microsoft, entertainment is entertainment, whether it's a movie on a screen or a game on a television set.

"Their ultimate goal is to be a part of, and participate in, music downloads, movie downloads and any kind of e-commerce. They are just using Xbox to get an installed base of consumers," says Michael Pachter of Wedbush Morgan Securities. "It's smart. It's visionary and it's a multi-decade strategy."

To highlight the importance of the hot-selling new Xbox 360 system to that strategy, Gates took the stage at Microsoft's presentation Tuesday in advance of E3 - his first live appearance at the video-game extravaganza, now in its 12th year.

Games have always been a pursuit for Gates, 50, ever since he programmed a Tic-Tac-Toe game at age 13. Later he created a Monopoly program and a 3-D baseball simulation. "Gaming has always been something hard-core software developers try their hand at," he says.

Similarly, even before Windows, Microsoft was creating games such as Flight Simulator for the original 1981 PC. "Gaming is one of the biggest software categories," he says.

Now the company is focused on merging online communications with games to broaden the gaming audience. Its new Live Anywhere initiative - built into the upcoming PC operating system Vista (expected in January) and incorporated into products such as MSN Messenger - could connect millions of enthusiastic Xbox game players to a multitude of traditional PC users and cellphone owners. "The key is to make it work with games of all sizes," Gates says.

At the press briefing, Gates demonstrated how Xbox Live players could invite others to play games via PC and phone instant messages. PC players could immediately join in (if the game runs on both 360 and PC). Players could send friends tricked-out racing cars, for example, that they could upload to their PC or game system to test-drive.

Many games will be available in different versions for Xbox 360, Vista PCs and mobile devices, including cellphones. "It's a platform for developers to do new things," he says.

Gates sees Live Anywhere, as well as downloadable, easy-to-understand games available on its Live Arcade service, as key to expanding the market. "We would say the industry has been overfocused on that hard-core gamer. We want to get all different groups (to play games)," he says.

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