Microsoft Chairman Bill Gates's keynote this year at the International Consumer Electronics Show (CES) put the company's newest power broker at center stage: Robbie Bach, president of the Entertainment and Devices division. Bach is the man behind Microsoft's Xbox, which at the time of its launch was a big risk and departure for the company. Xbox has gone on to become one of Microsoft's most successful consumer products, and Bach now is in charge of charting Microsoft's future strategy to give consumers real-time, always-available access to content over IP networks.

Elizabeth Montalbano sat down with Bach just before his keynote appearance. He discussed Microsoft's plan to help consumers untangle the web of products for the digital home, how wireless connectivity will factor into the company's "connected entertainment" vision, and the continued dilemma of digital rights management (DRM). An edited transcript of the interview follows.

What does the digital home experience look like two years from now, and how is Microsoft delivering on that vision?

I think the digital home experience two years from now will have a couple of characteristics. One, I think you're going to see dramatic changes in individual categories. In music, we're seeing dramatic changes. You're seeing that in video and TV delivery, you're seeing that in the video game space. Lots of different changes where digital technology is really reshaping the way people think about entertainment.

The second thing you'll see over that two-year period is, you'll see some of those experiences start to blend and merge. The idea that music and video games can interact; the idea that I might have one device that can help me with video and games; and the idea that there might be services that apply across those different ecosystems, I think, is pretty powerful. You'll see that happen over the next year or two. But ultimately, you get out four or five years, you'll start to see services in the [network] cloud. So you might not have a hard disk locally in your house. All of your data might be stored someplace else off premise by somebody else, and you just have access to it. I think you're going to see those kinds of applications.

Can you talk about how the specific products in your division -- such as Xbox, Zune, IPTV, and Windows Mobile -- will fit into that?

In my group, there are several ways that plays out. For example, we're taking our Xbox Live service and bringing those Live services to Windows. Now the Windows gaming community and the Xbox gaming community are one community. If you take IPTV, which is the idea that people like AT&T, British Telecom, Deutsche Telekom can deliver services into the home, we're going to talk about expanding that so you can actually use Xbox 360 as the set-top box for IPTV. That is a very powerful solution.

How does the Windows Home Server fit into this?

That's another need that you have in the home, which is, I have to protect all of this data, I have to file it, I have to edit it, I have to sort it -- how to make that management all easy. Literally, you have hundreds of gigabytes of data in the home. I know it sounds funny to talk about it that way, but that's what you have. You want to use the Home Server product to manage and control that.

Your vision of connected entertainment includes various sophisticated device-interaction scenarios. Right now, you've got Zune-to-Zune interaction with wireless capability, and there's been talk of Zune-to-Xbox wireless connectivity.

Ultimately the wireless capability in Zune opens up a whole set of opportunities for us. Our goal with wireless in Zune, when we launched it a few weeks ago, is to make sure it's in every device. Right now it's about peer-to-peer sharing, but certainly once you have the wireless radio, then you know there are other things we can do in the future.