On Sunday night Microsoft will provide us with its vision of the future as Bill Gates opens the annual International Consumer Electronics Show (CES) with his usual keynote address. I can't yet discuss what Microsoft is going to reveal, but I've been in touch with the company about its CES announcements because this year for the first time in several years I'm skipping the show. I'm bowing out because I've got a lot of other traveling to do this month and CES has just become too loud, busy and expensive to be worthwhile anymore. In fact, CES is pulling a COMDEX this year in that it's expanding to the Sands Expo Convention Center, a move that should scare everyone.

I guess we'll see whether I can cover what's going on at CES effectively without being there, but my guess based on years of experience of walking across half of Las Vegas because of all the cab lines is that I'll do just fine. Sadly, I'll miss an opportunity to meet with a surprisingly large assemblage of friends from around the globe. It seems as if everyone is going to CES this year. You know, except me. Oh well.

MacWorld also takes place next week, and don't be confused by the relatively small size of this show. Like the Macintosh market itself, MacWorld might attract only a small crowd but its influence and newsworthiness far exceed its size. I'm most curious about Apple's plans for iTV which could turn into a credible Windows Media Center challenger if it adds digital video recording, DVR technologies, iPhone rumored and the long expected true video iPod. But Apple should also talk about Leopard, the next OS X version and maybe we'll finally find out whether it will be a viable Windows Vista challenger.

The next episode of my Windows Weekly podcast should be available some time today. After a few weeks off for the holidays, Leo and I are back and hopefully the results are enjoyable. I certainly got a kick out of it.

Digital Music Sales Up but Still Falling Short 

There's been a lot of controversy about whether digital music sales actually fell last year as a researcher from Forrester had supposedly alleged (see below). But all the recent sales studies do agree on two facts: Digital music sales are slowing dramatically compared with sales in 2005 and they're certainly not making up for declining CD sales. Last year, for example, the best selling digital single "Bad Day" by Daniel Powter, sold more than two million copies. And online music services sold 33 million digital albums last year. But compared with physical music sales, even that success story seems muted. The industry sold more than 588 million CD albums in 2006, although that was down 4.9 percent from 2005. Physical single sales are currently unavailable. In 2006, overall digital music sales jumped 65 percent, which sounds great until you realize that growth was almost three times that in 2005. Remember, it's very easy to post huge gains when you're starting from scratch. And it appears that today, years into the so called digital revolution, digital music sales just aren't picking up the slack despite what initially appeared to be heady numbers.

Forrester Corrects Misunderstandings about Its Report 

Forrester, meanwhile, has taken some steps recently to correct misunderstandings mostly in the press about its report that few iPod owners have purchased anything from the iTunes Store. This report was confirmed by a similar article earlier in The Wall Street Journal and by a conversation I had last month with Microsoft regarding the attach rate of digital music and videos to MP3 players. Several news outlets big and small including this one read a bit too much into this report and said that iTunes music sales were plummeting. Here's what Forrester's report was really trying to say: iTunes sales are leveling, off a blog posting on the company's site reads. Apple is not in trouble it makes its money mostly from iPods and iTunes is just a way to make that experience better I don't think anyone was suggesting Apple was in trouble, however, it's well known that the company barely breaks even on the iTunes Store.

French Game Maker Sues Over Mobile Halo 

In Fusio, a French game maker, is suing Microsoft for breach of contract because the software giant never responded to In Fusio's multiple proposals for a mobile version of Halo, the popular Xbox video game. In Fusio says it agreed to make four payments of $500,000 to Microsoft to obtain exclusive rights to the game and it has submitted several game designs. But Microsoft has allegedly been ignoring the company and it has rejected In Fusio's designs without comment. In Fusio previously developed mobile versions of Age of Empires. It's Mr. Pants Midtown Madness and Sabre Wulf and the company does sell Halo based ringtones and wallpapers. According to In Fusion, the benefits of the mobile Halo game are incalculable.

Microsoft, Nintendo Come on Strong in Holiday Season

Sony couldn't make nearly enough PlayStation 3 consoles to meet demand (heck it hardly made any at all) but both Microsoft and Nintendo had no problem sopping up the spoils during the 2006 holiday selling season. Microsoft sold more than 2 million Xbox 360 consoles during the period compared with 1.8 million Wii consoles for Nintendo and about 17 PlayStation 3s (just kidding, the figure was actually 750,000). The PlayStation 3 will no doubt catch up in the long run but with second generation Xbox 360 games such as Gears of War making any and all PlayStation 3 launch titles look quaint by comparison and with Halo 3 waiting in the wings, Microsoft might finally deserve a little bit of credit. Its Xbox 360 is looking pretty good right now. This year should prove to be decisive for the console.

Apple Google Napster All Sued

Intertainer, a self proclaimed pioneer in the video on demand (VOD) business, sued Apple, Google and Napster this week claiming that the companies are infringing on its copyright. The company founded in 1996 claims to own a patent for a business model describing a way to offer video to consumers via TV and Internet. What's interesting about this company, aside from the fact that no one has ever heard of it, is that it shut down its business in 2002 after unsuccessfully trying to sue Sony, Time Warner and Vivendi Universal for price fixing and conspiracy. Now the resuscitated Intertainer apparently exists solely to license its patents, or to put it more properly, sue other companies. Sad.

Microsoft Ships Windows Live OneCare 1.5 

This week, Microsoft finalized the latest version of Windows Live OneCare 1.5, which adds Vista compatibility to the company's PC health subscription, offering OneCare 1.5 will ship by the end of January to make the Vista launch and is considered a major upgrade. If you're already a OneCare subscriber, all you have to do is wait. The update will be downloaded and installed automatically.

Hybrid Hard Drives Hitting the Market 

One of the big hardware advances that Vista takes advantage of is support for hybrid hard drives, a new generation of mobile hardware that includes both flash and hard disk memory in a single unit. The hybrid hard drives will reportedly speed boot up return from sleep and hibernation and even general performance, although you'll need a Vista based mobile computer to take advantage of them. Well I have good news: if you've been waiting anxiously. This week, Samsung announced that it will soon ship its first hybrid hard drives which feature as much as 4GB of flash memory. The company says Vista users who utilize these drives will see a 20 percent performance boost in typical hard drive usage Versions from Toshiba Hitachi Seagate and Fujitsu are also on the way.