Puzzling details about Microsoft's partnership with UK telecom company BT Group have begun to trickle down. According to BBC, when used as a set-top box to deliver BT's television service, Xbox 360 "will not be able to receive or record live TV." Say what?

The report describes the subscription-based service (with 12-month contract) as a library of on-demand content – yeah, like this one – that includes "near-live" Premier League soccer matches. "The reason for streaming-only on the Xbox is because currently the console does not have the capability for live TV or enough hard drive [space] for practical downloading of content," a BT spokesman told BBC, seemingly hinting that a firmware update could be in the works to enable live streaming. [Update: BT's current service only offers over-the-air live broadcasts (and not via IPTV); without a tuner, Xbox 360 is not capable of receiving the company's live programming.]

Whatever the case, something ain't right here, so we've put a call into Microsoft for answers. Stay tuned.

We've finally heard back from MS; their statement is attached after the break:

Having previously announced its intentions to have the Xbox 360 as a set-top box (STB) at last year's Consumer Electronics Show, Bill Gates told the audience at this year's keynote that British telecommunications company BT Group will be the first company to use the console as a set-top box, whose interface was most recently seen by accident in a repaired console.

Said Gates, "The final announcement, last year we talked about the 360 being an STB -- this year we're excited to announce that BT will be the first to provide that capability. Buy a 360 and use it as an STB for your TV." No other details are given (what about DVR?), but we're hoping to hear some more soon. Check out our hands-on with the service from last year's show.

So, we know those IPTV screens are "unrelated" to the Xbox 360's Fall Update, but that's about all we know about the last of this year's major 360 updates. Last year's Fall Update (was that really the first?) included 1080p support, HD DVD functionality, XNA functionality, WMV compatibility, and more. Some pretty big-ticket items in there, to be sure. And there's been two Spring Updates ('06 and '07), both of which came with some huge improvements including background downloading and chat and IM functionality.

Just two days before the one-year anniversary of the Fall Update, we'd like to ask you Joystiqers, what should we expect to see in this year's Fall Update? We've heard rumors of DivX video support, an XBLA blade, and integrated clan functionality. Surely there's more up the sleeve of Redmond's oversized fall-themed sweater. Us? We'd love to be able to change the listed gamertag of 'xXsmokezmadbluntz420Xx' to the more frequently used title: 'Mom'. And what do you, dear readers, want to see in your Fall Update? Vote up the comments you like best and we'll compile the best answers later in the week.

Turns out those images of an Xbox 360 with IPTV were legit. In a statement issued by Microsoft, the Redmond-based company acknowledged that the IPTV features "were inadvertently exposed while the customer's console was being serviced and is unrelated to the Fall Update."

The IPTV features, according to the statement, are part of the Microsoft Mediaroom services and will be made available to service providers by the end of this year, adding that it will be up to them to decide when the service is deployed. We've posted Microsoft's complete statement after the break.

Several images of IPTV options being displayed in the Xbox 360's dashboard have made their way into the blogosphere, courtesy of our pals* at X3F. According to tipster Aaron, the console recently returned from the oft-visited Microsoft repair center, only to display several new and seemingly incomplete menu additions. Appearing under the Media and System blades, mentions of DVR storage, live television services and pause buffers all seem to imply that the Xbox 360's IPTV services are close enough for us to start using words like "impending."

If these images are indeed proof of premature tweaks to the console (which still shows an older dashboard version number), one can speculate that IPTV may be introduced with this Fall's dashboard update. We've already asked Microsoft to comment, but if they treat this anything like the Arcade SKU, we can expect them to deny it until well after everybody's started watching TV on their consoles.

*This status may change should those bastards fail to return our copy of American Ninja 4.

We like the PS3, but we've often thought that it would be vastly improved if we could use it to figure out what sort of girl Bret Michaels goes for or if we were, in fact, smarter than a 5th grader. It appears that Sony has heard our prayers, with one marketing exec claiming that the system will receive a digital tuner that will allow the box to serve as a digital video recorder (a PS3-Vo, if you will) next year.

Warwick Light, who runs marketing for Sony Computer Entertainment in New Zealand, set the beans to spilling in The Press, saying "We're also hoping next year – about the same time that Freeview launches its terrestrial broadcasting service (expected to be in March) – to release a digital tuner for the PS3, turning it into a programmable TV recorder." When can you expect to hear more? Well, we're just guessing, but we've already heard we can expect some fireworks from Sony at Leipzig. Also, Microsoft's been talking about offering this sort of service this fall, so the timing would make sense.

[Via Engadget]

Microsoft has purchased 15 million shares in Sichuan, China-based Changhong Electric Co., valued at 94 million yuan (about US $12 million). That's just one percent off the company, according to the Taipei Times.

Said Microsoft spokesman in Beijing Roger Chen, the two companies will explore "a wide range of scenarios for digital entertainment needs ... The project focuses on in-home network digital entertainment -- how to connect PCs, TVs and the Internet to provide this digital entertainment experience."

The first thought that comes to our mind is the Xbox 360, Microsoft's most prominent living room entertainment device, and potentially is related to their IPTV service. No concrete details have been given about the project, so consider this all speculation at the moment.

During his keynote at Europe's The Connected Home Show, Microsoft TV's Ed Graczyk will showcase the Xbox 360's impending IPTV capabilities, first revealed at the Consumer Electronics Show this year.

Though the press release would have you believe that Graczyk, whose official long-winded job title is Worldwide Director of Marketing and Communications, will "showcase what happens when next-generation television is combined with next-generation gaming in a unique, new service delivered by your broadband provider," we aren't expecting much more than IPTV and possibly some DVR functions. Wonderland has provided an analysis of the fluff-tacular press release.

We can only hope Graczyk does reveal DVR capabilities and simulates them by pausing mid-speech and pantomiming the rewind feature. Evird drah regral a gnilaever tuoba woh?

The Connected Home Show, part of the IPTV World Forum, will be held March 5-7 in Olympia, London.

See Also:
Hands-on: IPTV on Xbox 360

The Xbox 360 was a notable bright spot in Microsoft's latest second quarter fiscal earnings report, otherwise marred by a tardy consumer Windows Vista release. In a brief phone interview with Peter Moore, vice president of Interactive Entertainment Business at Microsoft, we went over the announcement and what it meant for the 360.

Moore was eager to remind us that Microsoft had met their goal of shipping 10 million Xbox 360 units, breaking the numbers down as follows: 6 million in North America; 3.1 million in Europe; and 1.3 million in the remainder of the markets it's available in (including Japan). There were no specific numbers for Japan, but he was happy to point out Gears of War's cozy spot on the Japanese sales charts.

But it's not all good numbers. They've also altered their forecast for the fiscal year ending June 30th, from a goal of 13 to 15 million Xbox 360 consoles shipped to just 12 million, leaving them a relatively attainable goal of shipping an additional 1.6 million units over the next five months. Their real goal: profitability by this time 2008. With revenues of $2.96 billion, a 76% jump from last year, and a loss of $289 million, roughly the same as last year, profitability isn't too far off.

To achieve that goal, Moore pointed to titles like Viva Pinata which, while seriously underperforming at retail, remains a critical success and "will sell for years," says Moore. Exclusive first-party content, like Gears of War and Halo 3, coupled with third-party exclusives like BioShock and Splinter Cell Convictions will continue to push hardware sales, while ancillary services like Xbox Live and microtransactions will continue to add to revenues. While Microsoft is on the road to profitability, they have a ways to go to catch up with Nintendo whose latest financial report cited a 43% profit increase. It's a very long road, you see?

Read -- Microsoft Reports Record Revenue
Read -- Microsoft profit down, beats estimates (AP)

Speaking with Major Nelson, Microsoft group product manager Aaron Greenberg speculated that a version of Xbox 360 specialized for IPTV and DVR activity was certainly possible. Greenberg admitted that "[Microsoft] did not build [Xbox 360] to be a high-definition DVR," suggesting an IPTV upgrade (i.e. larger hard drive) and IPTV-specific console "configuration" were both possible solutions to the inherent dilemma. Greenberg did note that a larger hard drive would only be necessary for DVR functionality -- IPTV could function with or without a hard drive.

While this is hardly confirmation that a new version of Xbox 360 is inbound, Greenberg's statements may indicate that Microsoft is closing in on a strategy for 360 v2; one that won't upset early adopters (at least, not as much). Marketing v2 as an IPTV/DVR device (PSX, anyone?) might be enough of a diversion to excuse the original Xbox 360's lack of substantial hard drive space and HDMI output. If that is to be the case, it will be imperative that all of the v2 components are available for the original console, including a free IPTV software installation (with purchase of contract, of course).

We had a chance to check out Microsoft's IPTV offering for Xbox 360, announced earlier this week during Bill Gates' CES keynote, and get answers to some of the questions that have been nagging at us since first hearing about the service. Though Microsoft hasn't announced any providers for the service yet, both AT&T and Verizon -- as well as fourteen other telcos around the world -- use Microsoft's IPTV middleware platform to provide television over fiber, so they seem like likely candidates when the service debuts holiday season '07.Of course, if you're considering the DVR functionality, the Xbox 360's anemic 20GB hard drive won't get you very far. A Microsoft rep said the file sizes are dependent not only on the resolution of the feed, but the compression used by the provider; however, one could probably assume that the Xbox Live Video Marketplace's videos would be roughly analogous in size. Regardless, we'd expect an update to the drive before IPTV launches. Because IPTV uses software, not a hardware tuner, to decode the signal, the number of streams that can be simultaneously recorded is limited solely by internet and hard drive bandwidth. In addition, IPTV is capable of offering more HD channels than other platforms, like cable or satellite. Because the service shares the same connection as your phone and internet connection, it can provide telco caller-ID and features like teleconferencing have "been discussed." Perhaps the biggest question we have is whether or not any of this functionality would (or could) be made available to gamers who don't (or can't) get IPTV service in their area. Microsoft isn't saying anything but, considering the small amount of consumers with fiber service to the home, we certainly hope so.

Today's mysterious Xbox 360 update was simply a series of bug fixes that stabilized some performance issues. No IPTV this round.

In other update news, pop in your copy of Gears of War and download the new patch -- maps tomorrow.

Update: removed incorrect update details.

[Via Xbox 360 Fanboy]

You've watched or listened to the keynote, checked out the interface screenshots, watched the video, or simply heard about it through one of the 250+ news organizations that have already covered Microsoft's plans to add IPTV capability to the Xbox 360 in time for consumermas 2007.

So what?

What might this mean for the console wars? How will this change the game? We're not nearly as smart or creative as our collected readership (after all, Time made YOU the person of the year), so rather than rack our brains, we'll sift through yours and publish the best responses in a subsequent post.

Task: in your pithy best, share how you believe that this announcement might change the console war now underway, if at all.

Let's get a couple obvious ones out of the way first:

• A larger hard drive is assured. Ain't no DVR going on with a measly 20GB hard drive.
• Perhaps content partners might offer free Xbox 360s to consumers who purchase multi-month (or multi-year) IPTV service contracts, in much the same way that mobile phone service providers offer highly subsidized phones for customers who sign a one- or two-year service agreement.
• Sony announces intent to match this functionality, but does as well copying Xbox IPTV as they've done copying Xbox Live.

If this doesn't make you tingle all over, then you need to check your pulse. It's only been since November that we've had movies available to download on the Xbox 360, and soon it'll be live and recorded television as well. In the months after that, the console will slowly take over your kitchen, bathroom, and bedroom, leaving you fully assimilated into Microsoft's SkyNet service, offering sentient oversight of all of your bodily functions.

For now, revel in the goodness of Engadget's Xbox 360 IPTV interface gallery, and check out the video of this baby in action on Microsoft's Channel 10 site. TiVo, you'd better start working overtime.

Bill Gates and Robbie Bach are taking the stage at the annual CES keynote, eager to share all the secrets everything they have in store for us in '07. As leaked, Microsoft is touting 10.4 million Xbox 360 systems shipped to date as well as introducing IPTV services for the erstwhile gaming console. With "strong demand" for the HD-DVD drive and brisk sales from the Xbox Live Video Marketplace, the ability to stream television straight to the 'box brings the erstwhile gaming platform closer and closer to the mythical convergence box they've envisioned from the beginning.

While mythical, IPTV inclusion wasn't a mystery. Last year a Microsoft exec said IPTV on the Xbox 360 was a "fair bet" and Engadget asked Gates directly about IPTV on the 360. With significant investment in IPTV already, bringing that functionality to the Xbox 360 was an obvious move for Microsoft. Some of the functionality of their offering will include:

• "digital video recording capabilities" for gaming, movie viewing, and even voice and video chat -- we're really gonna need a bigger hard drive
• Live chat while watching television -- we're so going to watch Lost with out friends. "I totally knew that was going to happen!"
• Play on Xbox Live while recording television live in the background

Hold your horses! IPTV on Xbox 360 won't be available until "holiday season 2007." Even then, you'll need to be in a market "deploying TV services based on the Microsoft TV IPTV Edition software platform." Right now, we've got a lot more questions than we've got answers. Check Engadget for live coverage of the keynote for the announcements, happening now.