This is the first article by Mack D. Male, in a two part series, exploring Microsoft’s Internet TV strategy. Mack is the author of Windows Media Blog and mastermaq.

Television over the Internet, better known as IPTV, is a small but growing segment of the very large market for television products and services. Gartner predicts the number of IPTV subscribers will grow from 3 million in 2005 to 50 million in 2010, creating huge opportunities for technology vendors. However, there’s more to the story than simply moving the signal from traditional broadcast and cable networks to Internet networks.

At last night’s opening keynote speech for the 2007 Electronic Entertainment Expo (E3), Jeff Bell, Microsoft’s VP of Marketing for the Xbox, made a number of Internet TV-related announcements. The major, and longed after news, is that Video Market place, which enables users to download paid-for television shows and movies to the XBox 360, will finally launch in Canada and Europe by the end of the year. Bell also revealed that Xbox Live currently has more than 7 million members, and that content sold through the Video Marketplace has brought in $125 million of revenue.

The second big announcement is that, as of today, Disney content will be available on Xbox Live.

TiVo users can now access Amazon Unbox directly from their set-top-box, negating the need to use a PC in order to browse and purchase movies. Although the movie download service has been supported by TiVo devices since March, the feature previously required users to place orders through Amazon’s web site, rather than via a TiVo connected to the TV.

Over at NewTeeVee (a favorite blog of ours), Om Malik questions the logic of streaming live TV over the Internet. Echoing comments made by Business 2.0’s Erick Schonfeld, in reference to LiveStation, Malik writes:

In this age of hyper personalization, where DVRs are at our command, ready to playback the latest escapades of Vinnie Chase & the Boys, who needs live TV. Unless it is live sports extravaganzas, say NBA finals or SuperBowl (or Wimbeldon Tennis), television is no longer what appears on the TV Guide grid or on the hour.

Schonfeld goes even further, writing:

The Internet is the ultimate on-demand television system, where the choices of what to watch and when have no practical limits. The concept of live TV almost makes no sense in that context. Why limit your audience only to those people who can tune in at a certain time? … live TV will be a liability on the Web unless those streams are also stored for later viewing.

Having had Zattoo running on my desktop for the last couple of weeks, I’ve really enjoyed having a live TV stream playing in a small window in the corner of my laptop while at the same time: writing email, Instant Messaging, or blogging. If there is such a thing as background telly, then live TV on the Internet fits perfectly. Mostly I’ve had the BBC’s 24 hour news station playing, or on Sunday, for example, the men’s Wimbeldon tennis final. Proof, you could argue, that Schonfeld and Malik are right when they say that sports and ‘breaking’ news are the exception that proves the rule. However, I see another merit to live TV, over the net or otherwise.