This time it’s going to be different. That’s because Microsoft (MSFT) is paying to make it so. The company has teamed up with Fox to sponsor a “Family Guy” special built around Windows 7. The show, dubbed “Family Guy Presents: Seth & Alex’s Almost Live Comedy Show,” after creator Seth MacFarlane and voice talent Alex Borstein, will air Sunday, Nov. 8, at 8:30 pm, EST and PST.

The new episode will be free of commercial breaks but presumably rife with “clever” references to Windows. Microsoft agencies Universal McCann and Crispin, Porter and Bogusky, which were tapped to weave the company’s marketing messages into the program, will make sure of that.

“You’ll see us deeply integrated into the content,” Gayle Troberman, general manager of consumer engagement and advertising at Microsoft, told Ad Age. “You’ll hear a lot about how Windows 7 can help you simplify your PC–it’s simple, fast and easy to use.”

Sounds…hysterical.

Incidentally, it’s worth noting that this isn’t the first time MacFarlane has inked an advertising deal with a tech company. He’s currently working with Google (GOOG) on a project called “Seth MacFarlane’s Cavalcade of Cartoon Comedy,” which involves humorous animated shorts with built-in advertisements syndicated through the search giant’s AdSense advertising system.

Kara was half James Bond, half Indiana Jones in the cities and jungles of BoomTown this week. She jet-setted, jet-lagged and still managed to report on a genuine cougar fight.

BoomTown waved goodbye to merry old England and racked up some more frequent flier miles early in the week heading back to the techie embrace of Silicon Valley. Before her tray table was locked, though, Kara made a quick stop at music darling-of-the-moment Spotify. Daniel Ek, founder and CEO, hopes to bring its pay-per-month music service to millions of American mobile devices, to add to its hefty presence in the U.K. and Europe.

As D-Force One touched down at AllThingsD headquarters, one of the valley’s original major players shook things up with a $100 million branding move. Yahoo (YHOO), possibly now spelled Y!hoo, changed its brand in support of an overall shakeup of its services. Kara hearkened back to the D conference and wondered if rebranding the company Y!#@&$oo might have been more appropriate, considering CEO Carol Bartz’s preference for “salty” language.

And not to be left out of a worthy chuckle, BoomTown brought readers the inside scoop on the cougar that came to town. Yes, a cougar–or mountain lion, if you’re from California–was seem roaming the hills above Microsoft’s Redmond, Wash., campus this week. The company circulated a fairly priceless memo that included tips on how to successfully fight a cougar. Any such advice against snow leopards, however, was omitted.

As Kara was jet lagging, John was running full-tilt over at Digital Daily. On Monday, the Federal Trade Commission released a new proposal to institutionalize Net neutrality. The proposal would ban Internet service providers and data deliverers from prohibiting or throttling content to promote their own services. John pointed out that it wasn’t too surprising that AT&T (T)–and Republicans–weren’t too happy with the move.

While politicians exercised their series of tubes, Microsoft (MSFT) was busy shadow-tablet boxing. John filed a report about the first Microsoft device designed exclusively to compete with a product Apple (AAPL) doesn’t make. The “Courier,” as the two-page “tablet-book” is called, features some decidedly un-Apple-like interfaces, unless of course you look a little farther back to the days of the Newton.

To finish out the week, Digital Daily took the AllThingsD time machine back to 2003, when Apple was rolling out its revolutionary MMS service. Sometime Friday, iPhone users were suddenly able to share pictures with friends over the air. Unless they already use Flickr, Facebook, or about a zillion other apps that basically do the same thing.

MediaMemo explored its inner, or maybe outer, geek this week, beginning with the Gizmodo annual gallery show. The charity event featured musical Tesla coils, Star Trek props and a “Microsoft Surface”-like computer with a mud-based (not joking) user interface.

Peter continued the browsing theme, reporting that Yahoo and Google were both back in the market for acquisitions. Google (GOOG) CEO Eric Schmidt said he had his checkbook open again, now that “the worst is behind us.”

Even if Yahoo and Google are in a buying mood, one particular VC firm isn’t feeling so flush. New York’s Union Square Ventures opted out of the latest round of Twitter fund-raising. Peter hazarded a guess that the now-famous $1 billion valuation may have had something to do with it.

Across town at the Mossberg Solution, Katie gave readers a complete rundown on the Microsoft Zune HD. The iPod-hunting media player is now in its fourth generation. The player got high marks in the style and widgets categories, but still needs a solution to the confusing “points system” purchase interface. The problem with Zune isn’t the player, it seems, but the stuff Zune isn’t connected to.

It’s going to be another week of electro-awesomeness here at AllThingsD. Until then, always remember that you should never turn your back on a cougar. The safest way to escape is to buy it a pomegranate martini and squeeze out the window of the men’s bathroom.

Boy was he ever wrong. MarketWatch reports that revenue at Microsoft’s Entertainment and Devices unit, which manages the Zune and Xbox 360, fell 42 percent to about $211 million in its most recent quarter. Microsoft (MSFT) shipped more Xbox systems this spring than last, so what could be driving that grotesque revenue shortfall?

Yep. After nearly three years at market, Zune has remarkably little share to show for it. In fact, recent data from NPD Group show Zune’s share of the portable media player market at about two percent, compared to about 70 percent for the Apple (AAPL) iPod. And with a sales trend like the one revealed in Microsoft’s January 10Q, market share isn’t likely to be growing much. According to that document, “Zune platform revenue decreased $100 million or 54 percent reflecting a decrease in device sales.”

And that was in a holiday quarter.

Little wonder, then, that some have begun to wonder if it might not be time for Microsoft to just scuttle the device. “The market reception for Zune is so disappointing that many retailers have even stopped selling it altogether,” Tradition Capital Management VP George Kurian told MarketWatch. “Microsoft should abandon Zune and follow Apple’s strategy to try to make its presence felt in the high-growth smartphone sector.”

In remarks at Microsoft’s Worldwide Partner Conference today, COO Kevin Turner said Microsoft has settled on a location for the retail stores it announced earlier this year: Within spitting distance of Apple stores. “We will have some retail stores that are opened up right next door to Apple stores this fall,” he said.

There goes the neighborhood, right? Anyway…

So Microsoft is going to play McDonald’s (MCD) to Apple’s Burger King (BKC). Makes sense. Apple’s retail locations are very well chosen. Microsoft, if it’s going to go this route, would be wise to have stores there as well. As economic theorists Charles ReVelle and Harold Hotelling once observed, “The best position for a new vendor is back-to-back with the well-positioned first vendor, allowing an even split of the market. Any other position of the new vendor would have given that new entrant a smaller market share.”

And one could argue that Redmond might benefit from a retail presence that brings all its wares together in a single “shopping experience”–Windows, Xbox, Zune. All that partner hardware. Surface. Put a Project Natal booth at the back of the store to draw foot traffic and who knows what might happen?

Microsoft and Verizon are reportedly discussing a touchscreen multimedia cellphone that could launch on the carrier’s network in 2010. The project, code-named “Pink,” will apparently involve some ungodly combination of Windows Mobile and Zune software. That code name is particularly interesting in light of recent reports that Microsoft (MSFT) has requested proposals for a new ad campaign for a mysterious mobile application by the same name.

Beyond that, details are slim. Representatives for Verizon (VZ)–which already has six Windows Mobile touchscreen devices in its lineup–refused to comment on the report. And Microsoft is apparently holding to the party line, insisting that its mobile strategy is to provide a software solution, not devices. Consider these remarks from Microsoft CEO Steve Ballmer at a recent McGraw-Hill (MHP) media conference:

With Windows Mobile, we want to permit a range of hardware innovation, and yet, still have a pretty good experience end-to-end, with good applications, and we want the ability for software developers to target both a very high-end and a lower range or mid-range phone.

And the ability to scale up and down, to work with multiple hardware vendors, to get a range of competition and innovation and price competition amongst the hardware guys is a big asset. It is certainly what our strategy is. It’s very different than Apple’s, and it’s very different than BlackBerry’s. But, unless you assume Apple and BlackBerry are going to sell the lion’s share of most phones … which I don’t, because I think they’re going to get a lot of competition from the Samsungs, LGs, Sony Ericssons, Taiwanese. I mean, there are a lot of guys who are going to be in that phone business.

I think that the play for us is to permit broad innovation at many price points, with a very good and very feature-rich, in terms of applications, experience. If people want keyboard input, that’s great. If they want touch, that’s great. If they, you know, want voice, we need to give them a range of modalities for interaction. And that’s the direction we’re headed with Windows Mobile 6.5 and into the future.

Ah yes, Windows Mobile 6.5. When are we going to see that again?

That was Redmond’s terse denial of a report that it is preparing to launch a branded cellphone in the second half of this year. Put forth by analysts from Broadpoint.AmTech, the report speculates that the device would tightly integrate hardware and software, much like Apple’s (AAPL) iPhone, and that Microsoft (MSFT) may uncrate it at the Mobile World Congress in Barcelona later this month. Below, the note in its entirety:

Checks suggest MSFT working on its own smart-phone

MSFT Smart-Phone Launch? Multiple industry sources are telling us that MSFT is planning to launch a smartphone. We are told it will be a 2H launch. We do not see this as landscape changing, much like their Zune launch. There are however more established competitors in the smartphone space (RIMM, AAPL, HTC, NOK) and interesting contenders (GOOG, PALM). The Zune effort certainly did not change the iPod/ iTunes trajectory, but may have taken some share from weaker players including those using Windows DRM.

There could be an announcement at 3GSM. We will be attending MSFT’s analyst event at the show in Barcelona on Feb. 16th. There is also an analyst event in New York Feb 24th.

[Image credit: ZuneScene]

Overlooked in the carnage of Microsoft’s second quarter was the performance of the company’s Zune platform. Which was, quite simply, atrocious. Seems that $10 to $20 holiday discount didn’t do much good at all.

According to Microsoft’s latest 10-Q, “Zune platform revenue decreased $100 million or 54 percent reflecting a decrease in device sales.”

A precipitous decline. And one that stands in stark contrast to the record 22,727,000 iPods Apple (AAPL) shipped during its latest quarter, representing three percent unit growth over the year-ago quarter. Can’t really blame this one on the economy, can we Microsoft (MSFT)?

Beyond that, there’s likely to be a fair bit of talk about the Windows Mobile platform, the company’s new–and prematurely announced–agreement to become the default search provider for Verizon Wireless (VZ) and perhaps provide some sort of Zune interface for cellphones, but little else.

The keynote begins a bit before its scheduled start–not with Steve Ballmer, but with two beat-boxers. Wonderful, they’re rapping about CES. Where’s Bill “Big Pimpin’” Gates, when you need him?

The performers leave and Consumer Electronics Association President Gary Shapiro takes the stage. He acknowledges it was a “tough 2008,” and after a few introductory remarks (”Steve received a perfect 800 on the math portion of the SATs!”), introduces Ballmer. But first a little video. As it plays, I notice my inbox filling up with a handful of Microsoft press releases: Microsoft’s Ballmer Announces Availability of Windows 7 Beta and Windows Live, Microsoft makes new, early version of Windows available, etc.

Ballmer takes the stage a few moments later, all high energy and charisma. He begins by recognizing Microsoft’s history at the event and, of course, that Bill Gates has keynoted a CES or two in his time. A brief aside about email messages he’s received about the event today. There’s one from Gates: “Steve make sure you’re at CES and not that other event in Las Vegas this week” (presumably the annual Adult Video News Award show). And one from Yahoo CEO Jerry Yang: “Steve why do you keep ignoring my friend requests on Facebook?” Then, on to an industry overview.

“Today our world, our nation and our industry face some really big challenges,” Ballmer says. “All of us, we’re all feeling it. And its impact will likely be with us for quite awhile. But no matter what happens with the economy or how long this recession lasts, I believe our digital lives will only continue to get richer.”

Companies that pursue innovation will do better than those that pull back, says Ballmer. “We will continue to invest more than others.”

Outlining the broader vision now. Microsoft’s original vision was to put a PC in every home–a single screen. Today, it’s about three screens. The PC, the mobile phone and the TV. And the barriers between these screens are slowly going away. They’re being connected by the cloud. This is the “last mile” for the consumer experience–bringing the TV, the PC and the mobile phone together through the cloud.

And at the center of this experience? Windows, of course.

“In the next couple of years the computer will be able to hear you,” says Ballmer. “Speech gestures and handwriting will become a normal part of the way we interact with our PCs, our phones and our TVs…. Windows has become the language that over a billion people speak around the world.”

Moving on to hardware now. “At this time economically, when people are struggling…the choice that offers the most power and most value for the money is the PC.”

Oh, we all know what’s coming now, don’t we?

Yep. “That’s why I’m a PC and I’m proud of it!”

Onward. “Microsoft is transforming Windows from a PC operating system to the cloud,” says Ballmer, who notes that he’s excited by the progress the company’s made with Windows 7. “It’s the best Windows ever,” he says. Faster boot times, touch support, etc. “We are on track to deliver the best version of Windows ever. We are putting in all the right ingredients…and working hard to get it right and to get it ready…. Windows 7 will make every day tasks faster and easier.” And then, as expected, Ballmer announces the official beta. Smattering of applause. No big surprise here. “I encourage you all to get out and download it,” Ballmer adds.

Moving on to Windows Live now. A handful of announcements. Windows Live Messenger, Windows Live Photo Gallery, and Windows Live Mail. A partnership with Facebook. And a distribution deal with Dell (DELL) and the Verizon Wireless search deal, which was unofficially announced earlier today.

Ballmer invites product manager Charlotte Johnson to the stage for a demo of Windows 7, etc. Apparently very easy to clear desktop clutter in the new OS. Easy to compare two documents or Web sites as well. If that’s Windows 7’s marquee feature, Microsoft is in big trouble. This is all stuff that was in the pre-beta. “Homegroup” feature seems a nice way to set up a home network. Course, all the PCs involved must be Windows 7 machines for it to work.

On to multi-touch. “We built touch into the DNA of Windows 7,” Johnson says. She uses a touchscreen to navigate a 3D map of Manhattan. Yawn. Very little new here. The same is true of the Windows Mobile demo. Big revelation: Internet Explorer 6 for mobile phones supports Flash. And the Windows Live home page can now display updates from Facebook, Twitter, etc…. No. Nothing much new here at all. Seems today’s big announcement is the official beta of Windows 7.

Oh, here’s something. A new feature in Messenger. Some sort of dynamic display picture to communicate user moods. Exciting. A bit more patter and we’re on to the obligatory “I’m a PC” ads.

And then…another band? An Australian musical comedy act called Tripod. WACKY. No Flight of the Conchords, though.

Tripod finishes up and Robbie Bach, president of Microsoft’s Entertainment & Devices Division, takes the stage. “Zune had a great year. We’ve won critics over,” he says–and without a trace of irony. Two million people on Zune social, apparently.

Moving on to Xbox. “Not only our best holiday season but our best year ever for Xbox sales.” Two new Halo games in the pipe–”Halo Wars” and “Halo 3 ODST.”

Then a few moments on Xbox Live Primetime and we’re on to Kodu, a tool that enables users to create games without knowing a traditional programming language. Bach invites a 12-year-old girl onstage to demo it. She shows off a game she created and then beats Bach at it.

Ballmer returns to the stage for some Microsoft Research demos. First, some sort of digital anatomy textbook. Five bucks and a copy of Bill Gates’s “The Road Ahead” says we’ll get another Surface demo next.

And indeed we do. That’s followed by flexible color display less than one millimeter thick. And that’s pretty much it. A few final remarks from Ballmer and Shapiro and then Tripod closes out the keynote.

Microsoft (MSFT) hasn’t yet commented on the failure, so it’s difficult to determine what exactly is at work here, although it seems likely to be a firmware bug. Regardless of the cause, such a widespread simultaneous device failure is a nasty blow to Microsoft and to the Zune, which is already a powerful magnet for bad press.

“I hate to say it but I believe this is the end of the road for the Zune and I. Just as I was happy with the last update and things were fine, we get another major meltdown. I was always supportive and had good things to say about my Zune to those that would ask, however this is the nail in the coffin,” one Zune owner wrote in a post to ZuneScene. “I can’t take it anymore. I can’t sit here all the time and wonder what Microsoft does right or wrong anymore, I just want to get up and go listen to my music. Listening to music is about the last thing I do with my Zune. I always have to reinstall, download new firmware, or wait for the slow software to catch up. Now this? I want to throw it away and never look back.”

UPDATE: Microsoft is aware of the issue and working on a solution. From Zune Insider:

Customers with 30gb Zune devices may experience issues when booting their Zune hardware. We’re aware of the problem and are working to correct it. Sorry for the inconvenience, and thanks for your patience!

UPDATE II:: Looks like Microsoft’s discovered a solution to the Z2K9 bug, and it’s a simple one: wait 24 hours and it will go away on its own. Here’s Microsoft’s explanation in full:

Early this morning we were alerted by our customers that there was a widespread issue affecting our 2006 model Zune 30GB devices (a large number of which are still actively being used). The technical team jumped on the problem immediately and isolated the issue: a bug in the internal clock driver related to the way the device handles a leap year. That being the case, the issue should be resolved over the next 24 hours as the time change moves to January 1, 2009. We expect the internal clock on the Zune 30GB devices will automatically reset tomorrow (noon, GMT). By tomorrow you should allow the battery to fully run out of power before the unit can restart successfully then simply ensure that your device is recharged, then turn it back on. If you are a Zune Pass subscriber, you may need to sync your device with your PC to refresh the rights to the subscription content you have downloaded to your device.

Not true, the President-elect uses an iPod.”

– An Obama spokesman makes quick work of the Zunegate scandal