An overlooked news item during the CES was Bill Gate’s announcement that Microsoft’s Xbox 360 would be getting a live IPTV service. Rumors are also circulating that the Xbox 360 might also get DVR capabilities and other upgrades to compete with Apple TV in a fight for the living rooms of America and the world.

The TV service will be provided by merging Microsoft’s existing Microsoft® TV IPTV Edition software platform with the Xbox. The service should be available by the holiday season of 2007.

Robbie Bach, president of Microsoft’s Entertainment and Devices Division said, “Both Xbox 360 and Microsoft TV IPTV Edition by themselves deliver unique and exciting entertainment experiences today, but IPTV on Xbox 360 is truly a solution that is greater than the sum of its parts and will enable even more exciting experiences to delight consumers, service providers, content providers and game developers alike.”

Microsoft hasn’t released many more details on its live TV service let alone the possibility of any other upgrades but the direction the company is headed in is pretty clear. They’ve seen what Apple wants to do and they don’t want to loose out in the coming battle for the hearts and mind and more importantly, wallets, of consumers.

The Xbox 360 already provides an HD DVD player for its Xbox 360. This was seen as a strategically smart move by Microsoft as rival Sony struggles to meet demand for its PlayStation 3.