The alliance also calls for Thomson to sell WebTV set-top boxes under the RCA brand in the United States and the Thomson brand in Europe. Microsoft Windows CE based software will be used in the products, according to the announcement.
Further, the two companies will work to develop products for digital television that combine WebTV technologies with Thomson technologies for satellite and cable.
The agreement is one of many to emerge from the much-hyped convergence of television and computing, which is producing partnerships of companies from a broad cross-section of industries. As an indication of the chaotic nature of this new market, two major Japanese electronics firms have just pulled out of the "enhanced TV" market Microsoft and others will seek to develop.
Under today's announcement, the companies will work together to promote enhanced television sets, called eTVs or Net TVs, which feature support for interactive, Internet-supplemented TV programs as well as an electronic program guide.
"Microsoft believes that consumers can only benefit from the fruits of this relationship," Craig Mundie, Microsoft's senior vice president of the consumer platform division, said in the statement. "Thomson's leadership in consumer electronics, combined with Microsoft's desire and ability to provide technologies to enable digital television, is sure to bring products and services to the market that consumers will embrace."
Added Thomson chief executive Thierry Breton: "Our combined efforts will accelerate the emergence and the deployment of eTV."
Analysts noted that Thomson hasn't enjoyed much success in getting its own convergence products off the ground. Its RCA NC, a competitor to the WebTV that was based on Network Computer, Incorporated's software, was recalled when the Internet service provider went belly up. A high-profile relationship with Compaq to provide large-screen monitors for Compaq's PC Theatre product met a similar fate.
Thomson isn't the only company having difficulties in this nascent market. Sharp and Mitsubishi recently stopped producing enhanced TV models and will exit the market once inventory runs out, according to reports. Rivals Sanyo and NEC have temporarily ceased manufacturing as well.
Sharp sold just 8 ,000 units in Japan in the last 18 months, while Mitsubishi has sold 7,500. None of the four companies has previously marketed a Net TV in the United States.
Enhanced TVs "have always been oversized TVs, facing a tricky transition to digital TV, [and] always been at premium price points, well over the price of simply combining the two technologies," Sean Kaldor, International Data Corporation's vice president for consumer research, previously told CNET News.com.
But that's precisely what Thomson is hoping to do--its initial spate of products will be analog and digital televisions that have electronic programming guides and likely some for of email or other interactive service. Later, it will make a foray into digital set-top boxes for the cable industry, as well as similar devices for the digital satellite industry.
Thomson declined to disclose the amount of the investments, which represent a 30 percent in the company. Thomson's largest shareholder is still the French government, which granted special permission for it to seek outside investments.
The four-way investment in Thomson comes on the same day that billionaire investor and Microsoft cofounder Paul Allen bought Charter Communications, the nation's tenth largest cable operator, for $4.5 billion. It is Allen's second cable acquisition since April.