Microsoft has reached content deals in Europe with EMI Music Publishing and Napster LLC for handheld devices running Windows Mobile software for Portable Media Centers, the company announced today. The devices allow users to watch videos and recorded television, listen to music and browse photograph albums on the move.

Handsets from Creative and iRiver will be available worldwide in the second half of this year. Other manufacturers including Samsung are working on their own models, Microsoft's Portable Media Center Product Manager, James Bernard, said.

Deals have already been made with Napster, EMI and CinemaNow for consumers in the USA, Microsoft said. Content downloaded from these services in Windows Media Video, Windows Media Audio and MP3 formats, will be licensed for use on both PCs and the media Center products.

Windows Mobile software for Portable Media Centers is built on Windows CE .NET, Microsoft's operating system designed for small, mobile products. Devices running the software are being developed on the Intel XScale technology reference design, according to Microsoft.

Content can be downloaded to the handsets from any Windows XP-based PC via a USB 2.0 link, Bernard said.

Creative's Zen handset will store up to 40GB of content, which will allow up to 10,000 music tracks, or 175 hours of video. The Creative rechargable battery will last for three hours watching video or up to 12 hours listening to music. Users will also be able to buy spare batteries to stash in their backpacks.

A video-out link allows films and pictures (in Tiff and JPG files) to be viewed on a standard television, and an audio link is suited to both headphones and speakers.

Sales of personal media players of this sort could overtake sales of straight music players by 2007, but not necessarily for the reasons that Microsoft believes, James O'Donovan, principal analyst with Gartner said.

"Microsoft is talking about how you can watch television programs and videos on it, but I see the main benefits being in music videos and still photos. I think that as an extension of an MP3 player, being able to watch music videos adds tremendous value," O'Donovan said.

As an avid collector of music videos over the past 20 years O'Donovan confesses to being biased. "But I think there's a generation of kids that have been brought up with MTV and I think there's a value in being able to take them too," he said.

Extras like concert clips, lyrics, artwork and interviews would also add value, according to O'Donovan.

Being able to store photographs and personal videos to show to friends and family will also be great, he said. "You can show photos to your granny on her television. It bridges some gaps," he said.

The devices will cost between £399 and £449 in the UK. O'Donovan predicts that the prices are likely to drop rapidly, however. MP3 player sales are already taking off and that will bring down the price of hard drives and other components, he said. "Plus, many consumer electronics manufacturers are taking smaller margins to get the volumes up. So I wouldn't be surprised if we see a sub-$300 price within a year," he said.