Microsoft Chairman Bill Gates sat down with us for a chat ahead of his very last keynote at the annual Consumer Electronics Show in Las Vegas. He discussed the next big thing, Google, and HD-DVD.

You’re going to talk about the “next digital decade” tonight. What is the biggest breakthrough that needs to happen for the technology industry to make that next leap?
I think most of the things we need are happening. The great screens, the broadband penetration. I think the next big surprise for people will be how this natural interface becomes pervasive. You see touch on the iPhone, you see 3D controller on the Wii, you see Microsoft Surface and you see what we’ve done with speech in the Ford Sync product. All of those are just starting to show you that natural interaction pattern really breaks you out of the keyboard and mouse and lets multiple people interact in a casual way.

You mention in your keynote how the ubiquity of broadband drove the past digital decade. Some of your rivals cite this very development as spelling doom for traditional or packaged software. What do you think?
We’re about the magic of software and we don’t care whether it’s in a box or how you get it. We bemoaned the end of the floppy disc era (laughs) but we’re not about physical media. Even movies are moving away from physical media. Even music is moving away from physical media. In terms of having people get the latest in software and movies on their devices, the best thing possible is to have not just your software but all your information up in the (Internet) cloud. The arrival of the cloud is a great thing. We have a lot of software people, including competitors, taking advantage of that. We are extending the Windows platform into that area. So it is the new frontier and it will be the frontier that companies will prove themselves out on. That’s where all of our investments are.

Warner Brothers said last week it was backing Blu-ray exclusively. Will Microsoft remain committed to the HD DVD format even if it appears that the media companies are backing Blu-ray?
Certainly we supported both Blu-ray and HD DVD as Windows peripherals. The last announcement was Paramount opting for HD DVD and now this one is going the other way. I still think a format battle is going on there. Our contribution is the HDi Interactive format piece has been really well received. We hope to see that used broadly. I think the real competitor in the long run is digital (video) download. Just like in music, it is going to be the biggest of the three.

You kind of sound agnostic about the formats.
No, not really. We have definitely worked with HD DVD in a very strong fashion. Our codecs and HDi are available on the other format and we are a leader in digital download so we have some involvement in all three approaches. In the long run, people don’t want physical media. You don’t say to yourself, what’s the format battle after CD. If someone tried to introduce a new music format, you’d laugh and say ‘well isn’t that my phone, my iPod and my Zune?’ And you’d be right.

More from the interview here.