The industry has talked up the idea that computers will finally move from the home office to the living room for many years, but Ballmer said he thinks this theory may be about to become a market reality.
"I think we are close to the tipping point, to where we may get a device that can take on critical mass. There will be an explosion in demand. People weren't really sure where these new devices fitted in. At two hundred bucks, maybe, but at three hundred or four hundred bucks, it was too hard to boostrap the device type," he said.
There are of course no prizes for guessing Ballmer's pick to win the battle of the digital home -- and who he fingers as the loser.
"There is no way that you can get there with Apple. The critical mass has to come from the PC, or a next-generation video device," he said.
Ballmer said he's especially interested in "very basic end-to-end IP-based set-top box devices," which he said Microsoft is testing right now with Telecom Italia and Swisscom. Trials are set to start with such a device in the UK, although he declined to name the partners involved.
"We've seen surge of interest from the telcos, as everyone is looking for a triple play -- voice, video, data," he said.
Ballmer pointed out that elements of the converged digital landscape have been around for a while, but only now have complete systems built up that seem to be getting consumers involved.
"We have had media technology built for years -- Apple, Sony, RealNetworks, have been there for years. What's changed is that now you have the format, the player, the device, and the service, and that's what we will have with the launch of Microsoft Media Player 10, the official launch of the Microsoft Network (MSN), and Microsoft's Portable Media Center," he said.
Ballmer has strong words on the legal issues created by the growth in digital music and video in the home. Digital Rights Management (DRM) technology that will let content companies such as Hollywood studios feel comfortable that they can maintain control of their intellectual property is key to the convergence of consumer electronics and the PC industry.
Microsoft's CEO clearly wants to position Microsoft as the good guy in the market, and was at pains to try and position Apple as soft on the principles behind DRM.
"We've had DRM in Windows for years. The most common format of music on an iPod is 'stolen'. Part of the reason people steal music is money, but some of it is that the DRM stuff out there has not been that easy to use. We are going to continue to improve our DRM, to make it harder to crack, and easier, easier, easier, easier, to use," he said.
He also claimed some domestic familiarity with the issue.
"My twelve year old at home doesn't want to hear that he can't put all the music that he wants in all of the places that he would like it," he joked.
ZDNet UK's Michael Parsons reported from London. For more coverage from ZDNet UK, click here.
It looks like Ballmer is scared to death, that he actually has to resort to threatening his customers.
Let me tell you Stevieboy...this time, it's not going to work. Customers are maybe stupid, but they're not THAT stupid. Accusing your customers of being thieves is like trying to cut the rope that your holding at for dear life.
Although I don't own an iPod, I feel humiliated and being attacked by his behaviour. The CEO of a big company like Microsoft shouldn't act like that.
Or, maybe I should be thankful for it. Now everyone can clearly see what type of person Steve Ballmer really is. Mr. Ballmer, you may be rich, but I do feel sorry for you.
Apple's iPod and iTunes Music Store rule the market and Microsoft actually thinks, that with hard DRM he can win over customers.
Think again, Steve.