MICROSOFT, the world’s largest software company, has allocated more than $20 billion (£11.2 billion) to spend over the next six years in a drive to grab a share of the film and music entertainment market, The Times has learnt.

The company, which generates more than $1 billion in cash every month, already has 270 patents pending on recent innovations that will allow customers to watch television streamed through the internet.

The money to be spent on digital media innovations will amount to half the company's entire research and development budget until 2010.

Microsoft hopes that the plans will divert concerns over a delay of the next version of the Windows operating system. They also represent a crucial attempt to catch up with rivals after Microsoft was left behind in the race to offer music downloads.

Bill Gates, Microsoft’s billionaire chairman, will tonight unveil the first results of the company’s strategy to become the conduit through which people will watch films and download music over the internet. Mr Gates will also unveil other software and electronic devices intended to simplify legal sharing of video and music over the internet.

The software will allow specially configured personal computers to become an all-in-one digital jukebox, photo album and personal video recorder, connected wirelessly to the home television.

A handful of computer hardware companies, including Hewlett-Packard and Samsung, are expected to support the launch by announcing new compatible products.

The technology will allow consumers to book and watch content that is streamed directly over a high-speed internet connection, such as films and news updates.

Microsoft will make no money from distributing the new media software, hoping instead to drive sales of Windows — which rose to $11.5 billion, or more than 31 per cent of the company's sales, in the past financial year. At the heart of Microsoft's strategy will be numerous content-driven partnerships with companies such as internet service providers, record labels and internet-based film stores.

Although Windows Media Center software has existed for more than two years, it has failed to win a following because it has suffered from bugs, was unwieldy and did not make effective use of wireless technology.

The fresh attempt to make an impact on the audiovisual market has been spurred by the explosive success of rivals such as Apple Computer.

Record labels and Hollywood studios have become eager, in a bid to stop piracy, to strike deals that will allow their movies and music to be accessed legally online.