Media Center will succeed, just not yet

Microsoft's new cut-price Windows XP Media Center edition looks set to be targeted at home users, but the systems still seem too expensive
Written by Ted Schadler, Contributor

Microsoft is promoting its Windows Media Center Extender devices as the easiest way to get music, photos and video from a Media Center PC to a stereo or TV.

However, consumers won't care much today, since they can find cheaper music distribution solutions, and their TVs work just fine without a PC, thank you very much. But pay attention, anyway: Media Center Extender is Microsoft's first step in creating a universal "personal media server" for running digital home applications. In future versions, content owners may find it attractive to target this platform as an alternate path to consumers' TVs and stereos.

We spoke with Microsoft lead product manager Mark Pendergrast and lead program manager Scott Evans about the company's new Windows Media Center Extender, a box that connects a stereo or TV to a home network, accessing the music, photos and video stored on a Media Center PC. Hewlett-Packard and Linksys will ship the first Media Center Extender devices this fall. Our call: Version 1 of Windows Media Center Extender will fail to excite most consumers this festive season.

They are an expensive way to pipe digital music to the stereo. At $300 retail, Media Center Extender devices cost twice as much as home network music adapters from Apple and Netgear. The Media Center Extender's remote control and ability to play Microsoft music files won't be enough to sway most digital music consumers today.

For recorded video, digital video recorders are cheaper and easier to hook up. Despite Microsoft's fervent hope that consumers are linking their Media Center PCs to the TV, it's simply not true: Only 9 percent of the DVR users we recently surveyed used a PC to record their programs. With cable boxes and conditional access in the way, it's simply too difficult to get TV programming onto a PC, a problem that cheap or free cable and satellite DVRs don't have.

TiVo-like devices already scroll through photos on the TV. While some consumers will want to show off their digital snapshots on the high-definition TV in the living room, most will gladly drag family members into the home office. If they want to see photos on the television set, TiVo's home media option already does that nicely.

But if you have an Xbox, the low-cost Xbox Extender Kit makes sense. Buried in the announcement is a new product for Xbox Live owners that turns the connected game console into a media player and a low-cost way to get photos, music and programming to the game room. Because Xbox Live consoles are already attached to a TV and the home network, this kit does the job for $80 -- a whole lot cheaper than buying a Media Center Extender box just to move photos and music around.

Looking ahead
Even though Media Center Extenders won't fly today, they're an intriguing start. Those few consumers who do buy one have a new way to get access to music on the stereo and video on the TV -- over the Internet. Think of the combination of a Media Center PC and Media Center Extenders as a consumer's "personal media server" -- a universal platform for managing personal and premium content experiences.

The personal media server is a programmable platform available to any content owner or service provider that wants to deliver a digital home application directly to consumers. What the Web did for information on PCs, the personal media server could eventually do for TV and music in the living room. While Microsoft and its partners have taken only the first step toward this platform, it promises to deliver some intriguing applications:

Send mass-customised sound and video directly to consumers. Today, content owners like NPR and Reuters must deliver programming through broadcast distribution, a restriction that keeps them at arm's length from consumers and forces them into a one-size-fits-all product. With a personal media server, these providers can tailor their products to individuals; for example, to allow a consumer to select her NPR topics and download a customised daily radio program to listen to on the stereo or MP3 player.

Implement a personal "head end" for premium content. A movie distributor like Netflix or Movielink can already stream video to PCs in off hours so that the movie is ready for on-demand watching. What's new here? The content can easily get to the TV, where people actually want to experience it. Movielink, so far hamstrung by living on PCs, should move now to be part of every Media Center Extender.

Make the PC the controller of consumers' entertainment experiences. With a PC connected to the TV, consumers can use it to manage their entertainment. Scrolling through a movie guide online? Click the "record this" button on the site to have your PC record the next available showing. Wondering what others like you are watching at this minute? Configure your TV program guide search engine to sort by audience size. Because a personal media server is a networked PC, it can host consumers' content, preferences and billing details, the foundation of a custom experience.

Build applications that combine content with communications. How about an application that puts caller ID on consumers' TVs and lets them pipe a call immediately to email? Or lets consumers chat with buddies while doubling down on a bet that the Red Sox will take the Yankees in the 10th inning? Or letting the entire viewing audience directly influence the outcome of a reality show? All these are possible with a personal media server and the right application.

Convincing consumers
These application ideas are wonderful, but the challenge is still getting consumers to buy Media Center PCs and Media Center Extenders. We've got some ideas on how to do it:

Subsidise prices. Subscription services like Netflix and Rhapsody will pay for distribution. Hardware vendors like HP and Dell should partner with them, using bounties to keep prices on Media Center PCs and Media Center Extenders low.

Play up the game aspect. We think Xboxes running extender software will be the first sizable market for Media Center Extenders. Microsoft should promote the Xbox as the ultimate video portal, since it plays DVDs and will now get access to Net video.

Tap the telephone market. Telephone companies want to get into the video distribution business. Bundling a Media Center Extender into a DSL sale will make connectivity more valuable -- and give the carrier an instant, connected market for video over Internet Protocol, just in time for the fat fibre pipes they're laying in a neighbourhood near you.

Ted Schadler is vice-president of Forrester Research
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