Lean, Cheap Media Centers Prove Popular

The vision of a connected digital home has driven much of the product development at PC and processor companies over the last several years. However, the recent uptick in sales of the primary vehicles for a PC-based digital home, Windows XP Media Center PCs, can be attributed to vendors scaling down their products to reach lower prices, raising new questions about whether the PC is the best device to run a home media network.

PCs running Microsoft Windows XP Media Center Edition are one of the few areas of growth these days in the traditional desktop PC market. Endpoint Technologies Associates President Roger Kay issued a new forecast for Media Center PC sales on Tuesday, predicting that Media Center PC shipments will double to about 5 million units this year and double again in 2006.

Summer Sales Spurt

A Media Center PC is designed to help home users manage their digital content, such as pictures, television shows, movies, or music stored on a hard drive. Its interface is different from that of the standard Windows XP, with larger icons designed to be visible to a user sitting on a couch ten feet away from a television or large LCD. It also can be operated via a remote control; recently, Microsoft introduced a keyboard with a built-in mouse, aimed at Media Center PCs.

Although the operating system has been around for three years, shipments of Media Center PCs didn't really start to take off until July, when Gateway and other vendors started selling Media Center PCs without a TV tuner, said Toni DuBoise, senior analyst with Current Analysis in San Diego.

Between June and July, retail shipments of Media Center PCs without TV tuners skyrocketed, from 3.4 percent of all Media Center PCs to 61 percent in July, according to data compiled by Current Analysis. Over the same period of time, the price of an average Media Center PC fell almost $200.

As a result, Media Center PCs made up 40 percent of the total retail desktop market in August, up from 32 percent in July and just 15 percent in June, DuBoise said. Current Analysis measures sales of PCs at retail stores in the U.S., which notably excludes market share leader Dell. A Dell representative did not immediately return a call seeking comment on Dell's figures in the Media Center PC market.

Priced about $822 in August, a Media Center Edition PC comparable to a PC with the same hardware configuration and Windows XP, DuBoise said. Even if users don't record TV shows on their Media Center PCs, they still enjoy having a central management system for their digital pictures or other content, she said.

Easing into Media

PC vendors have sought to lower their costs after Microsoft expanded its definition of a Media Center PC, Kay said. Originally, Microsoft insisted that all PCs sold with the Media Center operating system include a TV tuner, but it has since backed off that demand in the face of tepid sales. This allows PC vendors to sell PCs using the integrated graphics available in Intel's chipsets, which is much cheaper than using graphics cards with TV tuners from companies such as ATI Technologies or Nvidia.

Despite the growth in Media Center PCs, PC vendors are clearly not convinced that the PC is the future of the home media network, said Stephen Baker, director of industry analysis with NPD Techworld in Reston, Virginia. Hewlett-Packard, for example, next year plans to build a DVR, wireless networking, and storage into a new line of digital televisions that can access the Internet and store digital content.

The surge in tuner-free PCs makes it appear that home PC users, at least in the U.S., aren't ready to cede control of their televisions to buggy and virus-prone PCs, Baker said. If Microsoft and the PC vendors aren't unable to overcome user concerns about viruses and complexity, the battle for the digital home might be won by vendors with low-cost media devices that focus solely on home entertainment, he said.

Competing Devices

Many companies could build a low-cost media hub or set-top box from commodity hardware and Linux that could connect to the Internet, download digital content, organize it with a user-friendly interface, and store it all on a built-in hard drive, Baker said. DVRs such as TiVo's devices are an early example of an easy-to-use device that doesn't try to do too much, he said.

"It's not likely you're going to be able to match the flexibility of the PC [with a low-cost Linux device]. But the opportunity to firewall it off a little bit, to keep it from being the core device, certainly appeals to a lot of developers," Baker said.

The struggle for control of the living room might tip further toward the PC next year, when Microsoft is finally expected to release Windows Vista, the long-awaited successor to Windows XP, Kay said. Windows Vista is expected to come with many of the current Media Center functions built into the base consumer operating system as well as improvements in security and ease of use.

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