Digital Media Wave: Microsoft aims for living room -- again

LOS ANGELES -- Microsoft Corp. software in a home entertainment center may seem to some as odd as Bill Gates chillin' on a couch with Queen Latifah. But it all makes sense to the company.

The Microsoft chairman went to the entertainment capital of the world to unveil a series of new and updated digital-media products, trying to give new momentum to the company's push for a bigger role in home entertainment.


		AP
	Microsoft Corp. Chairman Bill Gates and Queen Latifah laugh it up in a "living room" set during Microsoft's Digital Entertainment Anywhere event in the Shrine Auditorium in Los Angeles to introduce Windows Media Center 2005, a new version of Microsoft's software for recording and watching television and other media.

The products, shown during a Microsoft event at the Shrine Auditorium in Los Angeles, are meant to move the company's software further into the living room and onto hand-held devices while keeping the personal computer -- still Microsoft's largest source of profit -- at the center of the digital home.

Appearing on stage with Gates at one point was rapper and movie star Queen Latifah, who bantered with the software king as they showed the audience various ways to gain access to and buy her songs through Microsoft services.

"So what are you up to?" Gates asked.

"Just hanging, you know," Latifah said.

"Your new music sounds super," Gates told her later.

The main focus yesterday was the release of the Windows XP Media Center Edition 2005, a new version of Microsoft's software for watching and recording television and other media on a computer. It's the third iteration, and Microsoft hopes the latest improvements will attract a much larger base of users.

"We're moving Media Center into the mainstream," Gates predicted, calling it "an inflection point" for the company's digital media initiatives.

Other technology on display included new methods of transmitting digital audio and video from a computer to devices positioned around the home and held in the hand. The company also announced the release of a finished version of its MSN Music download service.

It's all part of the trend known as convergence, the blurring of the line between traditional computers and home entertainment machines. Microsoft wants its software to play a central role as the convergence takes place.

Yesterday's announcements, combined with the earlier releases of the new Windows Media Player 10 software and Portable Media Center devices, amount to a major digital-media rollout by the company. Yet the overall initiative isn't new. Microsoft has been trying for years -- with mixed results -- to establish a larger presence for its software in home entertainment.

The Windows Media Center Edition software, which debuted in 2002, gives the Windows XP operating system a special interface that can be accessed by remote control by someone sitting in a chair or couch.

Since the original launch, sales of Windows Media Center PCs have fallen short of some analysts' expectations. Based on its tracking of known shipments, research firm IDC forecasts about 550,000 Media Center PCs to be shipped worldwide this year, about a third of the 1.5 million the company had previously forecast for the year.

The 550,000 total would be slightly less than 1 percent of the 63 million expected shipments of home PCs this year -- a small fraction of the market.

As a result, people in the consumer-electronics and computer industries are keeping a close eye on the new release of the Media Center software to see if it can help Microsoft attract a larger market.

"A lot's on the line" for Microsoft this time around, said IDC analyst Roger Kay, who has been testing the new software himself and said it works well.

Improvements in the new version include better video quality, high-definition television recording, an enhanced programming guide, integrated CD and DVD burning, deeper connections to Internet services, remote-controlled photo editing, and the ability to easily move video and audio to portable devices.

Some of the features are meant to address previous shortcomings. The software now supports multiple TV tuners, for example, letting someone watch one program while recording others. Previously only one tuner was supported.

Gates said the company's Media Center strategy has been "very typical of us -- to get something out, take it to the hard-core market, really understand what they need, and use their feedback to drive the next versions."

He said the company has sold more than 1 million copies of Windows Media Center since the 2002 launch. But with the new version, he said, "We're going to take that volume level up again, up another factor of four or five."

"I actually think this new version is the best they've done so far," said Tim Bajarin, president of Creative Strategies, a technology-consulting firm. "It's one that I think gives them a stronger case to extend the PC's role in entertainment." At the same time, he added, "it is very clear that you're going to continue to have competition from the (consumer electronics) guys."

Those guys include such services as TiVo and ReplayTV, which offer stand-alone devices that sit next to the television and provide similar TV recording, storage and viewing functions. Cable companies such as Comcast Corp. also are beginning to offer digital video recording capabilities within cable boxes.

In the face of that competition, some analysts believe thateven if Microsoft keeps improving its Media Center software, the company will face an uphill battle if it continues to apply its PC-centric view to home entertainment.

"Even their last-generation product was every bit as good as TiVo and arguably better, because it's connected to more Internet content," said Rob Sanderson, media and communications analyst with American Technology Research. "But the bottleneck is still what it has been, and that is, how do you get PCs in people's living rooms? ... That's the bigger hurdle."

Hardware makers have been trying to overcome that hurdle by making Media Center PCs fit more naturally into the home entertainment center. Hewlett-Packard, for example, showed a new Media Center PC yesterday that looks like a stereo component and runs quietly.

"Why not have something like this in your (audio video) rack vs. something that just records TV shows?" said Ameer Karim, Hewlett-Packard director of worldwide consumer PC product marketing.

Another way Microsoft is trying to get the Media Center software into the living room is through new "extender" devices, small set-top boxes that pull audio and video content from a PC in one room for viewing on a television in another. They are meant for people who don't have or want a Media Center PC in their living room.

Microsoft announced the availability of the first of those devices yesterday, a set-top Media Center Extender from Hewlett-Packard that sells for $299. Microsoft will also sell a $79.99 extender kit that works by way of the Xbox video-game console.

But analysts aren't convinced the extender devices will appeal to a broad audience. Part of the problem is that there isn't much TV or commercial video content stored on the typical personal computer, said Ted Schadler, principal analyst with Forrester Research. What's more, he said, the benefits of trying to put television content on the PC aren't entirely clear.

"I've already got (video) on my TV," Schadler said. "Why do I need to put it on my PC and then watch it on my TV?"

On the other hand, he said, many people would value the extender devices for the ability to transmit digital photos and home videos from the computer in the home office for viewing on the television in the living room. But the initial prices for the set-top boxes may be too much for people focused only on those aspects.

Apple Computer, whose iPod and iTunes Music Store are major Microsoft competitors in the digital music field, sells a $129 product called AirPort Express that streams music over the home network from a computer to a stereo system.

Apart from the Media Center Extender devices, Microsoft and hardware makers also showed new audio receivers yesterday that use a technology called Windows Media Connect to play, on a stereo, music streamed from a computer in another room. The receivers range from $199 to $499.

Price has also been one of the challenges faced by Microsoft and computer makers selling the Media Centers PCs. Although Media Center PCs have been dropping in price, with some dipping below $1,000, other models still exceed $2,000.

By comparison, personal video recorders like TiVos sell for as little as $99.

But one advantage for Microsoft is that, unlike TiVo and other services, it doesn't charge a monthly fee for the Media Center PC digital program guide.

Another Microsoft advantage is the ability to connect the Media Center PC software to other products and services. The latest version, for example, ties into the Windows Media Player 10 software and can transfer audio and video content to a variety of devices, including the handheld Portable Media Centers.

This time around, Microsoft also is trying to address the price issue by letting computer makers sell Media Centers without TV tuners. The move is aimed at people who want to use the remote-controlled Media Center interface for music, photos and other media besides television. Prices for some Media Center systems are expected to drop to around $800 as a result.

In another switch that could push prices down, Microsoft is now making the Media Center software available to smaller computer makers, in addition to major companies like Hewlett-Packard, Dell, Toshiba, Sony and Gateway.

LOOKING FOR THE ANSWER FOR CONSUMERS

Dave Fester, general manager of Microsoft's Windows Consumer group, spoke with the Seattle Post-Intelligencer yesterday during the company's digital-media launch event at the Shrine Auditorium in Los Angeles. Excerpts:

On efforts to broaden the market for Media Center PCs: "You've got to have the right product that's going to be ready for the masses. Media Center of the past has been a great product ... but we wanted to take it mainstream. (With the latest improvements), I think it's going to start taking off in a pretty dramatic way."

On the company's PC-centric approach to home entertainment: "The processors are speeding up all the time, there's large hard-drive space, that's where your creativity is, that's where your library and management of your files are. That's the hub where you're going to store all your entertainment."

On Microsoft's approach to digital music, as compared to Apple Computer: "We've built a platform on Windows that exposes or enables many music stores to be available for consumers. (Windows Media Player 10) introduces the digital media mall that gives one-click access to all the music

services. Our strategy is much broader than

Apple's, (recognizing that) consumers want to

have choice."

On the strategy behind the new "Plays for Sure" logo, assuring users that music services and devices work together: "We went to a broad range of customers that went to the (online) music stores and asked them, what devices can you put this music content on? The only one where they could answer was iTunes, because it was one device. There's a problem there. We recognize that with choice can sometimes come complexity, so we wanted to remove that complexity and make it very simple for consumers."

DIGITAL MEDIA WAVE

Some of the new products and technologies announced by Microsoft during an event yesterday in Los Angeles:

Windows Media Center Edition 2005: Third iteration of Microsoft software for recording and watching television and other digital media on a computer.

MSN Music: The company released a finished version of the music download service and said it secured the exclusive online rights to sell the catalogue of legendary hard rock band AC/DC. MSN also is expanding the service into new European markets.

Media Center Extenders: Hewlett-Packard announced the availability of the first of these devices, which send television content, music and other media from Media Center PCs over the home network for viewing on the TV.

Media Transfer Protocol: New Microsoft technology that allows for transfer of media between computers and devices without the need to install device drivers.

Windows Media Connect: Technology used to stream music from a computer to a stereo or other consumer electronics device in another room.

Portable Subscriptions: Microsoft showed new uses for technology that lets people transfer music and other media bought by time-limited subscriptions to portable devices including music players, cell phones, and Pocket PCs. Previously subscription content could be accessed only on a PC.

"Plays For Sure": A new labeling campaign intended to assure consumers that portable players work properly with various online music stores, and vice versa.

P-I reporter Todd Bishop can be reached at 206-448-8221 or toddbishop@seattlepi.com

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