The Road To The PC-TV Runs Through Windows

Microsoft's rivals are unwitting allies as it elbows into living rooms

Slowly but surely, Microsoft (MSFT ) is moving into your living room. After years of failed attempts by cable and satellite-TV companies to sell set-top boxes and receivers, it turns out that the product that drives the long-awaited convergence between computing and entertainment may be Windows -- in the form of the Media Center PC.

Media Center is a version of Windows XP that lets users watch video on a PC -- including real-time TV and shows recorded to a hard drive. It also lets you use a remote control to manage music on the PC from across the room. On Sept. 30, Microsoft introduced a more capable version of Media Center. The fresh edition fixes a number of the annoyances that marred the original, but it remains flawed in several important respects.

First, the good news: The software is better. For example, while the original Media Center made you launch Media Player as a regular Windows program to record music off a CD, the new software lets you do it with the remote. More important, nearly every maker of consumer PCs now has a Media Center offering, including Dell (DELL ), which had passed on the first version, and Sony, which has been pushing a proprietary entertainment PC called GigaPocket. Gateway (GTW ) and Dell announced sub-$1,000 products -- remarkable given that manufacturers selling PCs with Media Center must also build in a TV tuner and other relatively high-end hardware, while paying a premium to Microsoft. Toshiba (TOSBF ) and Hewlett-Packard (HP ) are offering Media Center notebooks.

AS HAS OFTEN BEEN THE CASE, Microsoft's competitors have become its unwitting allies in the struggle to dominate the living room. Consumer-electronics companies make networked products, but they are mostly single-function appliances, such as DVD players or video recorders with hard drives. The products do not work well together and can be more difficult to set up than networked computers. Cable providers have talked for years about advanced set-top boxes that offer video recording and movies on demand, but deployments to consumers have been scarce.

The new Media Center is a bona fide advance over these, but it still has a ways to go. The bad news is that the analog-TV tuners installed in PCs aren't very good. You'll get a better picture on a $200 television. The monitor is another issue. TV pictures do not look very good on computer displays, whether CRT or LCD, which are optimized for the display of text and graphics, not video. You can use your TV as a display, but even a flat-panel model is not ideal. I used a prototype Media Center with a $4,000 Mitsubishi 22-inch LCD TV, a fine set that produces ravishing images from recorded high-definition video. But poor text quality makes it a lousy computer monitor. (Attaching both a PC monitor and a television is another option -- but ill-suited to the living room.)

Media Center is important for PC makers because the entertainment features give consumers a reason to buy top-of-the-line computers, which have much better margins than cheap PCs. For Microsoft, Media Center is a lot more than that. The company wants to dominate the online distribution of movies, music, and the like through Windows Media technology, which includes piracy-thwarting technology that Hollywood desires. While the consumer-electronics companies argue about technical standards in myriad task forces and working groups, Microsoft is getting products into consumers' homes.

Ultimately, home media centers will have to be a lot cheaper and simpler than the Media Center PC -- more like a set-top box or Xbox game console and less like a computer. In the meantime, Microsoft is getting a big leg up on the competition.

By Stephen H. Wildstrom

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