Media Center Poses Challenges For Channel

The company's latest version of Windows Media Center Edition, formerly code-named Symphony, offers Tivo-like functionality for live and recorded TV and Internet access offering extensive support for music, video and photos.

By most accounts, it's a hot new Windows operating system that will allow system builders to innovate, differentiate and build cool new form factors such as cubes and living room consoles. See related story.

But there are some marketing obstacles to overcome and new business models to embrace. Not many consumers are aware that Microsoft has a Tivo-like product with expanded functionality, and not too many system builders play in the consumer space. Microsoft will need to pump up its marketing to consumers and help system builders delve into the consumer market, observers said.

"The most obvious challenge is the system builder whose major market is SMB will have a hard time and see it to be a retail item," said Warren Wilkinson, president of PC Wholesale, San Antonio, Texas. "System builders will ask how they can make it work for their business model. But Microsoft got this one right. It'll make system builders turn to the home."

Another system builder who targets vertical markets is tinkering with the notion. "We'll take a hard look at it but we serve the education market and we're not sure if the multimedia capabilities are above and beyond what Windows XP SP2 offers," said Mike Healey, president of Ten Corp, a system builder and solution provider in Needham, Mass. "As far as Tivo, I don't even think of it that way. There was no market awareness of this before. If Microsoft isn't raising awareness that the Media Center is different from Windows XP Home, that's a big obstacle."

The Microsoft product, for instance, enables customers to pause and record live TV in similar fashion to the popular Tivo TV appliance, which runs on Linux. Additionally, the Windows OS has Internet access, high definition TV support, support for multiple TV tuner cards, a movie finder, CD and DVD burning, photo center, sleek new user interface, instant messaging and Windows Media Player 10 for robust audio and video downloads.

It's positive that Microsoft is authorizing its system builders to configure and sell the media center edition of Windows for the first time but it won't be an easy add-on for this channel, observers predict. Microsoft shipped the two previous versions of the OS to top-tier OEMs only.

Some channel partners complain that they will be disadvantaged once again by the volume discount offered to top-tiered OEMs.

Some also say and that these systems will be picked up only by wealthier customers; many of these home entertainment systems -- which can cost as much as an HDTV or higher -- may be out of the price range for many consumers. Systems, for example, can cost anywhere from $1,000 to as high as $10,000.

One Microsoft solution provider in Los Angeles views all of these factors as big obstacles. "I don't plan on using that version because I deal strictly with the SMB side," said Jeffrey Sherman, president of Warever Computing. "In my mind, a computer used as the centerpiece of a home entertainment system is an expensive proposition. Only the people who have more money than they know what to do with will buy Media Center Edition."

Microsoft handed the code over to system builders several weeks ago and featured a webcast for system builders Tuesday. The company is conducting road shows to educate system builders and has added technical content to the system builder web site to get the channel prepared, said Kurt Kolb, general manager of Microsoft's system builder channel.

Moreover, Microsoft has prepared readiness kits to seed the market and has bundled Windows Media Center 2005 with ATI and NVIDIA cards to give system builders out-of-the-box integration options. Microsoft has also removed a previous restriction that requires use of a TV tuner card with the software, a liberty that will allow for pricing under the $1,000 mark, claims Microsoft's Kolb.

ABS Computer Technologies, which was present at the launch event in Los Angeles Tuesday, will launch its Windows Media Center 2005 system next week, said Jasbir Singh, product manager at ABS, Whittier, Calif.

He said Microsoft has significant marketing plans for the new OS to help system builders. His only worry is battling other system builders hungry for new opportunities. "The big challenge is that there will be a lot of competition out there," Singh said. 'It's like Tivo for Windows and more. It'll be a big thing."

PC Wholesale, a system builder and distributor, put two new Windows Media Center 2005 systems on display at his business Tuesday. So far, his reseller customers have been impressed, said Wilkinson, who estimates the bulk of systems will be priced between $1,800 and $3,000.

"It looks to be fairly good avenue to get service components; some homeowners will want help to do peer to peer networks and how to share files between two Windows operating systems," Wilkinson said. System builders can also exploit opportunities offered by Media Center Extenders announced on Tuesday by HP and Linksys, which will allow consumers to enjoy their Media Center 2005 content from any room in the house.

Microsoft, which developed the extender technology, plans to launch a Media Center Extender for Xbox before the holiday season.

Microsoft also launched on Tuesday Windows Media Player 10 Mobile, which offers system builders and solution providers added opportunities through its native support of Windows Media Center 2005. This means that consumers can easily transfer their audio and video media content onto Windows Mobile-based Pocket PCs, Pocket PC Phone Edition and SmartPhones, said Jason Gordon, product manager, Mobile and Embedded Devices Division.

There are other obstacles. Jeffrey Sherman, president of Warever Computing, said there could be logistics issues unless auto-update features are properly activated for consumers. "The whole idea of having to keep patching and running anti-virus on your entertainment system is just a little weird for me," Sherman said.

Observers said Microsoft has marketing challenges but also deep pockets to solve them. "Tivo is an appliance trying to grow into a platform. Microsoft represents a platform that needs to act like an appliance," said Rob Enderle, principal, Enderle Group. "Each has what the other lacks with one big exception. Microsoft has the resources to do the heavy lifting needed to get to the other side. Tivo is resource poor and really struggling to finish their solution."