PC squares up to TV in home entertainment arena

8 Oct 2003

The battle for the burgeoning home entertainment market was well and truly joined recently when two of the biggest names in IT announced related products targeting this lucrative sector.

One of them, Microsoft, last week launched Windows XP Media Centre Edition 2004, the new version of its PC operating system, which the company says will “change the way people access entertainment on the home PC”. The software is designed to turn the PC from a business and information tool into an entertainment hub providing access to television, radio, film, photos and broadband internet – all though one device.

Microsoft released the first version of the software a year ago this month and soon it was being bundled with PCs sold by computer makers such as Gateway (still a sizeable brand in the US, despite its demise here), Toshiba and HP.

Dell is the other big name to enter this market. Last month, as part of a broader strategy that marked its push into the consumer electronics market, Dell announced that it, too, was equipping its consumer PCs with software, branded as the Dell Entertainment Centre, that allows consumers to watch DVDs or downloaded video clips, listen to MP3 files and play lists, and enjoy digital photo slideshows set to music – all on their PC. From early November, Dell Media Experience will ship as standard on all new Dimension desktops and on selected Inspiron notebooks, Dell Ireland announced last week.

Dell’s move is significant not only because the Texas-based company is the world’s second largest PC maker, but also because it is notoriously slow to launch a new technology unless it is satisfied the market is ready for it. If Dell is selling media centre PCs, the demand must be there. And, indeed, although there no hard sales data is yet available, market analyst IDC says the early indications in the US are that sales of media centre PCs, though small in absolute terms, are higher than expected.

“What we’re seeing with consumer PCs is that home users are using an increasing variety of digital entertainment applications,” says Jason Armitage, senior research analyst, European consumer devices and technologies, IDC. “The application that’s really likely to drive this market is digital video and digital TV programming. We expect all the PC makers to bring out products in the next year that cater to this market.”

The endgame for Dell, as for Microsoft, is to convert the PC from a functional device tucked away in a bedroom or home office into a domestic entertainment nerve centre. Recent research suggests that this dream may not be too far from reality. A survey of 2,070 home computer users in the United States conducted earlier this year by Harris Interactive, and recycled by Microsoft last week, found that the PC is becoming increasingly central to home entertainment. In that survey, more than 60pc of respondents said their computer was more important than either their CD player or stereo, 59pc ranked the computer above their DVD player, and 43pc said they thought their PC was more important than their TV. What’s more, 63pc of respondents said their PCs were located in family areas, such as a living room, dining room or kitchen.

In pushing into the home entertainment market, however, Microsoft could come up against the might of media and television companies, which see the digital television, rather than the PC, as the centre of the digital home entertainment experience.

If the two worlds of technology and media collide, the major battle on European soil would inevitably be between Microsoft and BSkyB, the pay TV colossus. While on paper these two firms seem to serve very different markets – BSkyB is primarily a content provider to its seven million subscribers (including nearly 300,000 here in Ireland) while Microsoft is a technology provider – there is a growing area of overlap. To receive BSkyB’s service, for instance, subscribers have to have a technology platform – a satellite dish or cable feed and set-top box. What’s more, BSkyB has developed a digital recording system – Sky Plus – which is linked to its own electronic programming guide. Microsoft has its own electronic programming guide, which competes directly with BSkyB’s, and is, of course, a content provider in its own right through MSN, the online news and information service.

Some commentators doubt, however, whether these two companies have actually locked horns in battle – or are even likely to. “BSkyB is a content and service provider of digital TV programming and there’s no reason that that content couldn’t be viewed on different devices in the home,” says IDC’s Armitage. “If you look at Microsoft, its focus is on supplying the technology that enables that type of content to be viewed and manipulated in the home. I don’t see them in direct competition; they are complementary, and there’s no reason they couldn’t partner with each other at some stage.”

Kingsley Wilson, a media analyst at Investec in London, believes many consumers find it hard to envisage the PC at the centre of home entertainment. “The question is whether you want to be entertained by a PC in an uncomfortable study or be entertained in the middle of your home surrounded by your family,” he says. He adds, quoting Independent Television Commission (ITC) figures, that while the average consumer watches 3 hours and 50 minutes of TV a day, they only spend half an hour on the PC.

Wilson also wonders about the premise of a single entertainment device eventually dominating the home and suggests that consumers, informed and increasingly sophisticated as they are, would be more inclined to take a ‘best of breed’ approach to entertainment, so they may go with BSkyB for pay TV, a cable operator for broadband and so on.

Armitage agrees that what’s important for the home user is the content, not the device. “When consumers think about gaming, they want the best gaming experience possible – that means a console or maybe a PC. If it’s programming or film they want, then TV the best provider. Content is still the big selling point for each technology and device. Another trend to note is that of connecting different devices together in the home. So rather than one converged device, you’ll have a number of devices networking with each other.”

There may well be enough room in the booming home entertainment market for Microsoft, BSkyB and a raft of other big players. If not, the deciding factor will be market power. Although BskyB has debts of £1.3bn, it generated £400m in cash last year and is expected to generate billions in the next few years, which, according to Wilson, will “give it some serious muscle”. If a battle does ensue with Microsoft, does he think Murdoch would be up for it? “For sure – if he feels there’s a threat there.”

By Brian Skelly

Pictured: Jeff Allchin, Microsoft Group vice-president, demonstrates Windows XP Media Centre Edition 2004