Microsoft selling new Windows at cut-rate price

The software giant is selling Media Center, its new version of Windows, to PC makers at a new, lower price, CNET News.com has learned. Windows of opportunity in Microsoft's media push

Ina Fried Former Staff writer, CNET News
During her years at CNET News, Ina Fried changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley.
Ina Fried
5 min read
LOS ANGELES--Despite all the changes Microsoft is touting with the new version of Media Center, the biggest change may be one that the company barely mentions: the price drop.

Microsoft had priced the first two versions of Windows XP Media Center edition, targeted at consumers, higher than even its professional edition of Windows sold to businesses. This time, Microsoft has priced the software somewhere between Windows XP Home and Windows XP Pro, CNET News.com has learned.

"There is a deliberate strategy to lower the price," said Tom Laemmel, a product manager in the Windows Client unit. "We want this to be taken seriously as a mainstream product. It is clearly the best OS for any room in the home."

Microsoft's media push
Software giant aims to become a household fixture with its entertainment-oriented Media Center 2005.

Microsoft has not disclosed what it charges PC makers for the OS, and it would not provide specifics on the new pricing.

In its previous versions, Windows XP Media Center Edition was a niche product that sold on about 1 million PCs, mostly high-end machines that appealed to enthusiasts who wanted to record TV shows onto their computer hard drives.

Media Center is similar to other flavors of Windows, but it adds a separate interface for playing movies, pictures and music using a remote control. With the 2005 version launched on Tuesday, Microsoft has said it is aiming much more for the mainstream PC buyer. Chairman Bill Gates said the company hopes to see this version sell four or five times as much as the prior versions.

Media Center is filling an important role for Microsoft, which will not have an all-new version of Windows to sell until Longhorn arrives in 2006. The software giant is counting on Media Center, along with new portable media players and other devices, to reinvigorate sales of the 3-year-old Windows XP operating system.

Although it remains to be seen if more consumers will gravitate to Media Center, the price drop was welcomed by computer makers.

"Fundamentally, the mainstream issue is going to be determined by price," said Tom Anderson, vice president for Hewlett-Packard's consumer PC unit.

By contrast, computer makers are moving rather slowly to adopt the other changes being made by Microsoft--particularly the support for high-definition television and multiple TV tuners. Microsoft only just this week gave computer makers the code they need to support high-definition, so models with that feature are not likely to be a big part of this year's holiday offerings. Also, as noted previously, Media Center supports only the kind of high-definition television that broadcast channels deliver to an antenna, not those channels offered by cable or satellite companies.

Where the tuners are
As for TV tuners, nearly all of the first Media Center 2005 PCs will ship with one tuner--the same as all past Media Centers. That's despite the fact that Microsoft has made a big deal of the fact it now supports up to three tuners. Microsoft has also offered computer makers the option of having no TV tuner at all, pitching Media Center to consumers merely as a better consumer experience when it comes to handling digital music and photos, but that has few early takers as well.

Of the big five consumer PC makers that announced systems on Tuesday, only HP is offering computers with more than one tuner, and even it is doing so only in the priciest version of its Digital Entertainment Center living room console.

Photo gallery
Windows of opportunity
At Microsoft's LA bash, the stars
are the new Media Center PCs.
Dell is initially supporting only a single tuner on two consumer lines, however, the direct seller plans shortly to offer Media Center across its consumer line, with buyers having the option for one or two TV tuners, or no tuner at all. By removing a TV tuner, Dell expects to offer a PC for $649, less than half of what many past Media Center PCs have cost. HP plans to test the waters with a tuner-less Media Center in retail outlets in the first half of next year, Anderson said.

Laemmel said he is not surprised that more consumers aren't immediately taking to the dual-tuner option. Although touted as a living room device, many Media Center PCs have ended up in the den. As a result, there isn't the kind of fighting for the remote control that drives the need to watch one program and record another. Such has been the case in his own home, he said. Only his 9-year-old daughter also uses the Media Center, and Laemmel said that so far he has retained control of the remote.

But things in his house and others may change as more people with Media Centers start buying a new class of set-top box called Media Center Extenders. The devices, which cost about $299, allow consumers to view content in one room that is gathered on a Media Center PC in another room. As a result, people in different rooms will, understandably, want to watch different channels, demand that is likely to translate into more sales of Media Center PCs with multiple tuners.

Laemmel points out that while HP is the only big-name company to support multiple tuners, smaller manufacturers like Alienware and Niveus Media are also adding the feature. Other smaller makers could follow suit in an effort to carve out a niche of the entertainment PC market.

"It's not inconsequential," he said.

Along with to the price change for Media Center, Microsoft has made some changes under the hood. In its past incarnations, Media Center contained all of the features of Windows XP Professional, along with its separate features for viewing TV and pictures via remote control.

HP in your living room
Media-loving consumers
will learn to embrace
boxes like Hewlett-Packard's
Digital Entertainment Center,
especially once the price drops.

Now that it costs less than XP Pro, Microsoft has altered Media Center's features slightly to ensure that businesses don't switch to Media Center just to save money.

The features that are no longer supported are things that would be largely invisible to even the most demanding home users. Media Center can no longer connect to a specific corporate domain server, nor is the technology supported to automatically manage a business user's login credentials.

Of course, dropping those features enabled the computer makers to pay significantly less for the OS, savings they can pass along to consumers. But even with that, and the new features, it is still hard to say how quickly sales will grow.

"It's going to be an evolutionary thing," said Dell marketing manager Nick DeMarco. "It's not going to be an overnight freight train."