Media Center upgrade takes center stage

As expected, Microsoft on Tuesday launched Windows XP Media Center Edition 2004, an updated version of its Media Center PC, and announced new partners for the operating system. Dell and Sony joined the list of computer makers that offer Media Center models that let people download and play music and movies via a remote control.

Microsoft upgrades Windows XP Media Center Rick Thompson, corporate vice president, Microsoft

Microsoft has added a number of features in the 2004 edition of the multimedia operating system. The most notable are the ability to pause and rewind radio broadcasts, edit and print photos, and rip CDs onto a hard drive--all done via the Media Center's remote control interface.

Media Center is a key part of Microsoft's strategy to convince more families to equip their homes with multiple PCs. But the launch event here proved that Microsoft continues to face challenges, as it tries to transition from "geek to sleek," as one executive characterized the effort. During one presentation of photos, the smooth graphic interface was interrupted by a very familiar and utterly PC-looking error box that said an application had unexpectedly quit.

Perhaps the biggest hint that the Media Center-powered PC has not yet crossed over into being cool is the fact that the typical owner is 43 years old, according to Microsoft.

"We did think a year ago that it was going to go younger," Rick Thompson, a Microsoft vice president, said. Originally, Microsoft expected the devices to largely end up in the hands of college students and twenty-somethings.

Appearing via satellite from Redmond, Wash., Microsoft executive Jim Allchin pitched the Media Center as the dawn of a new era in "experience computing."

Allchin, who heads Microsoft's Windows operating system business, said while computers should remain general-purpose machines, they need to be reconfigured to suit specific tasks. He said the PC needs to evolve to the point where it is like a friend who knows what tool to hand you when you're fixing something. "That's the partnership we are trying to create," he said.

The main obstacle for the first generation of Media Center PCs was not their coolness but their cost, according to Tim Bajarin, an analyst for Campbell, Calif.-based market research firm Creative Strategies.

"The biggest problem we found was that the kid in the dorm didn't have the money to buy these things," Bajarin said.

The entry of Dell and others to the market could help with that problem: Their experience and rivalry could lead to price cuts for Media PC machines, which typically cost more than standard models. Already, Media PC models start at less than $1,000.

In addition to hardware partnerships, Microsoft also announced new service deals at events here and in Redmond, New York and Los Angeles. It has joined forces with service providers, including rebel-turned-legitimate music provider Napster and movie distributors CinemaNow and Movielink.

With the launch of the Media Center upgrade, Microsoft is trying to take the interface beyond music, movies and still images. Its developer kit for the operating system has been downloaded by more than 100 companies, Microsoft said, which should pave the way for new software and services--including games--that can be controlled via remote control.

Media Center is a potential boon to companies like CinemaNow and Movielink, which allow customers to download movies to their PC for a limited period. With Media Center, those movies can now be easily rented and watched on a TV, potentially allowing the market to grow beyond a core group of enthusiasts.

Bruce Eisen, executive vice president of CinemaNow, which is based in Marina Del Rey, Calif., said he jumped at the chance to be included on the Media Center's menu of customized online services. "For people who buy this computer, we're there," he said.

In Los Angeles, Will Poole, senior vice president of Microsoft's Windows Client Business, highlighted the company's commitment to preventing digital content theft in partnership with Hollywood and rights owners.

Addressing an audience of about 60 at the Wyndham Bel Age hotel in West Hollywood--roughly two miles away from the 10th annual Digital Hollywood conference at the Directors Guild of America building, and close to where Microsoft made the debute of its Windows Media 9 Series video compression technology only a year earlier--Poole said that there was no better place to show the value of a home media center and illustrate the business opportunities possible for content owners. Poole said Microsoft was working with Hollywood in several ways to ensure that broadcasters and content owners are protected from digital theft.

"It's impossible to come here and not have a conversation about the vexing business problems" Hollywood faces, Poole said. He added that he has visited Los Angeles every couple of months for the last five years as the company has developed its software and systems for home entertainment.

Via Microsoft's technology, the threat of piracy could become more real to content owners. Media Center Edition software and compatible hardware give consumers ways to copy and "burn" content to a DVD or CD. Users could, for example, use the personal video recorder to copy a television show or movie from a pay channel to their hard drive and then burn that content to a DVD. They could then transfer the copy to another computer and make it available to mass audiences within a peer-to-peer community such as Kazaa.

Poole said Microsoft is working on solutions or "speed bumps" to make it harder for consumers to copy material. For example, Microsoft has announced full support for an analog standard called CGMS/A that secures content recorded through personal video recorders. Broadcasters use the standard to mark their content and restrict its reuse in other devices. Additionally, Poole said Microsoft is working with the industry on other technology standards, yet to be disclosed, to restrict copying practices. Other technologies the company is looking at include "forensic watermarking," which lets rights holders track content.

Making legitimate video and music services available to consumers is another strategy to "create honest markets," Poole said. Partnerships with video-on-demand services such as CinemaNow and Movielink, as well as with music service Napster, give people easy access to legal options for entertainment.

"Hollywood is duly concerned, as we are," Poole said. "We're rapidly creating these honest markets by making it possible to deliver subscription services" to the television. He added that education is key to stamping out digital theft.

Long term, the company is scouting options to address the problem of analog reconversion, or what's called the "analog hole," in which consumers can copy material to transferable discs and onto other devices. Poole said the industry needs to transition from a primarily analog world to a more easy-to-secure digital world.