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November 6, 2002 Provided by System Dynamics Inc.

Microsoft/HP Media Center PC -- Freestyle Release 1

At CES last January Bill Gates talked about two concepts that caught our attention - one code-named Freestyle and the other dubbed Mira. Fast forward ten months to New York's Bryant Park on October 29th. There Microsoft announced North American availability of the first "Freestyle" product: Hewlett-Packard's Media Center PC with Windows XP Media Center Edition (MCE). (Mira, now called Windows-Powered Smart Displays, is expected next year).

At the launch event, we got a close up of the HP Media Center. It is an all-in-one TV, PVR (personal video recorder), Windows XP Pro PC and DVD player. It provides both the usual PC functionality and an "across the room" entertainment experience.

The new "10 foot user interface" is controlled by a new TV-like "look and feel" and a remote control which navigates to My TV, My Music, My Pictures, My Videos and Play DVD.

The formal launch program included Microsoft's Mike Toutonghi, VP of Windows eHome Division, and Molly Scoville Rhoten, Group Program Manager; Tom Anderson, H-P's VP of Marketing, Consumer PCs; and comedian Tom Arnold of Fox Sports. For our money, the best part of the program was the three students from Columbia University who won Microsoft's very clever contest. Microsoft had given HP Media Centers to various groups of college kids and had them create content entries of what they liked about these units and why they should win. Dominique, Akil and Selum really rocked and conveyed the sparkle in a way only enthusiastic college kids can do. The promotion was clever because college students and others with small living quarters seem to be the dead-on target market for this "combo" product.

CompUSA's Fifth Avenue store in New York was a great place to showcase the product, since many New Yorkers, especially young ones, face the problem of shoehorning all their belongings into cramped quarters. However, this product can play a role in suburban homes that want both a PC and TV for a kids room or study.

There are many outstanding questions about this product, its positioning and what comes next. One natural question is "What's really new here and why did it take ten months since CES?" Many of the digital media functions that were being touted on the Media Center seem to be ones I can do with my current Windows XP Pro PC, or on any well-equipped new PC. I can already play DVDs and play and record CDs; use my hard drive as a jukebox for the digital music we've ripped from our CDs; connect our digital video camera thru the 1394 port, download video and use our video editing software; and connect our digital camera thru the USB connector and make albums. We can (and do) use our home network to show pictures through our ReplayTV 4000 on our entertainment center screen in the family room, and listen to music from our PC jukebox on the AudioTron in our bedroom.

So what is new? In a nutshell it's the multimedia integration. We're told that under the covers there's lots of new "core Windows AV plumbing." The Media Center includes a TV tuner card, a online program guide, PVR integration, high quality audio speakers and sound card, and the DVD recording capability we don't have on our year-old systems. The remote control and simple "10 foot" user interface are big distinguishing features. There's also an integrated media card reader which handles almost any removable media type. And for those who use the PC and TV together, there's picture-in-picture capability: you can scale the video window down and keep your TV show running while you're working or Web browsing. The prices for this functionality range from $1349 to $1999, depending on model (not including the display).

Much of the work has been about getting the multimedia software and interface done and putting together all the pieces so users don't have to cobble it together thmeselves. Except for the TV UI, its functionality is not all that different from what a techie type could stitch together from various pieces--but not many people will want to undertake that kind of project. Besides, much of this is really about the ease of use that comes from the out-of-the-box integration and UI.

Working with partners, Microsoft has also created the hooks to allow addition of new applications for entertainment, communications and control, leveraging the new user interface and remote control.

So we've seen the first step of Gate's promise. PC screens now display TV content and can be navigated by a remote from across the room. What about those who just bought a high-powered PC and don't want or need another one? And what about those who want to use the PC in one room and the TV in another - as Gates showed at CES?

Microsoft recently upgraded XP with SP1, which adds the core technologies to support MCE. What else is needed on a recently-purchased PC besides the MCE package? Support for this large potential upgrade-market segment depends on also having a TV tuner card with a hardware encoder for recording TV, a high performance graphics card and an IR sensor for communicating between the remote control and PC (and to control a cable or satellite set-top box).

Microsoft's literature for MCE says "It will only be available on these new PCs; no upgrade from a previous version of windows is planned." However, we expect Microsoft and its partners will create an add-on hardware/software bundle to allow your existing machine to play these new tricks. But there's lots of complexity in add-ons -- compatibility and horsepower questions can get in the way. Microsoft (and HP) have chosen to go after a very specific target market, get their feet wet and make the usual improvements that happen after a new product is released -- postponing the complex support issues that occur in the add-on market and waiting for elements like hardware encoders to become more available.

The other major item in Gate's January demo but missing here is remoting the TV from the PC screen to a big one in the home entertainment center. After all, if you've created a great video of your last family party and they visit again, you'd like to show off your video skills on the big screen, not the PC. What's missing is a capable (with high bandwidth and quality of service) and well-accepted standard for home video networking. Microsoft has apparently chosen to postpone this piece until the confusing video networking scene has had some time to shake out. (We talk more about video and whole home networking in the next article.)

So our appraisal is that it looks like a good first step. The rationale for Microsoft's first introduction seems perfectly reasonable: focus on a narrow market segment first, work the bugs out, and expand later to add-ons and remote TVs. We expect Microsoft will learn from it and over time fill in the missing pieces of the promise.

The bright daylight in Bryant Park made it difficult to assess TV picture quality, which was criticized in some of the reviews. We'll postpone our thoughts on this and the new user interface until we try it in our own home. We'll report further once we can put the Media Center through its paces with real applications.

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