The first Windows Mobile-based Portable Media Centers (PMCs), portable digital media devices with hard drives and small video screens, are part of a broad strategy to meet Apple's threat to the Microsoft digital media platform. However, it's not clear whether consumers will pay a premium over Apple's iPod for the ability to view pictures and video on the go, nor is it clear how the devices can compete with cheaper portable video players or multifunction handheld computers and phones.

One-Upping the iPod

Apple's digital media platform is gaining traction thanks to the popularity of its iPod portable music player and accompanying software and services. This success threatens Microsoft's digital media platform, including the Windows Media Format and its associated digital rights management (DRM) technology, which the company hopes will spur consumer PC upgrades and create new sources of revenue from consumer electronics companies and content owners. (For more background on Microsoft's digital media strategy and the threat from Apple, see "Media Player Update Moves Strategy Forward" in the Oct. 2004 issue of Update.)

Among other tactics, such as building its own music store to compete directly against Apple's iTunes Music Store (see "MSN Enters Music Store Race" in the Oct. 2004 issue of Update), Microsoft aims to leapfrog the iPod with a software platform and a reference hardware design for portable devices that can display pictures and video as well as play audio. By doing most of the heavy lifting—designing the user interface and ensuring that minimal user intervention is needed to transfer content from a PC to the device, for instance—then releasing this platform to partners, Microsoft hopes to keep costs low enough that consumers will have a reasonably priced yet more functional option to the audio-only iPod.

Windows Media on Four-Inch Screen

Announced in Jan. 2003 under the code name "Media2Go," the PMC is a software platform (based on Windows CE and analogous to the platforms for Pocket PC and Smartphones) and an accompanying reference design for portable devices with a hard drive (20GB at launch) and video screen no larger than four inches diagonally. Creative Labs shipped the first PMC in Sept. 2004, with iRiver and Samsung to follow later in the year.

The devices have menus similar to those found in Windows XP Media Center Edition, a special-purpose version of Windows XP that can be controlled with a remote and is geared toward media functions, such as recording TV shows. Content on the PMC is arranged by type, with top-level menus for pictures, movies, video, and recorded TV programs. A combination of horizontal and vertical submenus change contextually, based on the type of content, making it easy to navigate through large amounts of material.

The devices require a Windows XP PC with Windows Media Player 10. (The Player ships on a CD-ROM with the devices.) The PMC takes full advantage of new capabilities in the Player, including the AutoSync feature, which can synchronize content between the PC and the device without user intervention. The devices are also the first to support Windows Media 10 DRM, which paves the way for new subscription or rental models for online music and movie stores: if users stop paying their subscription, for example, the new DRM scheme will disable the content on the device. (For more background, see "DRM to Support Subscription, Rental Services" on page 26 of the June 2004 Update.)

The PMC can display JPEGs, play audio in the Windows Media Audio and MP3 audio formats at any bit rate or quality level, and play Windows Media Video at less than 320x240 resolution and less than 800Kbps bit rates. All other content from the PC must be changed into a format and resolution that the PMC supports, a process known as transcoding. Windows Media Player 10 can automatically transcode material in the background as it's being burned or downloaded to the PC's hard drive, so the next time the user connects the PMC, the content will be ready to transfer.

Where's the Niche?

The PMC occupies an unusual niche and could have a difficult time competing with existing portable digital media products at its current price.

At release, a 20GB PMC retails for US$499—US$200 more than an iPod with the same capacity. Yet, thanks to its screen and large battery pack (which gives it up to three hours of video playback or 12 hours of audio playback), the PMC is significantly bulkier than an iPod and too large to operate with one hand, meaning that it is unlikely to gain traction simply as an audio device.

On the video front, the PMC must compete with cheaper dedicated devices. Portable DVD players are becoming commodities, with seven-inch models available for less than US$250, and do not require a PC to use. In addition, many digital cameras can play video, although they boast a smaller screen and much less storage space than a PMC.

Other competition comes from Pocket PCs and Smartphones, which come with a version of the Windows Media Player and are expected to add support for new Windows Media technologies over time. These multifunction devices are often available for US$400 or less.

Finally, it's not clear that consumers will accept portable video as readily as they did music. Unlike music, which users can listen to while performing other tasks, video demands more attention.

Therefore, PMCs will initially appeal to a narrow niche: consumers who use their PC as a multifunction entertainment device and who are willing to pay a significant premium to take PC-based content with them—particularly recorded TV shows, which cannot easily be played on any other portable device. Microsoft's Portable Media Center site is at www.microsoft.com/windowsmobile/portablemediacenter/default.mspx.