Improving the Hub: Windows Media Center

Microsoft is taking two approaches to improving the PC’s capabilities as a home entertainment hub. In addition to improving the Windows Media Player, which ships with every copy of Windows, the company has also created an OS specifically designed for home entertainment PCs: Windows XP Media Center Edition (MCE).

To broaden the audience for this OS, Microsoft released a new version (MCE 2005) with better video support and other improvements in Oct. 2004 and began making it available to OEMs and system builders for use on less-expensive hardware. Because Microsoft charges a premium for MCE compared with Windows XP Home, a shift to Media Center PCs would increase Windows revenues more quickly than the growth rate of consumer PC sales, which is slowing.

The new Media Center strategy provides mixed opportunities for OEM partners. At the low end of the market, less restrictive hardware specifications and a broader manufacturing channel could dilute the Media Center brand and lead to commoditization. On the other hand, OEMs that successfully design and market high-end entertainment PCs based on MCE could find themselves with a profitable new niche, if they and Microsoft can convince consumers that a PC is a viable replacement for traditional home entertainment systems based on consumer electronics components.