Media Center Positioned As Premium Home OS

To broaden the audience for Windows XP Media Center Edition, a customized version of Windows XP for home entertainment PCs, Microsoft has added and improved a number of features and is making the OS available to OEMs and system builders for use on less expensive hardware. Because Microsoft charges a premium for Media Center Edition 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, built around a new release, Windows XP Media Center Edition 2005, will provide 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 Media Center Edition 2005 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.