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Microsoft ready to take another stab at television

Television has been something of a great white whale for the Microsoft Corp. The company has tried to sell WebTV and build software for TVs and cable boxes. It has even invested billions in cable systems. So far, these efforts have been expensive and have not yet put Microsoft into the position it covets: the maker of the software behind every glowing screen.

Today, Bill Gates, Microsoft's chairman, ventures into Hollywood to announce a renewed assault on a different front in his war of the tube, one that builds on Microsoft's greatest strength: Windows.

Gates will unveil a new version of the Windows XP Media Center, software that, combined with specially configured personal computers from dozens of manufacturers, turns the PC into a photo album, jukebox, DVD player and, most important, a TV set with a built-in video recorder.

The first two editions of the software have been slow to gain acceptance in the market, representing about 3 percent of home computers sold. But Microsoft hopes to turn that around with the latest version, which will add a few features and improve the technical quality of the television picture and the video recorder; both at times have been spotty.

More important, say industry executives, demand will be spurred by a series of new hardware devices using the Windows software that are to be introduced today.

Several manufacturers, including Linksys, a unit of Cisco Systems, and Hewlett-Packard, are expected to introduce versions of a product Microsoft announced last January called the Media Center Extender, a device that allows a television signal to be sent from a Media Center computer to a television in another room, by way of a wireless network.

And perhaps most significant, some of the new Media Center computers will have prices below US$1,000, about half that of the first models.

Still, it is questionable whether people want to watch television on their computers.

"Convergence solves a problem consumers don't have," said Sean Baenen, a managing director of Odyssey, a consumer research firm. He said that simpler, single-purpose machines are easier to use.

So far, the record of Media Center PCs is mixed. Since they were introduced in 2002, computers using the first two versions of this software have been slow sellers. IDC, which had forecast sales of 1.5 million of them this year, now sees sales at 550,000 units for all of 2004.

Roger Kay, a vice president of IDC, says sales of Media Center PCs have lagged because they are buggy, too hard to use, and often too noisy to put in a living room. And even among the small group of users, they haven't developed the fanatical following of TiVo, the stand-alone video recorder.

"I haven't been in some placid home where the people who use Media Center PCs think it is great and a part of their life," Kay said.

Brad Brooks, the marketing manger for Windows, said that Kay had undercounted the software's sales and had overstated its flaws.

"We're pretty happy where we are after only 22 months in the market," he said. "We have grown past 3 percent of the market." He said that over the next few years, Media Center machines would represent 10 percent to 20 percent of the market.

Brooks said this growth would be driven by the new software to be introduced today -- along with a series of related new products by hardware makers. He declined to say what specific changes would be in the new version, but news accounts and industry executives say they include a modest set of new features and improvements to the user interface.

"We are going into Version 3 of the Media Center edition, and everyone says that Version 3 is Microsoft's sweet spot."
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