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The Battle for the Digital Home: Does Apple or Microsoft win?

In the battle for the “Digital home,” the right answer (unless something changes) might be neither. I’ve just finished a review of the top contenders for awards at CES, and while I can’t divulge the winner (largely because I have no idea who it is), I can say that neither Microsoft’s nor Apple’s solutions came particularly close. Granted in Apple’s case that was largely because they don’t actually attend CES and seem to believe —with some justification — that they don’t have to. Microsoft seems to think they can continue to blame their partners for failures in this space, but right or wrong, failures are exactly that; at some point, I’ll bet either Bill Gates or Microsoft’s board will say, “Enough is enough” and step in.

But rather than talk about what large companies aren’t doing, let’s focus on what needs to be done to capture the digital home, and set a framework for how the products we will see at CES should be judged.

In Search of the Perfect Home Media Solution

A few weeks ago I had a chance to see what may be the current champion in home media solutions when I dropped in on Kaleidescape. They have a stunning product that allows you to rip your music and your DVD movies (or buy them pre-ripped) and then distribute them around your home. They don’t really work with portable media players yet, nor will their solution work in your car, but when it comes to your home, there is nothing else that comes close. If you want to know what both George Lucas and one of the most powerful (though unnamed) CEOs in the PC space have, it’s one of these systems. Problem is the complete solution can cost well over $100K, making it a little out of the average consumer’s price range (they did recently release a “value” product starting at $10K, but that is still in nosebleed territory).

This product, which is neither based on Microsoft nor Apple technology, is incredibly easy to use (passes the wife test), has a massive amount of readily available music and movie media, and sets the bar with regard to user experience. The only user interface that I’ve seen that beats it is the one from Digeo; interestingly enough, this company is owned by Microsoft founder Paul Allen, and it too is built from scratch. The easiest-to-install product (which arguably had the best remote control) was the Sonos, and it also was largely proprietary. Finally, when it comes to pulling and organizing TV shows, the gold standard is Tivo, which is based on Linux.

Now I will say that the best stealth Media Center in 2006 was the Mac Mini; I know a lot of folks that are using it to manage their media, and it represents one of the better values (particularly when you compare it to the whopping Kaleidescape price). At the end of the year, the best Microsoft product came to market from Alienware which has been positioning itself increasingly at Apple’s heart of late.

So the market-leading offering needs to embody what is great about the 2006 market-leading products, while maintaining the affordability and interoperability of the Microsoft and Apple solutions. This is clearly something much easier to say than do; otherwise, it would already be done.

Gaming and Home Automation

One interesting twist is the introduction of gaming into the mix by both Microsoft and Sony this year. In fact, if you really think about both the price and ease-of-use requirements, the Xbox probably comes closer to the requirement than Microsoft’s own Media Center. Sony kind of missed with the PlayStation 3, but it can be updated, and in terms of industrial design, it is one of the most attractive (and Apple has clearly demonstrated good looks sell) products in the segment.

Gaming adds yet one more dynamic to this mix, both because it is something a variety of these products can do and because it created the opportunity for subsidies, which can make a huge difference in price (the Sony subsidy is estimated to be a record-setting $300 right now).

For home automation, having a product that is always on can do wonders for managing things like your sprinklers and lights to reduce utility bills, which could provide something unique in this space: a return on your investment. At some point in the future, these things could actually pay for themselves in utility savings, not to mention better ensuring your own safety and security. Watch companies like Smart Labs as they work behind the scenes to integrate this type of feature into the various media center offerings.

Home Servers vs. Media Services

Right now we get most of our video off of cable, and then many of us use PVRs to time shift that media so we can consume it when we want. But with Internet TV, we can download what we want when we want it, if we have a big enough pipe into the home. That pipe is coming, and with enough bandwidth we may not need any of the hardware-based solutions we are currently anticipating.

One of those new hardware solutions is a Media Server. This product sits centrally in the home and stores everything you might want to consume in one place (hopefully, one very secure place); it also allows you to access this media from anyplace you have a network connection. The best I’ve seen so far is a product called the HD Codex, an impressive, but expensive offering that sets the bar for this class.

In the end this will come down to bandwidth. As we move to HD, we are likely a good ten years away from when bandwidth will be fast enough for most of us to go directly to a service without having something like a Media Server as a way to watch movies real-time. (To give you an idea, it currently takes about 12 hours to download an HD movie onto an Xbox 360 over DSL).

Looking Ahead to CES

It isn’t without some trepidation that I’m looking ahead to CES and the products there. Last year I saw a lot of potential in products that were far from what the market was looking for. This year I know of some that will be coming very close to the ideal, but they are from companies that lack the market strength to drive their solution to sufficient volume. While we may have our eyes on the big players, it may very well be one of the smaller guys that breaks this market open and creates the next iPod-like wave.

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