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Home PCs and Home Theater Don’t Mix

Anandtech has an absolutely horrifying review detailing the trials and tribulations of setting up a Windows Vista home theater PC (HTPC) with the first HD capable TV tuner from ATI (AMD). Even with the on-site assistance of Dell (DELL) and Time Warner Cable (TWC) (with promptness and technical expertise you or I could never hope to see) it took two days to get the Windows Vista PC, external HDTV cable tuner, and Time Warner Network integrated and up and running. The resulting experience was great, though most consumers would have never had the patience or technical fortitude to get it up and running. It makes one wonder why anyone would bother to do this at all.

At the end of the entire ordeal, the senior TWC representative that was with us turned to us and asked us what this system could do. We explained, to which he responded with the most priceless of facial expressions. It was an expression that needed no explanation; his reaction asked the question “why on earth would you go through this when you can just rent an HD-DVR from us for $9 a month?”

The Anandtech review illustrates the complexity of the problem; most if not all of the issues involved hardware and network integration problems between Time Warner’s network and the HTPC. The problems were not the ones typically associated with integrating Microsoft (MSFT) software with generic OEM hardware.

It is clear that cable operators need to be equally incentivized to get 3rd party hardware up-and-running as quickly and efficiently as their own set top boxes and DVR’s. Otherwise, the 3rd party hardware model will never succeed. Given Cable’s reluctance to hand over control of their user interface to a 3rd party and forfeit any resulting indirect revenue streams (advertising, downloads, user viewing data) this is not a problem that is going to resolve itself.

One thing is clear, Microsoft has a potential winner with their Media Center software. The interface is universally seen as very user friendly and represents a quantum leap over the first generation of DVR’s such as Tivo (TIVO). Tivo has been stagnant while Microsoft has poured investment (albeit unprofitable) into this segment.

It remains to be seen if Microsoft will port this software to a dedicated hardware platform such as the Xbox360 and integrate the HDTV tuner. This would eliminate any potential hardware/software integration issues and deliver a great experience to a consumer. It appears to me that this is also the only way Microsoft will see any appreciable ROI on their Media Center investment.

Microsoft has already forged a roadmap with AT&T (T ) to use the Xbox360 as an IPTV tuner. It isn’t a big leap to see them work with Time Warner or Comcast (CMCSA) and modify the Xbox360 hardware to emulate a traditional set top box. This would be a winning product for everyone.

The real issue remains – in the not-too-distant future when I can download all of my content over a broadband connection, exactly what purpose will the traditional cable broadcast model serve?


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