January 16, 2007 4:00 AM PST

Apple, Microsoft have designs on your living room

If you're looking to give your home a digital makeover, both Apple and Microsoft have some ideas.

The two companies last week each revealed new pieces to their digital living room strategy, aiming to move beyond their core strengths. At the Consumer Electronics Show in Las Vegas, Microsoft Chairman Bill Gates showed off Windows Home Server, a slimmed-down version of its operating system. It's designed to power a new generation of cheap and simple servers that can serve as a central household repository for photos, music, movies and more.

Two days later, Apple CEO Steve Jobs formally introduced Apple TV, a small box that sits next to a television set and enables people to play content stored on a Mac or PC elsewhere in the home.

"Apple--their business has been revived by the iPod and iTunes. It makes sense to try and build on that in whatever way they can," said Matt Rosoff, an analyst at market research firm Directions on Microsoft. "Microsoft--yes, they have a mobile story, but they seem to be more focused on in-home experiences."

The two products are not competitors, but reflect both companies' efforts to build on their strengths and work toward an all-encompassing range for the home.

Beyond the new home server product, Microsoft has been pitching its Media Center entertainment PC notion. It has also been expanding the role of the Xbox console beyond games into movies and, last week, into Internet Protocol-based television.

Apple, meanwhile, has dominated the mobile device market with the iPod, and it has sold millions of downloads of TV shows primarily for viewing on the media player. With the Apple TV box, it gains a much-needed gateway to the television.

Home gallery

Jobs gave a preview of Apple TV (then code-named iTV) in September, saying that the product "completes the picture" for the Cupertino, Calif., company.

"Now I can download content from iTunes and enjoy it on my computer, my iPod and the big-screen TV in my living room," Jobs said at the September event.

Apple TV is not, as some had hoped, the equivalent of a full Media Center PC, capable of recording TV shows that come in via cable or satellite. Rather, it is more akin to a Media Center Extender in the PC world--connecting content stored on a computer to the TV.

The $299 device does not take on all tasks, but it does offer Apple an important connection to the TV. The bridge is all the more important now that the Mac maker has begun selling movies. This week, the company expanded beyond selling Disney flicks, adding content from Paramount Pictures.

Digital Lifestyle Outfitters' HomeDock Deluxe takes a different approach to the same problem. Figuring that most of your iTunes content is already on your iPod, the dock simply connects the iPod to the TV via its own remote-controlled interface. The original version, launched last year, handled music files. In the latest version, DLO has added video. And at $149, it's a cheaper alternative for folks who just want their iTunes TV shows on the big screen.

For those who want to add TV recording abilities to their Mac, Miglia's TVMax is a Mac Mini-shaped box that does allow digital video recording, using El Gato's EyeTV software.

Fitting pieces together
Microsoft's big announcement at CES, Windows Home Server, was less about getting content into the home and more about what consumers do with it once it is there.

"We're really recognizing the fact that homes now (have) four or five PCs, an Xbox, music player, a Zune," Microsoft entertainment unit president Robbie Bach said in an interview. "We're going to want things to help people manage that, whether it is file backup or security or whatever it is you need in the home to keep your network safe and running well."

Hewlett-Packard plans to start selling a MediaSmart Server using the Microsoft technology later this year. Other PC makers are also expected to adopt the technology, which is based on Microsoft's Windows Server 2003 operating system.

Both Apple TV and the home server from Microsoft are potentially niche products for now. In an interview with CNET News.com, Gates said it isn't easy to predict when the notion of a home server will go mainstream. "As you get a product that's, say, well under $1,000, viewed as just dead simple to use, I think a reasonable percentage of multiple-PC homes will find this very attractive," he said.

Diffusion Group analyst Michael Greeson said in a note Friday that Apple TV has been overhyped by the media, noting that many of its abilities are already available in other products.

"In what world do these people live? Are they completely oblivious to the fact that Internet-enabled DVRs and set-top boxes, not to mention digital media adapters, have been around for a couple of years?" Greeson wrote. "Are they aware that the latest generation of game consoles do pretty much the same thing as Apple TV (sans iTunes), including burning content to an embedded hard drive?"

CONTINUED: Roomful of contenders…
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