April 15, 2002 4:00 AM PDT

PCs: Redefining "entertainment"

This holiday season, a new breed of Windows PCs will land on store shelves. The question is whether people will go for them.

Hewlett-Packard, Samsung and some other PC manufacturers will be selling upscale Windows XP computers with Freestyle, an additional software module from Microsoft that lets consumers use their PCs to record TV programs like a TiVo set-top box. Freestyle PCs will also come with a remote control.

It hasn't been determined whether Microsoft will eventually integrate Freestyle fully into the OS to create a new species of XP, or how much more Freestyle PCs will cost. Nonetheless, consumers will be well aware that they are getting something different.

"There will be a consumer name of some sort that designates this type of PC," said Jodie Cadieux, marketing manager for Microsoft's Windows eHome division. "This is a different software experience, so it will require more software."

Although initially Freestyle will appear on only a handful of PCs and provide a few functions, the computers' appearance may mark a seminal moment in the consumer PC market.

Freestyle PCs could further prod consumers into thinking of their computers as the nerve center of home entertainment, a long-sought goal throughout the industry.

The software's acceptance could also allow Microsoft to essentially create a deluxe, and potentially more profitable, class of Windows. That would be similar to a move by Intel, which successfully segmented its chip line in 1998 to get into the budget market. Microsoft already sells different versions of XP to the commercial and consumer markets, but they are roughly the same.

"It's a slightly different interface that's visible from 10 feet away, and it's a remote control for the PC. Big whoop."
--Matt Rosoff, analyst, Directions on Microsoft
"The code base of XP is going to morph over time," said Roger Kay, an analyst at research firm IDC. "You can expect them to keep doing this."

Then again, segmentation sometimes is a mixed bag. A few years back, Microsoft promoted a software module called Bob that promised to simplify running Windows. It was reviled by the public.

Promoting Freestyle will also require a substantial, coordinated effort funded primarily by Microsoft. With the decline in PC prices and profits, computer manufacturers and retailers don't have the stomach, let alone the money, to tout new technologies.

"There is really no room for anyone to add new (models) to a declining category," said Stephen Baker, an analyst at research firm NPD Techworld. "Microsoft is going to have to put market development funds into this. It has never done these kinds of things because they don't have the competition in the OS market."

Freestyle defined
At Bill Gates' original demonstration of Freestyle at this year's Consumer Electronics Show in Las Vegas, the Microsoft chairman said the company envisioned a digitally networked home where media stored on a PC could be accessed from a variety of devices, the so-called eHome environment.


Gartner analyst Michael Silver says: Although proof-of-concept products, Microsoft's Freestyle and Mira have the potential to reach a broad audience as the technology matures and new versions are released.

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The maiden version will be less grandiose in its scope. In its first incarnation, Freestyle serves as a platform for digital video, music and photos; records TV shows; and comes with a TV program guide. The Freestyle menu also comes with larger print and a remote control so it can be viewed from 10 feet away. (As an added bonus, the interface shrinks proportionally so it looks the same when the window is minimized or blown to full-screen size.)

Some analysts are under-whelmed.

"It's a slightly different interface that's visible from 10 feet away, and it's a remote control for the PC. Big whoop," said Matt Rosoff, an analyst at consulting firm Directions on Microsoft. "But it's part of a longer-term strategy that Microsoft is really committed to."

The first version is also missing one crucial feature: built-in support for wireless networking. PC makers, though, are getting around the technical hump by inserting wireless on their own.

At this year's CES, Samsung Electronics CEO Daeje Chin unveiled the Home Media Center, the company's upcoming cube-shaped Freestyle PC. The PC is expected to start shipping toward the end of this year or the beginning of next year and will use 802.11b wireless technology to communicate with other devices in the home.

The decision to not include wireless networking as an intrinsic feature likely came because companies including Sonicblue and Moxi Digital have been touting consumer appliances that will act as digital media jukeboxes, Rosoff theorized.

"The idea of being able to go around the house and access photos wherever you are by tapping on the screen--that could be pretty attractive."
--Paul Worthington, analyst, Future Image
"It's more of a tactical move than a strategic one," Rosoff said. "Microsoft saw Sonicblue and Moxi and other companies promoting this idea of having a consumer-electronics device that runs all your digital media. Microsoft felt they needed to get out there quickly with a PC-centric approach to doing that."

Despite some skepticism, a few of the features could strike a chord with buyers, especially with the growing popularity of DVD recording and MP3 files.

The advent of Mira, a wireless touch pad for controlling PCs due around the same time, may also enhance Freestyle's appeal.

"I think if you combine (Freestyle) with Mira, then you have a pretty convincing improvement," said Paul Worthington, an analyst at research firm Future Image. "The idea of being able to go around the house and access photos wherever you are by tapping on the screen--that could be pretty attractive."

The grubby details
Most likely, PC makers will offer Freestyle on all PCs after a certain price, analysts said. Manufacturers want to keep the number of PC lines they market at any given time to a minimum. They are also generally loath to sell two nearly identical models that compete against each other.

As a result, Freestyle will likely be wedged onto the upper end of the existing product lines.

The Gatekeeper:
Windows XP "Instead of having a non-Freestyle PC as your high-end PC, you can make it a Freestyle PC," NPD's Baker said. "There's really not much demand for pre-configured high-end PCs. This would certainly fit more into a build-to-order kind of model."

Convincing consumers of the benefits won't be easy, either. The average consumer has yet to cross the mental threshold to think of the PC as something that belongs in, or is at least connected to, the living room, according to Toni Duboise, an analyst at market research firm ARS. Initially, the people most intrigued by this will be students living in cramped quarters, where ordinary networking won't be a problem, she said. Broadband would help highlight some of the benefits, but it's not broadly accepted yet either.

And on a practical level, success will depend on relentless marketing, which Microsoft will have to fund.

"Microsoft is going to have to dump a lot of money into this to make it go," said IDC's Kay.

 

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