iTV vs. Microsoft Media Center vs. PS3: The Big Battle of 2007

Posted by Rob Enderle, Principal Analyst, Enderle Group

Last week I suggested Sony was getting better and almost as if Sony wanted to prove me wrong they released their financials which certainly didn't support my conclusion. Still, financials are generally a lagging indicator of both improvements and problems, because they reflect past events rather than future trends.

However, last week was a preparation for this week, where we'll discuss next year's battle for your digital living room and explore what we are likely to see when three of the most powerful vendors, in their respective spaces, run at each other with their top offerings.

After last week, we know all there is to know about the PS3. And with Vista RC2 testing well underway, we know a great deal about the Vista Media Center; however, we don't know that much about the iTV, so I'll be making a lot of assumption,s which may not turn out to be accurate. We believe there are several things that Apple is intentionally not disclosing about the device to maintain the mystery and allow excitement to properly build at launch.

PS3: Great games, marginal media

If there was a company that should win this fight it would be Sony. They have been in the CE business for decades and should know exactly what the market wants and the company should be able to do the best job of supplying it. Known for stunning designs and a solid premium brand, their PS2 product dominates gaming and the PlayStation has taken on all comers to generally win its segment that is until Microsoft entered the game.

Sony's traditional problem is the inability to compete as a company and it is known more for the crippling infighting between divisions than its successes lately. Even though, of the three, it is the only one that actually owns Media, something that should provide a huge advantage, its concerns over media theft have traditionally crippled Sony offerings by making them way too difficult to use. Still, as noted last week, I think Sony is getting better.

Looking at the PS3, it will launch with more gaming titles than the Xbox 360 did, but a year late, so the Xbox 360 is actually expected to have at least three times the installed base by the end of 2007. Studies in Japan have indicated that the Nintendo Wii should outsell the PS3 for most of the year. Going from the leading position to dead last will clearly be a problem.

However, this is about media and the PS3 is positioned as a media powerhouse. Unfortunately, at least initially, it doesn't live up to that promise. It does have HDMI out for easy initial set up and it integrates well with the PSP providing a unique remote watching capability for some media. But it won't work with media storage products; it won't even integrate with Sony's own Media Center, which actually does integrate with the Xbox 360. To get media onto the device you either have to buy it from the Sony Music store or bring it over on CDs or Flash Memory (only the most expensive PS3 has flash memory slots). In short, it really isn't a product ready for todays networked home.

It does have Blu-ray, some Media Centers will as well, though both Microsoft and Intel back HD-DVD. It may be the cheapest way to get a Blu-ray player in 2006, but Blu-ray content; particularly good Blu-ray content is hard to come by. You also have to pay extra for the remote that makes the Blu-ray drive work properly which seems counter-intuitive to me given how expensive this box currently is.

When I saw the design at E3 last year I thought it was best of class, but now it has been around for a year and it is starting to look dated to me. Xbox followed the Apple model of remaining secret until launch and, at least to me, its looks and those of the Wii look fresher. Both the iTV and true Media Centers look like they belong in a Stereo cabinet, the PS3 lacks an amp and ideally should match with a Sony receiver, which it does not. In fact, the two products - the console and the receiver - look like they came from different companies.

One final comment, yes, they lowered the price of this in Japan. Last year there were Xbox 360s selling upwards of $2K in some bundles due to the shortage and you would think the same would be true of the Sony, particularly in the Japan market, where it will be dramatically short in supply. The fact that they are even concerned about the launch price under those circumstances is a big red flag.

Media Center PC

For this I actually built a Media Center PC using Windows Vista RC2. Using the Ahanix MCE701 case, an AMD 4200+ dual-core processor, an Nvidia based motherboard and ATI graphics I was able to build decent box for under $1000 suggesting you should be able to buy one from someone else, next year, similarly configured for approximately the same price. This makes it the most expensive solution (if you don't have to buy a new PC to get the iTV to work right).

In terms of games, this will use the Xbox wired joysticks and accessories and it will play Windows games, many of which will have Xbox 360 variants.

The Media Center is a true PVR and can record shows but, if a set top box is involved, you generally have to use an IR blaster right now. Vista will support cable card but the experience with Tivo and Cable Card has been ugly with the cable companies seemingly doing all they can to destroy the user experience. For instance, the content you record using Tivo Cable Card isn't portable.

Right now, it works extremely well with Home Media servers (Network Attached Storage devices) and it will broadcast to an Xbox 360 and a number of media extenders. It works seamlessly with "Plays For Sure" media players from a variety of vendors and both TV and movies seem to move easily though I still find I can't live in the ten foot interface for Sync which is kind of aggravating. HD content remains a problem and HDMI interfaces for PCs aren't yet available but may make it by product launch.

There are a number of third party content providers that work with Media Center but iTunes isn't one of them. Full Media Center integration isn't yet cooked in RC2, so working with Urge, which is built into Vista, currently requires the user to leave the Media Center interface.

Third party support for Media Center remains strong and the Intel Viiv based version currently appears to be the most capable of the potential Vista offerings. We are, as yet, unable to test the Vista Viiv capabilities but, on paper, they do address some of the current Vista complexity issues.

Still, while somewhat rough around the edges, the new Vista Media Center is arguably the most capable product of all three but it pays the typical Microsoft penalty of also being relatively complex to set up and use - and it is also the most expensive. Finally, it is also the only one you can build yourself and that allows a level of customization that is also unmatched by the other offerings.

In terms of single box capability, the Media Center, on paper, is the product to beat but ease of use isn't its strength.


Can iTV beat Microsoft and Sony?

iTV

With this product, we move to almost pure speculation. What we know is that it is a set top box like product that will provide HD content. It is believed this content will largely consist of pay-per-view offerings downloaded from the Internet and coupled with Itunes Music. We believe it will also be able to link to other Media files on networked PCs or Internet resources. Costing under $300, this is easily the least expensive product in this grouping but it appears to depend on a networked PC for full capability (streaming video over a DSL connection would be ugly, particularly HD video).

For iTV it all comes down to content - how much, where they get it and how much it costs. We know the Sonos product, which looks very similar, does music incredibly well but won't do video at all and is locked into Real Networks for premium content. We know that the Apple user interface will be very good, and we know they probably have a deal with Disney for Disney content. But, even though Disney is the first studio I would pick, they can't be the only studio and if you have to buy every program at a dollar a pop for TV, I think that will get old fast in the face of anything else that will record off the air.

Price for Movies will be $9.99 to $14.99 or the same as DVDs and they should also play on your Ipod video and probably your laptop. TV will probably be a $1 per show but HD TV downloads may cost more and will clearly be a pain do download, due to file sizes. In fact, downloading HD anything could be incredibly painful which is why off-air may be the best short term solution.

While the Media Center and PS3 can function as standalone offerings, iTV needs something else and we simply don't know about that part of the offering yet to fully fill in all the blanks.

So, think of the iTV as more of a super set top box, or better Media Extender. But then, that may be all you want in the living room.

Picking the Winner

So, in the end, much like it is with gaming, the winner here will have a great deal to do with who gets the content. Number 3 is easy to call because the PS3 just doesn't have the content. Right now the Media Center would win on content but next year, when both products launch, that may not be true.

Now, in combination with an iTV a Media Center could be interesting and - as a super Media Extender - it could do very well. This is where Intel and Viiv come in and we know there are several things Apple is keeping close to the vest. If they plug into Viiv for content, the entire solution - which would be more in line with a full featured Media Center /Media Extender - could be very interesting and tip the scales in their favor because of ease-of-use advantages. And the Media Center, in this case, could be running the MacOS with some betting that Leopard, with Media Center capability, will actually launch on the same day the iTV does.

If that rumor is true, the combination of Leopard with Front Row 2.0 and Live TV could trump, with iTV, Windows Media Center/Media Extender/Xbox 360.

It is about time for the full power of the Apple/Intel alliance to be felt and, if iTV showcases that, it could mean the battle for the digital living room goes to Apple. But Apple traditionally doesn't do alliances well and Intel, so far, has tied Viiv to Microsoft's Media Center. In that view, a combination is a stretch but it also means that they have the opportunity to do something amazing and Apple does that a lot.

The company we all probably should be watching is Cisco because what they are building doesn't require a PC and their Scientific Atlanta division also has the content problem addressed through its alliances with cable providers. With the right implementation, they could build a scenario in which only the gaming products (and only for gaming) weren't obsolete.

We'll see, in the meantime I'm having a ball with my Vista Media Center. Building one of these things is a lot of fun and we'll probably revisit that when Vista ships next year.

Rob Enderle is principal analyst for the Enderle Group. He can be reached at renderle@enderlegroup.com.