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Increase in Offerings Might Ignite Sales of Specialty Entertainment PCs

Posted on: Tuesday, 11 April 2006, 06:00 CDT

By Michelle Kessler

SAN FRANCISCO -- Specialty entertainment PCs have suddenly topped regular PCs in popularity -- and sales might soar higher, thanks to Monday's Disney news, tech analysts say.

A typical entertainment PC looks like a regular computer. But it has high-end audio and video components, and usually an entertainment-focused version of Microsoft's Windows operating system called Media Center. It can be hooked up to a television or stereo.

Media Center PCs were a flop when they made their debut in 2002. Now, they make up about 59% of the U.S. retail PC market, researcher Current Analysis says. Sales should keep growing, especially if online TV becomes common, says PC analyst Toni Duboise at Current Analysis. Television "really increases the audience."

Sales are soaring because:

*There's more content. In 2002, Apple's iTunes music store was not available to Windows PC users. Video sites such as YouTube and Google Video didn't exist.

Now, the Internet is full of video content. CBS offers episodes of Survivor online for a small fee. And Disney, the parent company of ABC, plans to put such hits as Desperate Housewives online.

That's a turning point that might turn computer shoppers toward entertainment PCs, says tech analyst Roger Kay at Endpoint Technologies Associates. "It's a pretty good stimulus," he says.

*Prices are dropping. Early Media Center PCs cost about $1,500, in part because Microsoft insisted computer makers use pricey, high-end components in PCs bearing the name, says Duboise. Microsoft relaxed the requirements last summer, she says. The average price promptly fell 20% from $1,021 in June to $817 in July.

The drop caused sales to climb -- which in turn allowed PC makers to lower manufacturing costs. In March, the average price was $737, Current Analysis says.

The market still has room for growth, Duboise says. Entertainment PCs can be equipped with TV tuners, so they can receive cable, satellite or antenna TV broadcasts. But only about one in every four Media Center PCs sold in March had this option, she says. That's a sign that consumers use them for managing digital music and photos, but not yet for watching much TV.

If that changes, entertainment PC accessories could see sales growth. Among them: PC-compatible TV sets and wireless networking gear.

But there are still obstacles to overcome before digital entertainment becomes the norm, Kay says. It can take an hour or more to download a single DVD-quality video program over a typical home Internet connection, he says. The huge file size can overwhelm even the most powerful computers on the market, he says. (Most video websites avoid this problem by lowering quality, which is why online video often looks grainy.)

Furthermore, the behind-the-scenes Internet pipes aren't designed for constant, huge data transfers, Kay says. "If everybody starts (downloading) at once, we're going to be in trouble," he says.

(c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

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