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6/29/2006
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Apple's Next Big Thing: Home Entertainment

Sure, the company's on a roll. But does Apple have what it takes to repeat the success of the iPod in this notoriously fragmented venue?

Still, analysts say that the pieces are falling into place. With the introduction of the Intel-based Mac Mini in early 2006, Apple finally had a viable digital media server (the Mac Mini) that worked with a long-distance interface (Front Row), and a wireless network (AirPort). The major functionality missing at this point is the ability to directly view and record live television, according to Tim Deal, a senior analyst with Technology Business Research. "You can get that from third parties, but Apple needs it to complete its own portfolio," says Deal.

Some Apple watchers believe that Apple will introduce an IP/video set-top box that will bring the Internet and video downloads directly to the TV. Josh Bernoff, an analyst at Forrester Research, has predicted just that. He expects that current and future Apple technology will cumulate in a device he calls "AppleVision," which will include digital video recording capabilities that would make it an effective TiVo killer.

According to Bernoff, such a product would stand out from the already saturated market for DVR set-top boxes because existing devices don't have easy access to video content via the Internet. Some of them are getting close, however. TiVo just this month announced TiVoCast, which would deliver online video over a broadband connection from partners that include the National Basketball Association, the Women's National Basketball Association, and The New York Times.

Indeed, many people are betting against the PC as the hub of the digital living room. It's simply not reliably enough, for starters. In addition to all the other complexity, you've got "blue screens of death," viruses, and other malware that creeps in when PCs get involved in the hardware and software mix, says Phillip Swann, president of TVPredictions.com.

"PC-based entertainment systems have a limited appeal, and will never reach the mainstream," declares Swann. "They are too complicated and confusing and designed with excessive features."

PCs have a long way to go before they're a viable part of the digital home solution, agrees Ted Schadler, an analyst at Forrester. "Today, PCs do not plug-and-play into the digital entertainment in the living room. It's too complex."

How this will impact Apple is still anyone's guess. Although there are strong signals that Apple would push the Intel Mac Mini as a central media hub, there's also the iPod model, in which audio and video reside on the device itself, which would argue for a more distributed approach to storing and accessing content, says Dixon. "How the PC fits into Apple's vision is unclear," he adds.

Must Play Well With Others

For Apple to succeed, then, it's much more than just a question of working out the technical kinks. It involves making critical decisions that anticipate consumers' desired entertainment lifestyles--and creating the appropriate partnerships to make those lifestyles possible. And these partnerships require collaboration from a whole spectrum of notoriously hard-headed players.

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