Six months after Microsoft launched the mainstream PC business into the digital home with its Windows Media Center XP operating system, the digital home dream is proving to be a hit and miss affair for the IT channel.
Hardware partners including HP, Acer, Toshiba and Optima had been conservative in their sales predictions for the Media Center, which was hobbled by the lack of a local electronic program guide (EPG) to allow users to control TV watching and recording.
Local manufacturer Optima says the Windows Media Center PC (MCPC) represents less than 5 percent of its sales.
Selling a full-featured Media Center PC at around the $3000 mark was 'very difficult' in a market where the PC price point is $1500 or less, says Optima Chairman Cornel Ung. While Optima was having more success selling PCs bundled with Media Center software, even these accounted for just 15 to 20 percent of sales.
While claiming that sales of HP's Media Center PC had been 'absolutely in line with our expectation', HP's Image and Printing vice-president Rebekah O'Flaherty says the market is still developing.
'We've been focused on trying to help consumers put the pieces together to deliver a great experience. That's why we offered installation with our MCPC and why our retailers offer value added services to consumers to help them move from the analogue world to the digital world.'
The challenge facing Media Centre PCs was to make them more user friendly, says Ung. 'If you want to record something, today you'd prefer to use a VCR or DVD recorder.'
Despite a slow start for the multimedia PC, consumer spending on lifestyle technology has continued to be strong in other market segments.
According to new figures quoted in the Canon Digital Lifestyle Index (CDLI), consumer spending on digital lifestyle products including cameras and audio players was worth more than $1 billion in the second half of 2004.
The CDLI report, compiled by analyst firm GfK Marketing Services, suggests the spending sweet spot continues to be standalone devices rather than a central digital home hub such as a Media Centre PC, an observation echoed by vendors including Samsung.
'The most dramatic new product in the past six months has been the growth in digital portable entertainment devices - MP3 players and the like,' says Samsung's sales director for IT and AV products, Norman Krieke.
Coupled with the continued low penetration of broadband (Australia had just passed the one million connections mark in June of last year, according to the ACCC), the Australian market has not evolved to use a multimedia PC as its home entertainment hub, as some PC manufacturers had hoped and predicted.
In fact, in 2005 the sales of Media Centre PCs would be less than those of high end gaming PCs, according to IDC analyst Mike Sager.
'In Australia, the digital home dream hasn't delivered,' says Ian McLean, Netgear vice-president for Asia Pacific. 'We have no electronic program guide, so [the mechanism] to get from the PC to the TV screen is not really there. Six to 12 months ago we thought that this would happen quickly.
'From the amount of wireless and broadband kit being sold, there's no doubt that networking is happening, but we've got that split between the computer and television.'
Another figure in vendor land who is keen to hose down the hype and focus on the realities of the Australian market is Samsung's Krieke.
'The hype may have been too great in the early stages. The product was definitely available but the channel has not followed through. Various vendors got behind promoting the concept, while Tech Pacific as a major distributor put a lot of effort in demonstrating various digital home scenarios at their Tech Expo road shows,' Krieke says.
'However, the IT channel resellers really didn't take this on board as a concept to run with and promote. The most successful channel for convergence seems to be the high end or pro AV resellers.
'Samsung has enjoyed significant growth in large screen business, but this has been largely through the consumer electronics retail channel.'
The market reality is that Australia is lagging in adoption of key digital home technologies compared to countries like Korea, Krieke says.
'Korea has been one of the benchmark countries for digital home technologies stimulated by broadband adoption - the highest rate in the world. This has led to downloading of a lot of content that gets used in the home environment for entertainment and information purposes. It is fast and relatively inexpensive.'
Krieke acknowledges Australia's poor penetration level of broadband and its relatively high cost. 'This limits usage and the development of localised applications. Until broadband gets at least 50 percent penetration in major metropolitan areas, we will lag behind other major global markets.'
But this does not mean that the digital home is not developing at all. So far, at least, the television is winning against the PC as the delivery mechanism for digital content.
Television and video-on-demand - two key features that multimedia PCs will not be able to deliver without an onscreen EPG - are both starting to be offered through pay television operators, with ISPs also looking to follow suit.
While ISPs might aspire to provide multimedia content through the PC, content providers such as pay television operators were stepping into the breach, says McLean. 'Our friends at Foxtel will probably drive an even greater wedge in the market.'
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