Media Center: A New Foundation

Along the way, multimedia computers are finding themselves in a variety of new places, from $600 Media Center PCs used for content distribution in homes to beefed-up machines appearing in doctors' waiting rooms. While sales of multimedia PCs have been slow up until now, companies with the creativity to think of new ways to use them are finding receptive clients, new revenue streams and the ability to differentiate themselves from competitors. Instead of waiting for the technology to mature and the market to develop, these system builders and integrators are taking the initiative and building opportunities for themselves and their partners.

For Apple Valley, Minn.-based digital integrator Custom Entertainment, the Windows XP Media Center Edition platform is the foundation to offering a wide array of services in the home. Media Center PCs usually are sold individually as a home's main entertainment center and can include a single Media Center Extender to stream content to other devices in the home. Taking this further, Custom Entertainment last month launched a program in which it installs multiple Media Center PCs throughout a single house that work together to control the home's automation, lights, security and entertainment.

"Media Center is so flexible we can make almost anything happen with it," says Dan Allen, IT specialist at Custom Entertainment. "No one else has taken it that far. In the industry, people will get a product and plug it in and leave it. People don't stop to think about what else it can do, how can we change it. We like to take things apart and see how far we can take the technology."

As part of the package, Custom Entertainment installs a beefed-up Media Center PC costing around $2,000 to serve as a central control point for the home's automation and security systems and as a media server to distribute music, photos and video. Custom Entertainment then installs multiple slimmed-down Media Centers around the house. They cost between $600 and $1,000 and are equipped with about 256 Mbytes of RAM and 20-Gbyte hard drives. Those specs are sufficient for the PCs to receive and play content, control room lights and provide basic access to the Internet.

Custom Entertainment uses software from New Orleans-based HAI and others to provide automation, security and lighting control. After integrating off-the-shelf IP cameras, touch panels, remote controls and monitoring services, Custom Entertainment will be able to offer a complete home automation and entertainment package for a few thousand dollars, far below the $20,000 to $30,000 price of many competing solutions.

Using Media Center PCs and off-the-shelf components makes the solution very customizable and expandable, Allen says. For customers not yet ready for a complete automation package, Custom Entertainment offers a starter system with one or two PCs and security devices. From that point, Allen says it's easy to build up into a more robust system when the customer is ready. The system's design also makes it easy for customers to remotely monitor their homes or receive updates to cell phones and allows Custom Entertainment to change or add settings in a home system from its offices.

Many integrators are hesitant to sell Media Center PCs because of the platform's lack of stability and insufficient security. Allen says one way his company gets around the problems is by locking certain features at the administrator level. Allen also notes that many of the stability and functionality problems are due to compatibility issues with hardware components. Integrators, he says, can eliminate those concerns with a deep understanding of the hardware and by creating workarounds and drivers.

Though Custom Entertainment can build its own computers, the company sources its Media Center PCs from St. Paul, Minn.-based system builder Now Micro. Allen says Now Micro helps it get better prices and variety than it would be able to get on its own, for example, procuring system cases with built-in touch panels for some of its high-end Media Center PCs. Allen also says Now Micro's industry events are very valuable. At a recent roundtable hosted by the system builder, Custom Entertainment and three other integrators met with representatives from Now Micro, Microsoft and Intel to discuss Media Center opportunities.

Maverick Communications, an integrator in West Palm Beach, Fla., also is using multimedia computers as the center of its solution, but is taking a larger focus. The company is about to launch a program that offers phone, Internet and cable services to several communities and hotels throughout the United States. Fiber cables owned by Maverick will bring the services to the properties while multimedia computers built by the company's system- builder sister firm, Maverick Computers, will allow the content to be accessed and distributed throughout each home or room, says Patrick McNichols, president of both companies.

McNichols says Maverick has contracts with several builders and hotels. He expects to install at least one multimedia computer and one Media Center Extender-type device in each home or hotel room. Maverick decided to build its own multimedia PCs for the project because it couldn't find PCs with the advanced audio, video and high-definition TV components it needed. The company also developed its own multimedia software and installed Windows XP Home instead of Windows XP Media Center Edition on its PCs. Maverick can charge about $50 less per unit and install its software on PCs the customer already may own. Media Center Edition only can be installed on new machines.

In addition to phone, Internet and cable services, McNichols says Maverick will offer each customer the ability to stream content between rooms, as well as wireless networks and full technical assistance over the phone.

Integrators of all stripes say add-on services are important elements when selling multimedia computers. George Ramsey, design engineer at Eden Prairie, Minn.-based integrator Enhanced Home Systems, another participant in Now Micro's roundtable, says integrators should never see a Media Center PC as a one-time sale, but should view it as a chance for a long-term relationship. "What we're really looking at is the services that go into this, the calibration, ongoing maintenance of keeping these systems operating, as far as storage upgrades, memory upgrades [and] keeping the computer in shape," Ramsey says. "You're not just selling a box for $200 plus setup, but it's the ongoing service. You're looking at a lifetime relationship with your client. As far as security, we can sell yearly service agreements where we take care of patches, upgrades [and] updating."

System builders are taking note of the trends, and are increasingly offering Media Center PCs packaged with other products and services. For example, Mark Wojtasiak, marketing manager of Now Micro, is working with Minneapolis-based RipShark, a company that converts customers' CD collections to MP3 libraries so they can be installed in Now Micro Media Center PCs before shipping.

Wojtasiak says the company's sales of Media Center PCs also have affected how it does business. The majority of Now Micro's sales have been built-to-order custom PCs, but many of the companies selling its Media Center PCs are installers coming from the A/V world. Those companies prefer prebuilt Media Center PCs with high-end features they can easily advertise to their customers. Now Micro currently offers standard Media Center systems with rich feature sets and high price points.

Elite PC, Tempe, Ariz., has found the key to differentiating itself from other system builders is to offer complete Media Center solutions to attract integrators from the IT market and A/V dealers. Elite functions as both a system builder and a distributor. It bundles custom-built Media Center PCs with automation software, alarm contacts, structured cable products, thermostats, switches and lighting controls. Aaron Richy, Elite PC's vice president of sales and marketing, says offering a variety of products not only helps integrators sell full solutions to their customers, but also helps integrators hit higher margins. Richy estimates that integrators in his region make between 25 percent and 35 percent on components and between 15 percent and 20 percent on the Media Center PCs, compared with between 7 percent and 12 percent for traditional computers. The chance for higher margins from components is particularly appealing to A/V dealers, helping them approach the higher margins that are common in the CE space.

To help sales, Elite recently launched a Web-based configurator that integrators or builders can use in their offices to show customers how particular automation packages, devices, lighting control and PCs fit with furnishings and floor plans.

Though sales are growing, companies selling Media Center PCs say technology improvements will propel them into even more homes. Some limitations with the platform have slowed its adoption, such as its inability to support high-definition cable television and produce amplified sound. System builders also say the new Windows Vista operating system, expected to launch in late 2006, and Intel's new Viiv platform for entertainment PCs, expected to launch in early 2006, should help fuel the market. Both Elite PC and North Syracuse, N.Y.-based system builder Seneca Data are Viiv launch partners. Dan Hodkinson, Seneca Data's product engineering manager, says his company is working with Intel to develop new designs for computers and sales strategies for the Viiv family.

Creative integrators and system builders also are taking Media Center PCs into whole new markets, including small businesses and schools. While such markets have been overlooked by Media Center vendors and integrators, opportunities are plentiful for companies that know where to look and how to develop solutions.

Seneca Data sells Media Center PCs through IT integrators and A/V installers for the home, medical and education markets. The Media Center platform's rich management of multimedia content and its ability to distribute music and video make it ideal for such markets, Hodkinson says.

Seneca Data sells traditional computers to the health-care market, and several of the company's integrators have installed Media Center PCs as entertainment centers in medical waiting rooms. Doctors' offices use the Media Center PCs to play live or recorded video or music in the waiting rooms and to distribute music and video throughout the office. A single Media Center PC can serve all of these uses and function as a traditional computer for receptionists.

Seneca Data's Media Center PCs also have begun appearing in several schools. A Media Center PC is installed in each school's faculty lounge or other central location, which teachers use to stream recorded videos to classrooms via Media Center Extenders. The current Media Center platform can support only three Extenders at one time, but that number is sufficient for most schools.

"For us, it's a question of how do you differentiate yourself, how do you make your services different than a tier-one offering?" Hodkinson says. "From a product standpoint, it's configurations, other services you can provide."

Now Micro also is considering opportunities in businesses as it builds up its Media Center practice. Wojtasiak says a Media Center PC connected via a Media Center Extender to a large display would make an ideal digital signage solution. A company could play videos or show photos of products, services or previous projects on a display in its lobby. Businesses can present multimedia content in a conference room or other public setting and allow customers to interact with the content and access more information about particular elements. Other system builders and integrators are considering selling Media Center PCs to small businesses to help them organize their media collections and stream music from recordings or the radio throughout an office.

For system builders and integrators with the technical acumen, creativity and drive to create new uses for multimedia PCs, the opportunities are only just beginning.

"Hopefully, other integrators will get the idea that this is the way things are going. Almost everything is becoming IP-based. Everything is moving into IP, everything is going into a computer," Allen says. "Instead of waiting for something to happen, we're trying to make it happen."