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TMO Reports - Analyst: Goodbye PC. Hello Game Machines & Entertainment Servers in the Living Room

by , 3:30 PM EST, November 29th, 2004

As technology becomes cheaper, faster and more powerful, game machines like those from Sony and Microsoft or versatile entertainment servers will beat out the personal computer for supremacy in the living room, according to one industry watcher. One capable player could be Apple Computer, the analyst believes, who has the upper hand with devices like the iPod and software like iTunes and iDVD.

Merrill Lynch analyst Steven Milunovich wrote in a industry trends commentary Monday that game machines "will be the next advanced platform", which could have "important strategic implications.

"The future of microprocessors, storage devices, and development environments could be driven by the booming video game industry," he wrote.

In a research note obtained by The Mac Observer, Mr. Milunovich wrote, "it's premature to know which (if any) device will become the centerpiece of the digital family room of the future. Still, we doubt that PCs (even Media Center PCs) will win because they are too complex and unstable. It strikes us as more likely that either (1) the game console will move up market to become the leading device or (2) a new system we dub the entertainment server will be created."

Mr. Milunovich said he believes Apple is a "likely candidate" to build such an entertainment server because the company "knows how to create audio and image management for the masses." He wrote that he believes such a device would be based on iPod, iTunes, iPhoto, iDVD, and AirPort Express products. "A 200 (gigabyte) Apple server at a reasonable price and possibly with PVR technology could be Apple's next category killer."

A possible Apple entertainment server would store 250 DVD videos and would be a separate device from cable boxes, video game consoles, and other personal video recorders, he believes.

Mr. Milunovich cautioned entertainment servers need to be bare bones and uncomplicated, much like the easy use of today's televisions.

"PC operating systems (Apple included) have too many unnecessary features and, in our opinion, are too unstable to be the foundation of a family room entertainment server...We believe Apple could combine its iTunes, iPhoto, iDVD and AirPort Express technology on top of an embedded Linux (operating system) (possibly a scaled down MacOS) to field an entertainment server. It might connect to the Internet, but would likely not be used for Web surfing. By not trying to replace the PC or pull PC functions into the family room, it has a chance to be stable enough for entertainment use."

Mr. Milunovich warned that whoever wins the war of the living room, some companies will be winners and losers as well. "Microsoft may have more to lose given its PC dominance," he wrote. "We don't expect Intel will be in any of the upcoming game machines and, therefore, believe it is at risk...Apple has a chance to take center stage in a potentially large market."

Observer Comments

Show: Subjects Only | Full Comments
Close Name:Biff Posts: 1479 Joined: 08 Apr 2004
Subject: This just in!

Game consoles likely to be more popular in living rooms than personal computers! Stay tuned for more news at 11!

Close Name:rkfoster Posts: 32 Joined: 06 May 2004
Subject: Apple is probably gun shy on this one

Apple tried the "set-top box" years ago and quickly got out of it. They may not be willing to try it again. iTunes, iPhoto, and iDVD all require a full computer interface, mouse, and keyboard in order to really use their complete features. TiVo is already positioning itself for downloadable, digital movies. Apple might be able to come up with a combination of all of those technologies in a set-top box but what does that really do for the average consumer? A digital library ("server"?) box for music, photos, movies, and TV shows? I suppose that's what the analyst is getting at. Might be a market for it...

Close Name:jimothy Posts: 612 Joined: 04 Jun 2004
Subject: Linux

Analysts continue to amaze me. I refuse to believe that Apple would put Linux on a home entertainment server, were they even to make one. Clearly, they would either use Mac OS X (possibly scaled down) or a purpose-built OS, as they did on the iPod. But Linux would offer no advantage over OS X, and Apple would have a PR nightmare once word leaked that they chose Linux over their own OS.

Close Name:Guest
Subject: why not? they already did that

Apple ran their own .country servers on Linux up until a couple of months ago in many european and almost all asian countries. They finally switched over to OS X Server more than 2 years after its release because they were worried that all the snickering going on on the 'net would catch fire and everyone would learn that they didn't trust their own servers to their own software. A couple months ago, they switched them all to Panther/Apache without any fanfare...despite 10.3 server having already been out for almost a year at that point...

Close Name:NoVaMac Posts: 121 Joined: 16 Mar 2004
Subject: Brad Brad Brad

You are bored and day dreamin, or a nightmare more likely

Close Name:Guest
Subject: PowerPod, anyone?

The entertainment server (PowerPod?) can be considered as a cross between a home iPod and an Airport Express with video added as it would include music, photo, H.264/AVC video serving/storage, wifi/ethernet networking with a Mac/PC, and an AC plug for power.

The iTunes and iPhoto reference just denotes that this PowerPod has the same simple sync relationship as the iPod has to those two apps. I think a new Apple iTunes-like app for catalogging/ripping/recording movies/clips/TV/video is needed (unless it is just added to iTunes).

The PowerPod would have the color iPod UI on its front panel (screen to left of clickwheel instead of above it) and an iPod-lookalike remote control. The iPod screen would become the 10' user interface, as its categories would be displayed on the remote control, front panel, and TV - of course, movies, TV, and video would need to be added.

All Apple has to do to make this happen is work the wifi remote control protocol to the Mac/PC and the PowerPod, and add the H.264-based video app on the Mac(PC?), and H.264 video recording/playback for the PowerPod (with all the variations on TV/display interfaces). Both iTunes and iPhoto apps could be extended to show libraries on both the Mac/PC and the PowerPod, with the ability to rendezvous and sync.

Apple would make a big splash if it introduced this PowerPod, along with H.264 in Tiger, and an agreement to allow DRMed-ripping of standard-quality DVDs. Now if they could work out the digital download Movie Store at the same time, that would be icing on the cake.

Close Name:Guest
Subject: I dont think so morons

Ummm. No. Bad morons. BAD!

:::::::::::slap:::::::::::

PCs will always be the best for gaming....

Why?

Well you can upgrade a computer. And not HAVE to buy a new one every 2 years.

Computers are peoples lives, gaming is peoples lives. But they dont surf the internet, email, chat, anything but gaming with their XBOXs etc.

Also, WHO THE HELL PLAYS HALO2 ON AN XBOX AND THINKS ITS SO GREAT? HALO WAS SUPPOSED TO BE A MAC ONLY GAME BY BUNGIE, AN APPLE ONLY COMPANY (not anymore). HALO1 WAS TO BE THE FIRST GAME FOR THE BUDDING OSX, AND BAM NOTHING HAPPENED FOR YEARS.

I rant for this reason, a first person shooter is going to play like crap if you dont have a mouse. Joystick and buttons? F*ck off thats not how you play a first person shooter.

Close Name:jonkroupa Posts: 48 Joined: 25 Mar 2004
Subject: Cry and Cry

You guys sure cry a lot about Bungie being bought by Microsoft, thus ending Halo to come out on OS X first. Of course you blame Microsoft, but why not blame Bungie for being sellouts?

Besides, you go with the where the markets are.

Close Name:Nookster Posts: 111 Joined: 27 Oct 2004
Subject: Bungie eh?

As if Halo was ever going to be Mac first anyway, given that everything they released from Myth onwards up to Oni and Myth III was a Bi-Platform release.

Even ye olde Marathon II got ported to the PC eventually, and Oni appeared on the PS2.

Close Name:John F. Braun -   TMO Staff Posts: 233 Joined: 11 Jun 2001
Subject: Apple/TiVo Alliance?

If I had to make a bet on the most likely scenario, it would be some sort of alliance between Apple and TiVo. Alas, I only have a "Series 1" TiVo box, but the Series 2 has a Home Media feature and TiVo Desktop software that allows music and photo sharing, as well as some other spiffy features.

I get the sense that, although out for a number of years, Microsoft's Media Center PC is only a blip on the radar when compared to the number of TiVo units. Plus, TiVo owners seem to be almost, if not more, enthuiastic about their platform than Mac users. And last I checked, TiVo is running a version of Linux on a PowerPC chip.

Close Name:Mace Posts: 9604 Joined: 07 Aug 2003
Subject:

Hmm ... why not extrapolate to Apple bought out TiVo and relaunch it as an Entertainment Server? Recall that Apple relaunched SoundJam as iTunes.

In another development, Sony will be launching a home server (based on IBM's Cell processor) for broadband content, probably next year. Will Apple's entertainment server also based on Cell processor or G5?

Close Name:John F. Braun -   TMO Staff Posts: 233 Joined: 11 Jun 2001
Subject: Apple + TiVo = Profit?

Good call, Mace. With Apple 4B+ pile of cash, and TiVo's market cap of around 400M, Apple could easily purchase them.

As I indicated in my prior post, I think a TiVo/Apple combo would be a great winner. Although the Microsoft Media Center PC may have the technology, TiVo definitely has the mindshare, and (more importantly) the rabidly loyal users that would complement Apple well.

Close Name:algr Posts: 296 Joined: 07 Aug 2003
Subject: Keyboards & Mouse

Computers don't work in the living room - the industry was trying to push this a few years ago, but keyboards and mice can't be used effectively from a sofa or EZ chair. (Whereas videogame pads work fine.)

Close Name:mloader Posts: 21 Joined: 03 Sep 2002
Subject:

Doesn't TiVo use rendezvous? Or support it in some way?

Close Name:Guest
Subject: entertainment server is not a PC

algr,

PC's don't work in the living room is exactly the point being made by Milunovich. an entertainment server is not a PC, but an easy-to-use, almost-never-crash consumer electronics device like a stereo or TiVo. so either a videogame console or this entertainment server device will become central in the living room. that's why Apple has a chance, as they're proving with the iPod and Airport Express that they can make such consumer electronics devices. the entertainment server will not require a mouse or keyboard, it will use a remote control with the UI viewed either on the remote or on the TV. The color iPod interface is beginning to shape up as just such a 10' interface.

Close Name:Guest
Subject: think not on tivo

the only reason to buy tivo is to get their software, as tivo itself really doesn't even design or make the hardware. does apple think they need tivo's software, given what they've accomplished with the iPod and clickwheel? i don't think so.

regarding mindshare, who has more - tivo or apple? clearly apple, even though it is not as a pvr. but the similarity between its iPod and its entertainment server will make crossing over easy.

tivo has only about 2 to 2.5 million subscribers, of which 65% come through directv (and 75% of new subscribers come through directv). directv is rumored to be ending its partnership with tivo by summer. if directv thinks they can write pvr software, then apple surely could. i don't see them buying tivo, which is beginning to get the word "beleaguered" attached to its name.

Close Name:Guest
Subject: Apple is the Only Contender

Microsoft has positioned itself toward the business market (although is trying to get back into the home with Media Center and XBox).

However, when you think "entertainment" - you think of Apple. Period.

Microsoft will never be an "entertainment" anything. Microsoft won the business battle but Apple will clearly win the home entertainment one.

Can't wait to see it!

Close Name:Biff Posts: 1479 Joined: 08 Apr 2004
Subject:

XBox ROOLZ!

Close Name:Guest
Subject: embedded linux???

why not use embedded darwin? this guy doesn't know what he's talking about... besides all those programs would have to be re-written.

Close Name:Biff Posts: 1479 Joined: 08 Apr 2004
Subject: Tivo

Quote
mloader wrote:
Doesn't TiVo use rendezvous? Or support it in some way?
Yes, when you have the Tivo Desktop software started on your Mac, it will announce iTunes playlists and iPhoto albums using Rendez... er... OpenTalk. The Tivo will then see them. Since the home media option is now free, all series 2 Tivos support this. The music player is a bit awkward to use but not too bad (it only supports mp3). The photo viewer is very good and images look amazingly crisp on my TV. And while these features are kind of cool, I find I use them very very rarely.

Close Name:Guest
Subject: tivo comment - most likely

apple buying them or not - not sure. smart for Apple if they did. Ties nicely to pixar too . Tivo likely has a huge cache of very hard to beat patents (I worked in this space so have a pretty strong opinion about that) coupled with their early market entry and tremendous learning from that. Plus they've tackled the hardest part first - video - so adding other media would be easier. And it's ok if they don't make their stuff. Most powerful position would be in a reference design they license. Think ARM meets Intel Inside for the home entertainment market. IMHO

Close Name:Guest
Subject: whole report

Where will I find the whole report?

Close Name:Guest
Subject:

that statment was true before wireless. i have no problem kicking back on my sofa with my keyboard in my lap.

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