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LOS ANGELES—Microsoft formally unveiled its “Digital Entertainment Anywhere” strategy here on Tuesday, part of the company’s plan to manage multimedia content at home, on the road and in portable devices.

As expected, the linchpin of the announcement was Windows XP Media Center 2005, together with a Media Center Expander Device that will push a home’s digital content out through a wired or wireless network. In addition, the “top six” PC OEMs announced that they would back the new software with their own hardware, complete with support for multiple tuners and HDTV (high-definition TV) content.

Finally, Microsoft launched “Windows Marketplace,” a portal site to allow consumers to purchase digital hardware and software for their new PCs.

Microsoft also highlighted recent launches of Windows Media Player 10 and MSN Music, both designed to allow consumers to purchase, manage and play back music.

Microsoft will exclusively offer selected content and tracks from artists such as AC/DC on the new service, company executives said. Windows Media Player is now shipping in a new phone from Audiovox, available from AT&T.

“What’s the vision for digital entertainment anywhere? To have music, videos, digital content anywhere you go,” Bill Gates told a large audience at the Shrine Auditorium here.

Microsoft has struggled to make the vision work, Gates acknowledged, especially in the area of video quality. To date, Microsoft has shipped just a million units of the Media Center software, which he called a “very significant number.” Now that the company is taking the technology “mainstream,” Gates said, Microsoft plans to sell four or five times that amount. However, Gates did not say when.

Consumers have complained previously that the devices aren’t simple enough to set up and configure. To help streamline the process, Microsoft has established a “Plays for Sure” program to make sure that devices interoperate. Microsoft officials said the program is similar to the company’s WHQL (Windows Hardware Quality Laboratories), which place Microsoft’s stamp of approval on individual components and their drivers. “We want to give you a choice, but we want to make sure you know what will play,” Gates said.

Are we a long way from having digital homes? Click here for a column.

Analysts said they expect the so-called “rule of three” to hold true where the Media Center edition is concerned. The rule holds that Microsoft requires three versions of a particular product to get it “right.”

Analyst firm IDC, based in Framingham, Mass., forecasts that 1.5 million Media Center-equipped PCs will ship during 2004—a forecast based on actual sales from the first two quarters of 2004 and projections based on holiday sales from last year. IDC estimates that Microsoft’s actual sales are lagging behind that prediction, said IDC’s Roger Kay.

On the other hand, if sales of TV tuner-equipped PCs are included in the mix, then it’s likely that the industry has sold 2 million TV-equipped PCs already this year, including those using other operating systems, Kay said.

“The proportion of that due to Media Center is dependent on three key areas,” he said, including the experience of how everything works; the ecosystem, or how it interacts with the underlying code and accompanying devices; and the price. Kay said Microsoft delivered final code to him a week ago. The verdict? “Version 3 is better than the other two.”

That doesn’t mean the software lacks problems. Kay said his New England cable ISP, Comcast, delivers an electronic program guide that doesn’t interface properly with the Microsoft software.

One of the key issues is whether consumers will lean toward the new Windows Media PCs or see the same functionality already present in PVR boxes from their existing satellite or cable providers. Microsoft continues to walk a fine line between offering the functionality of a PC and the simplicity of a dedicated box, such as devices by TiVo and ReplayTV, said Van Baker, an analyst with Gartner Inc. in San Jose, Calif. Like the Windows Media PCs, new TiVos can view photos stored on PCs and share content across other receivers on the network.

Click here to read about home-entertainment hubs that use Wi-Fi.

Microsoft hopes to one-up the PVR community by offering integrated DVD- and CD-burning functionality within the Media Center OS, instead of forcing consumers to leave the application, according to Sean Alexander, a Microsoft technology product manager who joined Gates onstage.

“It’s a pretty nice product,” Baker said. “From our perspective, however, we still view it as a niche product. Its single biggest strength is also its biggest weakness: It’s a programmable device. That means if I try out this game, suddenly my television doesn’t work anymore.”

Baker said it’s likely that Microsoft and hardware OEMs will take advantage of Vanderpool, a virtualization technology designed by Intel Corp. that will be included in its microprocessors by next year. Rival Advanced Micro Devices Inc. has its own virtualization technology, dubbed Pacifica.

Both Vanderpool and Pacifica are designed to allow two or more instances of different OSes to boot concurrently. Although the most popular usage scenario involves dual-booting Linux and a Microsoft OS, another scenario is dual-booting Windows XP and Windows Media Center, he said. Such a scenario also would allow Microsoft to charge OEMs for two OSes per machine, he added.

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