(A friend of mine asked me to comment on Microsoft business models in the HTPC / PC-TV world and these were some of my comments....)

Microsoft and Intel actually had an 'Entertainment PC' specification back in 1998 for watching broadcast TV or cable TV on a PC (and, FYI, Intel resurrected and updated the 'Entertainment PC' specification in 2004). Microsoft did have the 'WebTV for Windows' included in Windows 98 for watching TV, receiving enhanced TV interactive links via broadcasts, with an EPG and also Intercast for receiving data broadcasts were included in Windows 98. But you had to specifically select to install those options from the Win98 installation CD and, of course, you needed a TV Tuner card. The user was required to provide the TV Tuner card.

Now, beginning in 2002, it's the concept of the 'Media Center PC' or the 'Freestyle PC' or the 'Lifestyle PC' where Microsoft has apparently seen what was happening in the HTPC/PC-TV community of early adopters and enthusiasts with the PC user community's response to TiVo and ReplayTV. Microsoft does have a business model right now with Windows XP Media Center Edition (WinXP MCE) which is a specialized version of Windows XP Pro but which includes an 'EHome' component with a frontend interface for watching and recording TV, listening to music, viewing digital pictures on a TV. Microsoft only provides WinXP MCE to OEM PC manufacturers (which does actually include Dell, Gateway, HP, and others) who go about building 'Media Center PCs' and then the manufacturers sell the PCs with certain TV Tuner cards that have built-in hardware recording encoders (which make for a more stabilized PC recording without putting a burden on the CPU) along with handheld remote controls and IR blasters to consumer electronics stores, computer stores and consumers. Microsoft is leveraging its position in the PC manufacturing supply chain by providing a 'Media Center' OS to OEM PC manufacturers. This is where Microsoft is doing what it has always done in making deals for bundling a version of Windows in new PCs sold in stores but the PCs are required to have TV Tuner cards. Microsoft with its partners will be introducing a 'Media Center Extender', by the end of 2004 but don't expect wide distribution until 2005, as a gateway adapter device using 802.11g wireless technology to send the media on the Media Center PCs to TVs in the home since TVs don't have built-in PC wireless LAN adapters. Although expect at least maybe some TVs to begin including built-in 802.11g technology in the future.

Keep in mind that this is still a niche market. Even in today's world where you can get streaming video over the net, many people still don't think it's natural to have a TV on a PC. So any PC-TV developments would be preceived to be slow in coming about. TiVo and ReplayTV in the set-top world were not announced until late 1998 and didn't begin wide distribution until 1999. Microsoft took note of TiVo by developing UltimateTV which came out in 2000 which is one year after distribution of TiVo and ReplayTV began. In 1999, you had the beginnings of TiVo-like PC-based systems with Klaus Schmidinger's VDR (Video Disk Recorder) for Linux and Snapstream's Personal Video Station for Windows. Then you had Videoblaster Digital VCR, SageTV, MythTV, and then WinXP MCE. (See my nutshell history of PC-based TV video recording.) This really is a recent 'TiVo-ization' development for the PC. And note that harddrive prices did not reach the $1 per gigabyte price point until recent years.

In the overall grand scheme of things, you could probably look back on this in the future to see that these 'Media PCs,' 'Media Server PCs,' and other similar PCs are an early niche part of the eventual movement towards HDTV. When consumers are eventually forced to switch to HDTV, their options will include buying an HDTV set, switching to cable or satellite TV so you can keep your current TV set, getting a digital TV adapter for your current TV set to get over-the-air digital broadcasts, getting a TiVo-type or a DVD recorder box that has a digital TV receiver for use with your current TV set, only watching DVDs on your current TV set, or switching to broadband video boxes for watching online movies and TV shows such as from MovieLink and elsewhere, or stop watching TV. The TiVo-type or DVD recorder boxes that would have digital TV receivers would include off-the-shelf consumer electronics and also include PCs much like what we have right now with PC-TV and HTPC boxes built by early adopters and with 'Media Center PCs' based on WinXP MCE but with digital TV Tuner cards -- add a broadband connection and you'll also have a built-in broadband video capability on the PC -- where the PC is used with a PC monitor (flat-screen or CRT), or with a regular TV set, or with a large-screen HDTV display. However, currrently about 85% of U.S. households subscribe to cable TV or satellite TV. You can do the math to confirm that that PC-TV is in a niche market. Nonetheless, given that TV and media audiences are narrowing where TV watchers are also going to other entertainment venues, then starting from being in a niche market may be a good thing. So, since people will want to watch whatever they want to watch, you may want to see how the technology may follow the media entertainment content.
 
Happy PC-TV Watching!
Ruel