Tech on Deck: The Digital Distribution Dilemma

Have you ever received a gift for which you really had no use? According to "Connected Home Theater" — a recent NPD report that looked at awareness of, interest in and usage of consumer electronics devices that can access digital content from a PC or broadband connection — that's been the case for millions of Americans.

The "gift" has been the ability to access content, such as music, photos and video on a PC, via the big-screen television in the main entertainment center. Products with this capability include the Xbox 360, PlayStation 3, Apple TV and many TiVo video recorders. Only 8 percent of U.S. consumers say that they have such a device, but fewer than half of even those consumers use the PC content-sharing features.

That's sobering news for companies such as Microsoft, which recently introduced a new platform for what it calls Media Center Extenders — products that can bring the Windows Media Center user interface to devices such as DVD players and televisions. But, in order to determine why consumers aren't interested in such products, it helps to look at what they are using them for today.

More than half of consumers who own such products said that they listened to PC-based music or looked at PC-based photos on the TV in their main entertainment area, using these products.

However, the leading type of media enjoyed was video, including personal content, such as video shot with a camcorder, and commercial video downloaded from online stores, such as iTunes and CinemaNow.

PCs often have a lot of music and photos on them, but rarely do many TV shows and movies have the kind of content that consumers most want to see on their televisions.

One route that companies are taking to get around this dilemma is by circumventing the PC entirely. HP, for example, has developed MediaSmart televisions that allow ordering of movies directly from CinemaNow.

TiVo has a partnership with Amazon Unbox that allows direct movie ordering.

Indeed, NPD found that, while a quarter of consumers with a home network are interested in a device that can access broadband entertainment — and many of them are in the market for potential devices that can access it, such as televisions, video game systems and digital video recorders — the leading objection to such products is satisfaction with the selection from existing cable and satellite TV service providers.

How can companies delivering broadband entertainment compete with the extensive video programming choices and DVRs offered by cable and satellite companies? One way is via on-demand selection.

VUDU, a startup based in Santa Clara, Calif., is rolling out a device that allows instant ordering of 10,000 movies. That's more than you'll find in a couple of video rental stores, but pales in comparison to the 85,000 DVDs that rental service Netflix has to offer.

Apple, on the other hand, enables access to many YouTube videos with its Apple TV product. And Microsoft plans to bolster its Media Center Extenders with its own Internet TV offering.

Companies that can pull together the right content with the right features at the right price, will hold the key to opening up more choices for entertainment in the digital living room.

Ross Rubin is director of industry analysis for consumer technology at the NPD Group.