Stand-Alone Media Servers and Digital Media Adapters Just a Niche in Future Digital Home

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Early digital home media solutions fail to find an early market, but will be reborn in convergence platforms based on well-diffused devices.

Evidence is beginning to amass that two of the most hyped products in the early digital home market will be fortunate to attain niche market status in the next few years. According to new research from The Diffusion Group, despite the fact that media servers and digital media adapters were well-hyped and widely discussed, and despite the fact that early forecasts from a number of research firms were quite rosy, the devices have suffered from extremely limited demand. The Diffusion Group believes that demand for both of these solutions will remain limited and that what unique functionality these solutions do offer will be quickly integrated into other platforms.

"It is not that this type of functionality is undesirable," said Michael Greeson, President of The Diffusion Group. "The premise of networking stored digital media content to multiple devices in the home is valid, but consumers aren’t looking for separate devices to enable this experience. Instead, the applications and benefits enabled by these two platforms will be increasingly integrated into devices with which consumers are more familiar – such as DVD players that are now evolving into DVD-recorders or set-top boxes with built-in hard-drives and integrated networking."

"While media servers were originally positioned to be the hub of the digital home, demand for these solutions has never gotten off the ground. Media Center PCs have been moderately successful in terms of consumer adoption, but this is more due to normal PC replacement cycles than to something uniquely compelling about the Media Center PC," said Greeson. Other media server platforms have been much less successful, although the push of high-end digital set-top boxes by cable and satellite video service providers offers a case for optimism. "However," says Greeson, "this is a push model, where the equipment is subsidized by the service provider in order to generate digital media service revenue, as opposed to a 'pull' model where consumers are so enamored with the device that they run to the retail store to purchase one."

The Diffusion Group says the same holds for the digital media adapters or DMAs. Introduced a couple of years ago, the idea was to make it easy to get content from the PC to other media devices in the home, such as a TV or stereo. "Not long ago, there were ten to fifteen companies offering DMAs," said Gary Sasaki, a contributing analyst with The Diffusion Group and President of DIGDIA, a media consultancy. "At this year’s CES, DMAs were hard to find. Part of the reason for the premature demise of DMAs is that their functionality appeals mostly to early-adopter or technology-savvy buyers. Additionally, and somewhat similar to media servers, the functionality of DMAs is slowly getting integrated into other more familiar product categories."

According to The Diffusion Group’s latest report, "The Digital Home: An Industry in Transition," this shift from stand-alone platforms to more integrated or converged solutions is indicative of a Digital Home industry that is transitioning from what Sasaki calls "1st Gear" to "2nd Gear." 1st Gear is understood as that stage in which an industry is characterized by widespread evangelism and hype, with few real products in the market. On the other hand, 2nd Gear is the stage in which an industry figures out practical ways to inject new functionalities into products that consumers might actually buy.

"The Digital Home: An Industry in Transition" is a new report written by Gary Sasaki of DIGDIA and published by The Diffusion Group. The report covers the six major themes of the Digital Home industry this year; the positioning and strategic direction of the major players; and many of the key technologies engineers are focusing.

About The Diffusion Group (TDG Research) -

The Diffusion Group is a "think tank" of consumer technology analysts charged with providing timely, actionable intelligence designed to best position new consumer technologies for rapid diffusion. Our team is committed to providing market research and strategic consulting services based on conservative, real-world analysis and market forecasts grounded in consumer research. For more information about TDG Research, visit our website at http://www.tdgresearch.com or email info@tdgresearch.com.

Contact:

Andy Tarczon

andy@thediffusiongroup.com

214-677-9723

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