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Microsoft Makes Its Move

Playing Games

Another piece of the puzzle is Microsoft's Xbox 360 video-game console, which can function as a media extender between the PC and television. Microsoft has spent billions to develop Xbox, which is widely viewed as more than just a way to get into the lucrative and growing video game-software market.

"If you start to dig into the functionality of that video game box you can turn it into a DVR, you can play games on it," says Ken Papagan, of home-video tracking firm Rentrak. "It really becomes a Trojan horse into the home that could bypass the network operators."

And analysts agree that Microsoft's new Xbox 360 console connects nicely to Media Center PCs.

"If you want to download movies ... and stream them from the PC to the television, the Xbox is a great high-definition media adapter," Gartner's Baker says. Trouble is, the average consumer is not willing to do the tinkering to make that work, he says.

Xbox is not a "mainstream product; it's a niche product," Baker adds. "But it's a healthy niche, and it's a growing niche."

"Xbox first and foremost is a gaming platform," says Ed Graczyk, director of marketing and communications for Microsoft TV. "As great as it is, chances are my grandmother will never have an Xbox."

She may not have a PC either, and therefore is unlikely to be a candidate for Microsoft's Media Center PCs. But, Graczyk adds, "she does have a TV."

This explains why Microsoft is reaching in so many directions in its quest to gain a spot in the living room.

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