Apple's Head Start

The company's lead in digital media is a good base for the living room assault.
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Updated from 7:31 a.m. EST

If digital media is to become as much a part of the American living room as the couch and the TV, it may take

Apple Computer

(AAPL) - Get Report

to get us there.

For years now, technovisionaries have dreamt of a world in which consumers can order a pizza, watch any TV show or movie ever made, or teleconference with family and friends, all over their television sets from the comfort of their couch.

But few Americans have anything like the digital living room envisioned by the digerati and, what's more, it's not clear they even want it.

That's because today's entertainment systems "just work," according to Robert Acker, vice president of digital music services at

RealNetworks

(RNWK) - Get Report

, at a business conference last month.

"Part of our challenge as an industry is to create something that's just as easy to use as what we want them to replace -- in a way that doesn't require any

time investment on their part," Acker said.

Although Acker would likely dispute the notion, that may be where Apple comes in. From the PC to the digital music player, the company has been a key player over the last 30 years in making digital technology user-friendly -- and mainstream.

Of all the companies that could lead Americans into the digital living room, "Apple's in the best position," says Tim Bajarin, president of Creative Strategies, an industry research firm. "Whether it takes advantage of it is a totally separate question."

Rumors of prospective products aside, Apple current digital living room offerings are limited and lack some kind of all-in-one box that would allow consumers to play their digital music, photos and movies over their home entertainment systems. A company representative wasn't immediately available for comment, but the company typically doesn't discuss future product plans.

However, indications are that Apple is heading that way -- and could be a success if it does:

At least in the U.S., Apple's iPod music players and iTunes music store dominate the digital music market. The company has sold more than 850 million songs through iTunes and says it's on pace to sell more than a billion this year. As song downloading replaces CDs, many analysts believe it's only natural that consumers will increasingly want to listen to digital music in their living rooms -- and that Apple will help accommodate them.

Last fall, Apple began offering video downloads through iTunes, in addition to songs. The service launched with episodes of "Lost" and "Desperate Housewives" from Disney's ABC and has since added episodes of television shows aired by a number of different NBC-related networks as well. Those deals marked the first time that an online video provider was offering content from major Hollywood studios. And the service seems to be taking off; since launching the video downloads in October, Apple has already sold 8 million of them. The videos are low-resolution, designed for short download times and to be viewed on Apple's video-playing iPods. But some analysts believe it's only a matter of time before Apple begins offering higher-resolution versions made for television-sized displays.

The company is shipping remote controls and its Front Row software with its most recently updated Macintosh computers. The software and remote promise to give users a living room-like experience through their computers, allowing easy access to digital music and movie files without having to sit right in front of the keyboard.

Apple already provides some connections between the living room and its computers. Its AirPort Express wireless access point allows users to play iTunes-purchased songs over their home stereo systems via a wireless network. The company and some of its partners also offer cables and docking stations that allow users to connect their iPods to their entertainment centers to play music or display photos on their TVs.

Through its iLife creative suite, Apple has made a name for itself in recent years in providing tools for everyday computer users to create and edit digital content. Again, some analysts believe it's not a huge leap between giving users the tools to create digital movies or play digital songs and helping them to enjoy them in their living rooms.

"It currently offers a piece of the whole digital living room play," says Tim Deal, an analyst with Technology Business Research. The key thing missing from Apple's current offerings is a direct way to view and record live television, notes Deal.

"If it were equipped with these functions," the company's iMac desktop computer, which already includes the remote control and Front Row software, "would be an excellent flagship home convergence device for Apple," he says.

Deal believes the company will head in that direction, if only because its competitors are already there -- or soon will be.

Microsoft

(MSFT) - Get Report

, for instance, is trying to enter the living room with its video- and music-playing

Xbox 360 game console and with the Media Center PC, the multimedia-enhanced version of its Windows operating system.

Dell

(DELL) - Get Report

,

Hewlett-Packard

(HPQ) - Get Report

and other computer and electronics manufacturers are making their own versions of Media Center PC boxes.

Sony

(SNE) - Get Report

is attacking the living room with its video-playing

PlayStation Portable handheld game system and its upcoming

PlayStation 3 game console, which will play digital movies and music.

Meanwhile,

Intel

(INTC) - Get Report

launched its digital living room platform,

Viiv, at the Consumer Electronics Show earlier this month. The company expects to have a number of manufacturers debut machines based on the platform this year.

Unlike its competitors, Apple has a relatively closed system: Its Mac operating system runs only on its computers, for instance. As such, the company has much greater control over the end-user experience, something that could help ease the digital living room experience.

"If you look at the Media Center PC, it hasn't set the world on fire," notes Stephen Baker, an analyst with NPD Group, a market analysis firm.

Of course, not everyone's convinced that Apple is the right company to lead the way to the digital living room. Part of that skepticism has to do with pragmatic concerns. Although Apple has forged ties with some content companies, the company has no links to cable or satellite television companies. Some analysts think such companies, whose set-top boxes -- essentially limited function computers -- already reside in the lion's share of U.S. homes, have the best shot at popularizing the digital living room.

Other skepticism is more philosophical. Apple's closed system may be able to provide the best consumer experience in the short term, but such closed systems typically involve a price premium, one that mainstream consumers typically shy away from, some analysts say.

"In the long run, we prefer open systems," says Jonathan Gaw, an analyst with market research firm IDC.