Integration of a technology to a chipset is considered a watershed moment, often leading manufacturers to adopt the technology at lower price points. Kishore estimates that there are about 1.2 million homes with devices that have DVR capabilities now, and he expects that number to expand to 18.6 million by 2006. That compares with the approximately 130 million PCs that manufacturers ship each year -- close to half of which go to consumers. "In our view, DVRs will only become mass-market products when bundled into other consumer-electronic devices," Marla Backer, an analyst with institutional research firm Brean Murray, wrote in an 2 August report about TiVo's licensing strategy. "That is why we believe that TiVo's evolution to a licensing/software model from a hardware model should accelerate consumer adoption of TiVo." The incorporation of DVR functions into PCs could mean further cost reductions, including the elimination of the need for subscription services: free programming guides are available on the Internet that PC users can tap. Access to TiVo's program guide, which is downloaded to the device at regular intervals, costs $12.95 per month, or $249 for a subscription that lasts the lifetime of the recorder. The DVR itself runs about $400. The high fees are a "head wind" to the growth of DVRs, said Richard Doherty, research director at market researcher The Envisioneering Group. "The PC-DVR market can take off much quicker than the subscription-DVR market because on the PC device it would be subscription-free," Doherty said. Also, he said, "audiences tend to go with platforms that they already use." Additional groundwork for the convergence of DVR into PCs will be laid over the next few years through the natural action of Moore's Law, said Sean Maloney, general manager of Intel's communication group. That is, chip designers are increasingly cramming more transistors into individual chips, which means more capabilities will be inserted into them. In a few years, it's likely that all the functions necessary for using a PC hard drive as a digital video recorder will be incorporated into the standard sets of chips necessary for building a PC, making DVRs essentially free with every new computer. Some Japanese companies are already experimenting with how best to incorporate this function into consumer PCs, Maloney said. Broadband and other communications functions will also be incorporated as standard PC elements. Currently, manufacturers ship approximately 130 million PCs a year, and close to half of these go to consumers. "You are going to start to see built-in radio, built-in DSL, built-in cable," Maloney said. "The PC is a communications device. It is not a computer." That is similar to the pitch Microsoft is making for the entertainment version of Windows -- which will go by the name Windows XP Media Center Edition. A new class of PCs running Media Center Edition, due out later this year, will let consumers use a TV remote control to catalog songs, videos and pictures, as well as check TV listings. Windows Media Center also comes with a digital video recorder that offers TiVo-like features, provided that the PC contains a TV tuner card. While Intel's processors are likely to power this new class of PC, Intel is also working with potential customers on a portable DVR. The device uses Intel's XScale processors that will let consumers download from a PC or DVR such content files as video or audio clips, and store and play those files on a portable device that would essentially be a digital video Walkman. News.com's Michael Kanellos contributed to this report.
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