There is a battle of epic proportions shaping up between Sony and Microsoft over the storage, delivery and management of digital media in and around the home. At stake for Sony – its continuing dominance of home entertainment electronics as it enters a new era. For Microsoft, it’s about winning

or losing new territory for the Windows OS as the market for productivity PC’s matures.

Each company must build a long-term strategy around their greatest strengths and their opponent’s weaknesses – and we can see this strategy unfolding as the two announce their new home media products, Sony’s PSX and the Windows XP Home Media Edition-based Media Center PC.

Of course, this battle will not be fought in a vacuum. There are numerous other technologies and standards that are jockeying for a piece of this new market. Video compression and wireless networking are two of the most important of these. Technology breakthroughs, the pace of standardization and commercialization, and licensing issues in both areas create opportunities and threats that will effect how both Microsoft and Sony unfold their game plan.

Developed by a Joint Video Team (JVT) of the ITU-T and ISO/MPEG, the Advanced Video Codec, also known as H.264 and MPEG-4, Part 10, is a significant leap forward in video compression technology. The codec is at least twice as efficient as MPEG-2 for standard definition video and may be as much as four times as efficient for high definition. Unlike MPEG-4, Part 2 video, which was only about 20 per cent more efficient than MPEG-2, there is a clear case for implementing AVC at some point to improve the performance of home media systems.

This bulleting surveys a broad range of issues related to the development of the next generation of home media systems, and focuses on the potential role of AVC in their development. It also looks at some of the relative strengths and weaknesses of the main proponents, their apparent strategies for winning this market, and how environmental factors, like new codecs and networking, may help or impede their efforts.

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