Home entertainment and computing technologies are rapidly merging and the latest TV revolutions are just around the corner, creating new openings for resellers. But they'll have to know their product to avoid misleading customers, reports Paul Bray in part two of our home entertainment focus.

When is a computer not a computer? When it's a set-top box, personal video recorder (PVR), DVD player, home cinema, hi-fi, TV set, or any of the other devices that have popped up over the past few years.

Take your pick, they are all correct answers. Home entertainment has gone high-tech with a vengeance, fuelled by the advent of broadband and the shift from analogue broadcasting and videotape to digital TV and DVD.

IT vendors can see the mother of all marketing opportunities. "Nearly everyone has a TV set. So the market for home entertainment technology is potentially the whole population," says Tony Alderson, product manager at Toshiba.

"Hewlett-Packard [HP] sees a huge market opportunity in home digital entertainment," says Rob Crampton, consumer desktop category manager at HP.

"A number of technologies and products are driving this, with connectivity at the heart. As broadband becomes more established in the home, the PC is moving from the office into the living room."

The new buzz phrase is 'media centre' (MC). MCs offer consumers two options. They can act as a gateway-cum-network-server, linking all the consumer's entertainment devices and bringing in content from broadcast, satellite, cable and the internet. Or they can replace the set-top box, PVR, DVD player/recorder, TV, hi-fi et al, aggregating or storing content and piping it to screens, speakers and consoles around the home, most likely via Wi-Fi.

With a hard disk or two, a DVD writer, TV tuner and sound system, a multimedia PC contains most of the components found in home entertainment devices, with the added benefits of processing punch, configurability and connectivity.

"PC vendors have realised that PVRs are just specialised PCs," says James Wright, product manager for digital home at Acer. "Rather than unconfigurable, dumb, standalone boxes, our expertise is in producing highly configurable, high-performance machines. We can make these a lot sexier than a PVR. Another huge advantage of a PC-based MC is free and easy access to the internet."

MCs are already appearing, from both tier-one vendors including Acer, HP and Sony, and from specialist players such as Elonex and Evesham. By next year, there will be half-a-dozen different types of MC to suit everyone, from gaming nuts and digital photography fanatics to couch potatoes. Prices will soon fall to the 'supermarket price' level of around £500, no more than the early DVD players, according to Wright.

Elonex's MC range includes PC-like boxes with 17in or 32in screens, and one that resembles a DVD player. These will be sold through the channel. According to Darren Lewitt, divisional director at distributor Midwich, trade prices range from £900 to £2,000, with street prices of £1,299 to £2,499, offering far higher potential margins than conventional PCs.

HP's MCs sport 160GB removable hard drives, christened 'personal media drives' by the firm. When removed from the MC, the drive's USB connector allows it to be plugged into other devices so you can take it to your friend's house to show off your holiday snaps (though whether they will still be your friends after sitting through 160GB of photos, HP doesn't say).

For people who want to maintain a separation between their home office and their lounge, D-Link has just launched a wireless media server that can stream media from the PC in the home office to the TV in the lounge.

Bal Phull, D-Link's marketing communications manager, says: "It's no longer a PC-centric environment, but a network-centric environment. More people are building home offices and want to integrate the resources they have around the home. This may mean that the home office and lounge are connected wirelessly."

Whatever its external appearance, the MC is likely to be Windows-based on the inside. Sony may be persevering with its own HE software (a mistake, thinks Lewitt), but Acer has abandoned its proprietary MC software because it reckons Microsoft does it better. Windows XP Media Center 2005, says Wright, is sexy, feature-rich and, just as important, very stable. Consumers don't expect their TV and hi-fi to crash or run like treacle in the way PCs have done for years.

PVR vendors are not ready to give up the fight, however, and PVRs such as Sky Plus and Tivo remain popular. Sony Japan has even produced a seven-tuner PVR so punters can record six channels while watching a seventh.

Few people want to enjoy their multimedia content via a 14in portable television, and as prices have fallen below the £1,000 mark, large-screen plasma and LCD displays are rapidly increasing in popularity. Analyst Decision Tree Consulting predicts that UK sales of large, flat-panel displays will double this year to 916,000. Cheaper plasma has traditionally been the more popular technology, but LCD prices are falling. LCD overtook plasma last year and will account for nearly two-thirds of UK sales this year, according to the firm.

With the advent of the MC and high-definition television (HDTV), resolution will become a key issue. MCs and HDTV require better definition than a conventional TV picture. This in turn requires an XGA standard display, not the VGA of some cheap Taiwanese plasma screens, says Lewitt. LCD is likely to offer better quality.

High-end, flat-screen TVs are now supplied with PC and TV connectors. "For some time flat panels have been true multimedia products, with inputs for both PC and RGB/Composite/S video for audiovisual applications," says Andrew Mullen, general manager for communications and new technologies at Korean vendor LG Electronics. Panasonic produces TVs with secure digital and PC card slots for viewing digital images, and by the end of the year Acer will be shipping LCD TVs with built-in MC capabilities.

HDTV will have a huge impact on the home entertainment market. "High-definition TV will be the biggest thing since colour, much bigger than DVD replacing video," says Lewitt. "The difference in picture quality is incredible."

An HDTV channel, HD1, is already broadcasting from Brussels, and German high-definition TV station Premiere is expected to launch later this year. In the UK, Sky is expected to begin high-definition broadcasts in time for next year's World Cup. HDTV really comes into its own on home cinema systems, and large screens in venues such as pubs and clubs.

However, although a boon to broadcasters and viewers, HDTV promises headaches for resellers, unless they know their portfolio well, warns Lewitt. TVs or MCs will need the ability to receive high-definition signals, probably via two standards: high-definition multimedia interface or high bandwidth digital content protection. Although vendors are building high-definition capability into flat-panel displays and TVs, there are still many non-compatible models on the market, and even TVs with high-definition screens may still need an external decoder to process the signal.

It's all highly confusing, so it's hardly surprising that non-compatible kit is sometimes missold. "There's a lot of misunderstanding and miscommunication in the market," warns Lewitt, adding that resellers who are not serious about this market risk misleading their customers.

The other impending revolution in broadcasting is TV via Internet Protocol (IPTV), which will feature multi-channel broadcasting, gaming and movies-on-demand delivered via broadband.

"IPTV is seen as an opportunity for telcos to win back customers from the satellite and cable companies that have offered voice calls, TV and internet access," says Karthik Ranjan, director of product marketing at IPTV set-top box maker Amino. This model is already working in the US and France, adds Ranjan, and Home Choice and Kingston Communications are offering IPTV services in London and Yorkshire.

Eran Wagner, vice-president of interactive TV at IPTV specialist Amdocs, says that because it does not require a dedicated tuner for each concurrent channel, IPTV can offer as many simultaneous channels as the bandwidth will support, says. Amdocs cites figures from research firm MRG, predicting an increase in the worldwide IPTV subscriber base from 2.1 million to 27 million by 2008.

"IPTV is expected to provide a broader range of entertainment, with personalised content, including video-on-demand, PVR, personalised interactive services, and blended services such as voice over IP [VoIP], video conferencing, home security and even refrigerator replenishment," says Wagner.

Improved compression formats, such as MPEG4 and WMV 9, are making it easier to deliver live TV streaming over conventional copper wires, and set-top boxes based on these standards will be available soon, says Ranjan. IPTV could be a major enabler of home security and home automation, with IP CCTV cameras linked into the householder's MC, says Lewitt.

VoIP will be another driver, believes Nadahl Shocair, chief executive of comms reseller DeTeWe. "VoIP will become a key enabler in the home entertainment market," he says. "Consumers want bridges to 'unified', high-speed, quality auditory, collaborative, informative and visual services no matter where they are.

"Within three to seven years, telephone services as we currently understand them will become an adjunct to the internet."