While the sudden popularity of MP3 files caught many audio and music industry players by surprise, the budding home media server market is being watched closely from its inception. As defined by In-Stat/MDR, media server products are either PC-based, using an operating system such as Microsoft's Media Center Edition OS, or consumer electronics devices, like advanced set-top boxes, that offer both broadband connectivity and hard-disk-drive–based storage.

And although the current number of home media server products in actual use is modest, new research from In-Stat projects that worldwide unit shipments of media server products will almost double in 2004 to over 6 million units.

In-Stat researchers report that this anticipated growth presents content developers, such as movie studios and record companies, "with both threats to their existing business models and opportunities to create new revenue-generating businesses."

The researchers also claim that even though media server products are just beginning to show up in a few homes, the content-development community is already expressing concerns about their adoption, particularly in terms of how the products might contribute to digital content piracy.

In-Stat's Mike Paxton demurs, however, noting "Increasing consumer demand for media server products also offers content developers some interesting new business opportunities. Among these are the chance to establish new 'Pay-per-View / Pay-per-Listen' services, the opportunity to develop co-branded media server products, and the potential to more accurately track what consumers are actually listening to and watching."

According to the research, unit shipments of PC-based media server products are projected to rise rapidly in the 2006 to 2008 period, "as consumers begin to demand that their PCs support a richer and more full-featured media experience."

The surging demand for media server products will also help drive the home networking semiconductor market over the next five years, says In-Stat, as revenues are projected to grow 12% per year to reach over $2.3 billion in 2008. "This growth will come despite decreasing per unit prices, as overall unit momentum through 2008 will create a 'rising tide' for the connected home silicon market."

In-Stat's Mike Wolf says, "Delivering video and audio entertainment over the network is becoming the main focus of product development as well as of end-users. Ethernet, new wireless networking standards such as 802.11n, and new media backbone technologies like MoCA and HomePlug AV will become standard in many of the new media center and media hub designs hitting the market in the next few years."