DENVER (Billboard) - Converting to a fully digitized entertainment library is a good way to cut down on clutter in the house. So what replaces the CD rack once you do?

The 500 GB hard drive that comes standard on most home computers today? Soon, even that won't be big enough to store and organize the massive amount of digital music, video and photography that consumers are accumulating as part of the emerging "terabyte lifestyle."

That opens the door to a new market, one that for now remains a niche afterthought to most people: home servers.

Most digital media today is stored on an individual computer and then synched to one device or another or streamed through a home network to an entertainment system or other appliance. The drawback with such a system is that all files will be lost should the hard drive crash, and it's very difficult to synchronize files across multiple computers, devices and users without overlap.

By contrast, a home server acts as a central storage hub for all the content in the home, and multiple devices can link to it in order to stream or otherwise access music, video or other content. A home server will even automatically backup and reconcile content stored on any connected device. And servers are far less prone to crashes.

The home server market is currently all potential, with only an estimated 400,000 U.S. households employing one today, according to multiple analyst reports, dominated primarily by tech enthusiasts and IT pros installing them in their homes.

But Forrester Research projects the U.S. market will grow to more than 4.5 million households by 2012, while the Diffusion Group predicts it surging to as high as 21.5 million in all of North America by 2015.

Driving this growth, of course, is digital content. It's hard to measure just how much content is now stored on home computers, but based on reported activity, it's certainly on the rise. A Forrester Research survey shows that the number of people viewing or managing photos on their computers rose from 26% of survey respondents in 2002 to 47% in 2007. The percentage of those owning an MP3 player went from 3% to 36% during the same time frame.

"The digital assets that people have are clearly climbing, and with that comes the potential need for a home server," analyst J.P. Gownder says. Diffusion Group senior analyst Ted Theocheung notes that the average computer user will have up to 2 terabytes of content stored by 2010.

But increased storage capacity is not enough to jump-start the market. The real appeal of the home server is its synching, streaming and management capabilities. The more devices in the house that need access to the same content, the more need there is for a home server.

According to Forrester, the number of homes with multiple computers increased from 25.8 million in 2002 to 47.8 million last year. These computers are increasingly being connected via a home network, the penetration of which has doubled in the same time period from 12% to 24%. And that's not even including the proliferation of iPods, mobile phones and other portable devices that need access as well.

"There needs to be something beyond backup to make the home server story come alive for consumers," Gownder says. "The server category has to demonstrate application extensibility where it's projecting things you couldn't do previously rather than just being a source of backup and storage. It needs to proactively help people with their media."

Hewlett-Packard's Media-Smart Server line, for instance, allows users to store their entire iTunes library on a server, from which any computer in the home network can then stream music. French company LaCie offers its Ethernet Disc Mini Home Edition service that does much the same.

Microsoft, and its Windows Home Server software that it launched in January, is expected to rule the home server market for the next five years, during which PC-based servers will be the dominant solution. But Theocheung says the real spike in consumer adoption won't come until after consumer electronics companies begin building server-like functions into their entertainment system products, which will overtake the PC as the primary source of such store-and-synch capability. In particular, he expects cable operators to be leaders in this transition, doing for servers what they did for DVRs by including the functionality in set-top boxes.

"That changes the whole model," Theocheung says. "If you have to buy these yourself, the trend is going to be slower. But when service providers latch onto this and let you just add $5 to your $100 monthly cable bill, it's not a noticeable impact. Then you're going to see some action."

Perhaps when this market begins to expand, music subscription services like Rhapsody and Napster will place support for their technology on these home servers. Rhapsody in particular has been aggressive about making its service compatible with non-PC music appliances. Meanwhile, the move to digital rights management-free downloads for purchased content will also be a key step toward ensuring that digital music takes advantage of the coming media server boom.

Following are some home server options:

PC-BASED

HP MediaSmart Server ($600): Five hundred GB of storage on a single hard drive; supports up to four additional drives; features a Gigabit Ethernet connection and four USB 2.0 ports.

Fujitsu Siemens SCALEO Home Server (Europe only): Choice of two 500 GB or two 750 GB of storage; includes a Gigabit local area network and four USB 2.0 ports.

CONSUMER ELECTRONIC

Seagate Mirra ($350): Five hundred GB of storage; provides network file backup to connected PCs; monitors any folders users choose to back up and synch via a LAN; includes remote access.

Apple Time Capsule ($300/$500): Choice of 500 GB or 1 terabyte of storage; integrated with Mac OS Leopard software for automatic file backup; offers built-in extension to the Airport Extreme Wi-Fi base station. LaCie Ethernet Disk Mini-Home Edition ($200): Five hundred GB of storage; doubles as a home networking hub; can stream to multiple devices and provide remote access to content via any Web browser; includes USB 2.0 ports and Gigabit Ethernet networking functions.

COMBO

Sony HES-V1000 ($3,500): Five hundred GB of storage with 200-disc Blu-ray DVD changer; integrates with Sony PlayStation 3 and Sony TVs that include the XrossMediaBar, a multi-option, onscreen menu that offers access to content from home networked devices and Internet-based sources like online music and movie services.

Harman Kardon DMC 100 Digital Media Center ($3,500): Two hundred fifty GB of storage; delivers up to four streams of music, video and photos at the same time to up to four devices; automatically rips inserted CDs to the hard drive for digital backup; records and plays content from various media cards and USB devices.

Reuters/Billboard

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