The following article is written with Mac users in mind, though much of it also applies to PC users. It’s a long article, but there are many variables to consider here. This is all based on my quest to create a central, easily accessible library for all the the media I purchase, create, and download. Ideally this media library would be connected to my home entertainment system, where it can be played back on a big television in the company of my family and friends, as well as synced up to my iPhone, iPods, and MacBook Pro as needed.

This is part of a larger goal of streamlining my digital life. I don’t want to waste money, energy, or environmental resources on overkill solutions. Then again, I don’t want to waste money or time on solutions that don’t meet my needs, or will be quickly outgrown. As with all tech-related purchases, it’s a fine balance between overspending at the bleeding-edge of technology, or mistakenly investing in a solution that is critically limited or nearly obsolete. Finally, it’s important to consider a backup strategy that doesn’t leave redundant files scattered across several hard drives.

My situation might be similar to yours. I have hundreds of gigabytes of movies, music, photos, and TV shows, most of which I never or rarely watch. I don’t want those files cluttering up my MacBook Pro’s internal drive, but do want to keep them properly organized. Previously I used an iMac to store those files, but I sold it to (again) streamline my digital life and cut down on computer clutter.

Currently I use Netflix for renting DVDs as well as streaming movies and TV shows from their excellent “Watch Instantly” service. I subscribe to a few TV shows via iTunes. This allows me to watch them on any of my Macs, my iPhone or Apple TV, any time I choose. It’s affordable and reliable. I occasionally (but rarely) rent HD movies from iTunes. There’s a Blockbuster a few blocks away from the house; it’s faster to go there than download a movie, and the video quality is slightly better. I have a PS3 that has a connection to the Playstation Network, which (like iTunes), allows for purchasing TV shows and purchasing and renting movies. However, in my opinion the service and user experience doesn’t come close to the convenience of the iTunes Store. Plus, you can’t easily move these files to a computer, iPod, or iPhone.

An ever-increasing percentage of the media we consume (music, movies, TV shows) is downloaded directly from the Internet. Likewise, most of the media we individually produce (photos, home movies, music) is created, shared, and stored on our computers, never leaving digital form, never even burned to DVD or CD.

There is a huge amount of programing available for streaming and downloading over the Internet. Hulu.com, Netflix.com, and many individual cable TV channels allow streaming of selected programs and movies directly from their websites. Since these sites stream video, there are no files to store or catalog. Of course, these media streams can move or go away as licensing changes, and streams can be interrupted by bad Internet connections or server-side issues. Streaming media can’t be moved to an iPod or iPhone for watching on the go (though new iPhone apps are allowing for this in limited situations). And many online media streams are embedded in websites, meaning they have to be watched in a web browser, often interrupted by ads (ads which keep them free, of course).

Meanwhile, iTunes is one of the easiest, most reliable ways to purchase or rent a large diversity of digital media, including popular television programs the day after they air. These are downloaded and managed via iTunes, and can can be synced and shared on authorized Macs, iPods, and iPhones.

Ultimately, along with creating a central media server, I plan on discontinuing my paid cable TV service completely. Mac|Life ran an article in August (Build The Ultimate Mac Entertainment Center) showing that, even including the cost of an Apple TV or Mac mini, it’s easily possible to save money streaming shows and buying 8 – 10 TV show season passes from the iTunes store vs. the typical cost of a cable bill. The New York Times just ran an article on this very topic (Cable Freedom Is a Click Away).

Of course, not every show is legally available in iTunes or streaming online. And it’s frustrating that it’s still not easy to get live, streaming sports coverage over the Internet. Some services are closing this gap; a web-based version of the MLB iPhone app with streaming video would be ideal. I’d pay to subscribe to that. On the other hand, if I can’t easily watch sports at home, that’s just an excuse to head out to the local sports bar!

Only in the past couple of years has it become relatively easy to get digital media off our computers and onto our big televisions and central sound systems. Easy, but still frustrating because there is still no single silver bullet for centralized storage, streaming, and playback of digital media in its many different formats.

There are a variety of devices that allow you to stream media stored on a computer to an entertainment system; the WDTV Live is a popular model, but it doesn’t play iTunes video content, and will only stream a limited amount of content directly from the Internet, including YouTube, but not including Netflix or Hulu.

The Apple TV is a very popular and easy-to-use device that wirelessly syncs music, video (uniquely, including TV shows and movies purchased from iTunes), podcasts and photos from a Mac or PC’s iTunes library to play back on a central entertainment system. You can also purchase and rent TV shows and movies (including HD content) from the iTunes Store directly from Apple TV. Like the WDTV live, a very limited amount of media can be streamed directly from the internet, including from YouTube, Flickr, and MobileMe, but not from popular sites such as Netflix and Hulu.com. Apple TV is largely a window to the iTunes Store, as well as an iPod for your television.

It is easy to “hack” the Apple TV to get greater functionally such as video streaming from a large number of websites. This is not supported by Apple and may offer a subpar viewing experience. The Apple TV’s rather old 1GHz processor is optimized for playing back video stored on its internal drive, not decoding and streaming video directly from the Internet.

Boxee is a free, popular user-installed software package for Apple TV, as well as any Intel Mac or most PCs. Boxee provides a clean, easy to browse interface for dozens of streaming and downloading services. Boxee claims to be “the best way to enjoy entertainment from the Internet and computer on your TV.” In my limited experience, this is true. All browsing happens via remote control, rather than keyboard. It’s almost as easy as browsing a Tivo menu, just with many more options.

In January, Boxee and D-link will be offering a device simply called the “Boxee Box by D-Link.” This is a promising device that, though important details aren’t yet released (including price, drive capacity, ability to such media from a Macs’s hard drive), could offer much of what’s missing in AppleTV. Of course, the Boxee Box does not play video purchased from iTunes, or other DRM-protected media. It should play iTunes Plus audio.

Some people simply connect their iPhones or iPods to their televisions to play movies and TV shows. It’s easy to connect an iPhone/iPod to most televisions with the Apple Composite AV Cable. This is how I currently watch TV shows purchased from iTunes on my LCD television. The image quality is quite dark and the resolution is very average. But it’s easy, and cheap since I already own the iPod.

Finally, many people connect a Mac directly to their home entertainment system. This allows video streaming from any website (including Hulu, YouTube, Netflix, etc), use of the Boxee browsing interface (and other apps like Boxee), full use of the iTunes Store to subscribe to TV shows and rent movies, mass centralized storage of video, music, photos and podcasts, and full 1920×1080 HD video out to a flat screen TV. Unique to any of the solutions listed above, a TV tuner can be used with the Mac mini. This means you can watch and record free over-the-air TV programing (including HD programing) live over the air. I’ve used the El Gato EyeTV Hybrid with success in the past; click here to read a review. Also unique to the devices above, the Mac mini also has a built-in DVD player. It’s not a Blu-Ray player, but it’s perfectly adequate for watching and burning SD videos. Since it runs full OS X, the Mac mini is easy to back up with Time Machine. It can even be wirelessly backed up via Time Capsule. You can play games on the Mac mini, as well as use it as a regular Mac to check email, iCal, browse the web, etc. Even without Boxee (again, a free download), Apple’s Front Row media playing application looks great on a big TV.

So why isn’t the Mac mini the perfect digital media hub? As a full-featured computer, it’s probably overkill for most people who simply want to consolidate and watch their digital media. Also, since it’s a computer, it’s also relatively expensive—$599 in its least expensive version, though for a media hub, it’s recommended to upgrade the internal drive to at least 500GB and add 4GB of RAM, adding about $215 to the cost. Its optical drive won’t play back Blu-Ray movies.

Still in, in the end, I decided that I will mostly likely ultimately invest in a Mac mini as my central media player/server of choice. As it is today, the Apple TV doesn’t offer enough features to bring me closer to my goal of canceling cable. If I cancel cable, that will pay for the Mac mini by the end of the year. I’m intrigued by the Boxee Box, but access to iTunes and the iTunes Store is important for me, because those products work well for me.

I am going to give it a couple more months to make the plunge, though. I’m hoping that Apple updates the Apple TV, or introduces a new device in between the Mac mini and Apple TV. In the meantime, I will continue with my current set up: a central iTunes library on an external drive, accessed by an old 12-inch G4 PowerBook (which is barely up to the task). I’ll continue watching iTunes media on my large TV via low-res iPod touch. I’ll continue to be distracted by the clutter and files scattered about.

Then again, maybe I’ll just treat myself to a Mac mini for Christmas…

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