February 27, 2004 4:00 PM PST

Microsoft on every DVD?

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An industry standards group has made a preliminary decision to include Microsoft's video compression technology in a next-generation DVD format, giving the company a key boost in the digital media arena.

The steering committee for the DVD Forum on Friday announced provisional approval for Microsoft's VC-9 and two other video technologies--H.264 and MPEG-2--as mandatory for the HD-DVD video specification for playback devices. VC-9 is the reference title for the underlying video decoding technology within Windows Media Video 9. The approval is subject to several conditions, including an update in 60 days of licensing terms and conditions.

The DVD Forum Steering Committee also approved a near-final version of the HD-DVD specifications for rewritable discs.

The provisional decision "ends months of speculation over whether Microsoft would be endorsed or not," said Richard Doherty, the president of Envisioneering Group, a media consultancy. "It's a good tailwind for Microsoft."

A standards win on DVDs would dramatically buoy Microsoft's ambitions to take its multimedia technology beyond the Internet. It also could give the Redmond, Wash., giant substantial credibility when it shops its codec to partners outside of the PC business.

Last September, Microsoft submitted its Windows Media Series 9 as a standards candidate to the Society of Motion Picture and Television Engineers (SMPTE)--a first for the company and a marked departure from its longtime commitment to keeping its technology proprietary.

In doing so, Microsoft set out to provide a viable successor to MPEG-2, a compression standard that is the foundation of satellite, cable, video-editing systems and DVDs. If approved, Microsoft hopes its technology will become de facto for a range of set-top boxes, professional video-editing equipment, satellite transmissions and consumer electronics.

HD-DVD is a blue-laser technology that crams much more information onto optical discs than do typical DVDs today, which use red-laser light. The format for HD-DVD, also known as high-definition and high-density DVD, specifies a 20GB rewritable disc and a read-only disc with 15GB on a single layer and 30GB on dual layers. DVDs read by red-laser drives can hold 4.7GB on a single layer and 8.5GB on dual layers.

The DVD Forum's steering committee had previously approved a near-final version of the HD-DVD specifications for read-only discs. NEC and Toshiba back the HD-DVD format.

Despite its endorsements by the DVD Forum, HD-DVD has serious competition from so-called Blu-ray technology. Blu-ray is supported by a group of industry giants that includes Sony, Hewlett-Packard and Dell. In addition, China is developing a third next-generation DVD technology.

The various formats echo the earlier video standards battle between VHS and Betamax, and it remains to be seen which will come to dominate the market.

With the DVD Forum's approval, Microsoft could have valuable leverage with technical standards bodies in other industries--such as wireless--and with SMPTE.

SMPTE is holding a digital engineering meeting in Chicago this week, and the news is being well-received, Doherty said.

The draw for Microsoft, and likely many others, is the potential money from royalties to be made if one codec becomes ubiquitous in the industry. Companies in industries such as consumer electronics and satellite communications pay license fees to patent holders each time they use a specific compression technology.

Web technology companies are unaccustomed to the magnitude of usage or pay scales associated with such implementations, given the largely free culture of the Internet. If a company's video codec is chosen for every high-definition TV set--with royalty rates of 10 cents and 15 cents per decoder and encoder, respectively--it could quickly net a fortune.

"This represents true convergence between the Internet...and consumer electronics," said Amir Majidimehr, the vice president of the Windows Digital Media division. "The industry is getting together and, for the first time, picking common technology between the two."

With the DVD Forum's provisional approval, Microsoft codecs cleared the technology bar, winning a vote for best picture quality from 19 other companies on the group's steering committee, according to Majidimehr. Members of the DVD Forum steering committee include Disney, Warner, Sony and Panasonic.

DVDs must store 2 million pixels to produce the resolution of a high-definition picture, whereas a TV-quality picture is comprised of 400,000 pixels. Majidimehr said Windows Media technology can store three to five times more information on an HD-DVD, producing a high-quality resolution with economies for manufacturers.

Now that its technology measures up, Microsoft must prove that it will provide favorable licensing terms to the industry.

Microsoft has long been feared by members of Hollywood and consumer electronics companies for its competitive practices. The thinking has been that if Microsoft were to gain a foothold in their business that it would eventually seize control by charging outlandish licensing fees for its technology.

"All those fears were on their mind," Majidimehr said. "At the end of the day they said, We're going to trust Microsoft. It does require us to be responsive in providing the kind of licensing terms that the industry can accept."

As a condition to Microsoft before it could establish VC-9 as a standard, it had to strip VC-9 of proprietary status, Majidimehr said. The company satisfied that condition when it submitted the underlying video compression technology to SMPTE last year and opened up its software to developers for the first time. Now developers can download the technical spec, build on it and not be beholden to Microsoft.

SMPTE is expected to rule on Windows Media 9 as a standard candidate within the next year.

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microsoft wins again, buy American
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