January 7, 2003 5:29 AM PST

Microsoft takes media beyond Windows

Read more about Microsoft and digital media
Microsoft announced Tuesday its first-ever licensing fees for use of its media delivery software on non-Windows technology, a move designed to expand its reach in the market for digital media players.

In addition, the Redmond, Wash.-based company is introducing new versions of technology in hopes of raising its profile in the market for the creation and playback of digital entertainment on PCs and consumer electronics. Among other products, Microsoft is releasing a final version of its Windows Media 9 Series software for the development, distribution and playback of digital audio and video files.

By adding a license for the audio and video compression software, or codecs, of Windows Media 9, Microsoft is extending the technology beyond its Windows operating system, where the software is available for free. Microsoft hopes that cell phone makers or Web publishers running Linux operating systems, for example, will be more willing to license Microsoft?s proprietary media technology, since they will no longer be required to also adopt the Windows operating system.

In the process, the company is positioning itself to capture a growing market in consumer electronics that is migrating to new digital media standards such as MPEG-4, a standard for compressing large digital files into a smaller format that can be more easily transmitted over networks.

For use of its video compression technology on non-Windows operating systems, Microsoft will charge 10 cents per decoder, 20 cents per encoder, or 25 cents for both. In comparison, MPEG-LA--a consortium of companies holding patents attached to MPEG-4--charges 25 cents per encoder and decoder, or 50 cents for both.

Despite the lower licensing fees, analysts say Microsoft faces an uphill battle to persuade consumer electronics companies to work with it. They say that many companies fear an alliance with the software behemoth because of its competitive ferocity. In addition, many companies are concerned about seeing their products become generic or a commodity.

Nevertheless, multimedia software companies will now find newly heated competition for their business.

"This puts Microsoft on par with their competitors, and this low-ball pricing is indicative of the fact that Microsoft means to be a player here, with portable video players, DVD players--anything that's in the consumer electronic realm," said Michael Gartenberg, an analyst at Jupiter Research.

"But the proponents of MPEG-4 are not going to roll over and play dead in light of this. The stakes are high because whoever wins this war basically will determine what the de facto standard is for digital media in the years to come," said Gartenberg.

Taking a cut at Apple
Analysts say Microsoft's move also will turn up the heat in the company's battle with Apple Computer, which supports MPEG-4.

"This is Microsoft preparing to take Apple head-on," Gartenberg said.

Microsoft is also polishing the image of its Windows XP operating system to rival Apple's Mac OS by releasing Microsoft Plus Digital Media Edition for Windows XP and MovieMaker 2.

"Take Microsoft Windows Media 9 Series, combine that with Windows Moviemaker 2, and Digital Plus--this is Microsoft tired of people saying that Windows XP is not as good of a hub for digital content as Apple's," Gartenberg said.

Windows Media 9 Series is key to Microsoft's plan. The company has considered the software a valuable selling tool for promoting Windows. Now, it is front-and-center in Microsoft plan for "enabling digital media everywhere," said Dave Fester, general manager of Windows Digital Media Division.

The company is hoping to make licensing of the technology palatable for makers of personal digital assistants, cell phones, DVDs, set-top boxes, video recorders and PCs by putting its costs at or below those of MPEG-4 implementations. In addition, Microsoft is allowing developers to license its digital rights management (DRM) technology, file container and streaming protocols, so developers can mix and match technologies.

"Before if you wanted to license Windows Media it was all or nothing, now you can decide if you want our DRM and you like someone else's audio, you can do that," Fester said.

MPEG-4 is under development by the Moving Pictures Experts Group (MPEG) under the auspices of the International Organization for Standardization. The MPEG group, founded in 1988, created MPEG-1 for the video compact disc and for MP3 audio, and MPEG-2 for DVD and digital television set-top boxes.

Rob Koenen, president of the MPEG 4 Industry Forum, said that he could not fully comment on Microsoft's licensing terms, which he has not yet seen, but that the move may prove to be a positive development.

"Some competition in licensing is a good thing," he said.

Microsoft licensed its technology to makers of DVD players and set-top boxes including Tandberg TV earlier this year, he pointed out. But this marks Microsoft's formal license fee structure and a competitive strike at the emerging industry standard. "They're making (their strategy) more explicit," Koenen said.

For its part, Apple, which agreed to license MPEG-4 a month before MPEG-LA's license terms were finally made public, has touted its application of the standard as far superior to proprietary technology from Microsoft or RealNetworks because of its foundation in enabling interoperable systems. Apple could not be immediately reached for comment.

The final versions of Windows Media Player 9 Series, Windows Media Encoder 9 Series and Windows Media 9 Series SDK are available for public download at noon PT on Tuesday at Microsoft's site.

 

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