July 13, 2004 4:00 AM PDT

Microsoft video tech aims for prime time

An obscure contest over futuristic video technologies is beginning to unfold in the broadcast industry, with dramatic consequences for the future of television, Hollywood and Microsoft.

The battle for now is visible only on the fringes, where experts are carefully weighing the pros and cons of two new candidates for delivering emerging applications such as Internet movies on demand, video over cell phones and high-definition TV (HDTV) programming.

One candidate, known alternately as MPEG-4 AVC or H.264, is the latest successor to the standard video format currently used by virtually all cable and broadcast TV stations. The other is Microsoft's Windows Media VC-9 format.

News.context

What's new:
Microsoft seeks supremacy in a battle over video technologies that could determine the future of TV and emerging applications.

Bottom line:
Although the race is too close to call for now, experts say Microsoft has successfully gained a seat at the table and remains a strong contender.

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Royalty rates were set for the H.264 format in May. Final licensing terms are expected to be approved in the next few weeks, a move that will heighten already tense competition with Microsoft over technology that could one day be used to deliver billions of hours of cable TV and satellite programming.

The fight has put Microsoft on unfamiliar ground, forcing it to compete outside of the computer industry it dominates due to its Windows operating systems. But the software giant has responded with remarkable flexibility, abandoning many of the tactics it perfected in the PC world to adjust to an arena bound by consensus and open standards. Although the race for now is too close to call, experts say Microsoft has successfully gained a seat at the table and remains a strong contender.

"Almost everyone is adopting both formats because they don't know who's going to win," said Ben Waggoner, a video compression expert who has written extensively on the topic.

At stake are mathematical formulas known as codecs, or compression-decompression algorithms--an essential cog in the wheel that delivers high-resolution visual images in DVDs, cable and satellite, video conferencing, mobile devices and online. The technology is used to compress large video files into tiny bits and bytes for transfer over cable lines, IP-based networks or airwaves. Industries such as cable and satellite look to advances in the technology to save money on bandwidth while producing higher-resolution pictures and more potential services.

Both Microsoft's VC-9 and the MPEG-4 AVC formats purport to deliver DVD-quality video at as much as half the bit rate of MPEG-2, the current industry standard. That helps open up the possibility for a cable company to offer twice the number of regular channels it has today, HDTV programming and video-on-demand services, for example.

A number of contenders have battled for dominance in this arena, including RealNetworks, Apple Computer and dark horse DivX Networks. But the fight increasingly appears to be polarizing between standards-based H.264 and Microsoft's VC-9. In recent weeks, for example, the DVD Forum set the first-round specification for next-generation High Definition DVDs that included H.264, its predecessor MPEG-2 and Microsoft's software.

Preliminary nod
Microsoft also has received a preliminary standards nod from the Society of Motion Pictures and Television Engineers for approval of its VC-9 technology.

MPEG-LA, the patent licensing-body that governs MPEG (Moving Picture Experts Group) technology, also has met with Microsoft and issued a call for patents for the VC-9 encoder in a move to set it as a new industry standard.

"We think there's an appetite for that technology, and we were asked to undertake an effort to create a joint patent license for that technology as well," said MPEG-LA spokesman Larry Horn.

The new high-compression codecs have for now been gaining acceptance on the Internet and among wireless carriers, where infrastructure is being built from scratch and bandwidth is scarce.

We think there's an appetite for that technology.
--Larry Horn,
spokesman, MPEG-LA
But experts said they expect the biggest codec battle to be fought in the cable and satellite business, which has relied on MPEG-2 compression technology for more than a decade. The stakes are highest in this industry because the compression technology will help with the efficient delivery of billions of hours of content viewed every year and define the way people watch television.

Marc Tayer, technology strategist for high-definition satellite TV start-up Voom, put his company on the front lines of the debate when he agreed to license VC-9 earlier this year. Microsoft quickly touted the deal as one of the first endorsements of its technology by a commercial broadcast service. But Tayer has hedged his bets, making sure Voom can also support H.264.

"For now, the plan is to keep both options open," Tayer said. "We have the luxury of a few months to decide...For us, cost and schedule and also seeing how the licensing shakes out are all important criteria."

Voom is months or even years ahead of most in the professional video business, but its dilemma is ultimately expected to become industrywide. The VC-9 and H.264 formats are in the early stages of a struggle that could ultimately define the next generation of professional video technology for a decade or longer.

More evidence of dual support of the codecs is Harmonic, a provider of codec technology to cable companies and others. While it supports H.264, it also has added VC-9 support for the company's new DiviCom real-time encoding platform.

The mainstream cable industry is deeply interested in the new codecs, although most companies aren't yet ready to take the plunge.

Stumbling block
The biggest hurdle is the set-top boxes used to decode cable signals that are already distributed to tens of millions of households around the country. Even though chipmakers are building support for the new codecs into boxes today, subscribers typically use their old boxes for years. The cable industry can't afford to upgrade all its customers' set-top boxes overnight and certainly can't afford to lose customers using the old boxes, executives say.

Cable industry technology experts say the codecs are thus more likely to find their way first into specialized or niche services such as video on demand or high-definition stations. They also could be used for more efficient storage of video before it is converted into older formats for transmission, some say.

"I think in our world we're looking at (the codecs) to the extent that we want to be ready for them when they're in the mainstream," said Dave Feldman, vice president of technology at cable giant Charter Communications. "We're not really going to take the position of early adopter."

Microsoft set licensing terms for its technology more than a year ago, giving it a big head start over the MPEG group, which is still waiting final licensing approval for H.264.

Both technologies are very good, and, indeed, both command respect for each other.
--Sebastian Moeritz,
head, MPEG Industry Forum
Technology and licensing woes have beset MPEG's efforts to update its video technology for years.

MPEG-4 Part 2, another advanced codec, was originally labeled the successor to MPEG-2, but withered on the vine in recent years because of delays and confusion in its licensing program and the perception that H.264 would eventually one-up it.

Such complications aside, H.264 is showing signs that it can compete successfully with Microsoft, putting to rest worries over the future of the MPEG-4 format following the demise of MPEG-4 Part 2.

Apple, whose products are widely used inside the professional video-encoding world, is strongly backing the H.264 format. Along with smaller companies, Apple showed off a prerelease version of the codec a few months ago at the National Association of Broadcasters trade show. It added video conferencing features last month using the H.264 codec as part of an operating system upgrade, and it plans to ship H.264 in its QuickTime player platform in 2005.

Corporate video conferencing developers also are turning to H.264 to improve real-time streaming broadcasts over the Internet. For example, Norway's Tandberg last week unveiled H.264 support as part of an overhaul of its video streaming technology.

"The industry will see a very interesting competition between (H.264) and VC9," said Sebastian Moeritz, head of the MPEG Industry Forum. "Both technologies are very good, and, indeed, both command respect for each other."

The H.264 advantage
Although Microsoft has been quicker to market, H.264 carries a major advantage in being an open standard approved by both MPEG and the International Telecommunications Union, two major international groups responsible for setting video standards.

Because Microsoft's technology is proprietary, it has been forced to reshape its business strategies for industries such as broadcast and Hollywood that are deeply steeped in standards.

"A lot of broadcasters really embrace standards and only work with those," said Erin Cullen, lead product manager for Microsoft's Windows Media division.

That's been a problem for Microsoft until recently because it has held as tightly as possible to its trade secrets, rather than opening them up to the potential indignities of a standards-setting process.

But the promise of potentially vast revenue from consumer electronics markets have prompted shifts in its plans. As far back as 1997, in a letter to investor Warren Buffett, Microsoft executive Jeff Raikes outlined the desirability of seeing Microsoft software find its way inside living room electronics.

"The real goal is to figure out a way to get an 'operating system' royalty per TV," Raikes wrote in an e-mail that ultimately surfaced in one of the class-action lawsuits against the company. "Tens of millions of TVs per year at $10 to $20 per TV is a nice little 'operating system' business."

This "operating system" strategy, which led Microsoft to purchase WebTV and invest heavily in interactive TV software, has yet to bear much fruit. But the company has seen its Windows Media video codec as a way to infiltrate the home market more effectively.

"The biggest problem for VC-9 is that it's from Microsoft," said video compression expert Waggoner. "They're working harder to resolve the substantive issues against using Microsoft" by developing an open standard.

9 comments

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European HDTV will use H264
European HDTV will use H264

Looks like Steve made the right decision by choosing H264 (aka
MPEG-4 AVC) as the default codec in Tiger, and the next
versions of iChat and Quicktime.

Astra, the main satelite tv provider in Europe, along with 60
technical "partners" have just agreed on the format that will be
used for video data compression. Rather than using Microsoft's
proprietary formats, they chose open source codecs, including
H264.

HDTV will allow resolutions up to 1940x1080. The default
resolution will be 1280x720, instead of the 720x576 that is now
used for PAL signals. The sound will be encoded in Dolby Digital
5.1.

A nice acknowledgement of the good choice made by Apple.
Posted by machelpdesk (44 comments )
Reply Link Flag
H.264 for HDTV in Europe? Hah!
Where did you get this?

The body that sets the standards for digital TV in Europe is the DVB project (<a class="jive-link-external" href="http://www.dvb.org" target="_newWindow">http://www.dvb.org</a>). They have so far evaluated H.264 but have not accepted it due to the current licensing terms which are seen as too costly for European broadcasters (<a class="jive-link-external" href="http://www.ebu.ch" target="_newWindow">http://www.ebu.ch</a>) who control DVB. If this licensing isn't resolved soon, and VC-9 is finalised in SMPTE, everything could change.

Astra is a satellite company. They carry DVB-S transport signals and have no say over what the broadcasters use for video coding.

And there is currently no standard for HDTV in Europe.
Posted by A.Sinic (13 comments )
Link Flag
Microsoft video tech aims for big time
Microsoft, as everyone knows, is a monster already. They should not be allowed to gain even more power, since they clearly abuse what they have. No brainer.
Posted by (1 comment )
Reply Link Flag
Why CNet is lying?
The CNet article is clearly trying to bash Microsoft here. Microsoft's standard is more open than the Mpeg4 here, and if there is a competition here it is also quite clear that Mpeg4 is not an industry standard. I think, ultimately the users has to decide on whether to use Microsoft's value proposition or the value proposition of the companies behind the Mpeg4 codec. Given how hard CNet is trying to depict Microsoft as evil and hide some important facts or try to obscure them, it is clear to me that Microsoft's solution is much better as a value proposition. Mpeg4's licensees are asked to pay a lot of money, which is customers, later on companies decided to think more about the fees. We consumers do not want to pay a lot, thus Microsoft is a good solution. This is just like Apple vs Microsoft, would you like to pay thousands of dollars to Apple for something less in value, or Microsoft for something better? 95% of the computer users say Microsoft. CNet is trying to change it, but people are not stupid.
Posted by (13 comments )
Reply Link Flag
RE: Why CNet is lying?
This is a first. CNET is probably the most PRO MS site I know.

I guess what the industry is worried about is that MS has a
history of controlling everything it gets into. If they dominate the
codecs for broadcasting and try to control it, what will happen?
This is an unknown, but a real possibility given that past actions
by MS.

Which codec is better is still unclear. But I am for open standards
as it makes sense. If you have to rely on one supplier as we do
for the desktop OS, you can see where that will lead to. But most
likely you own a Dell and think paying less is what makes
something better.

What gives something real value is what you get back from your
investment, such as peace of mind, ease of use, or good resale
value. Do any of these relate to what MS has shown, given, sold,
and or forced us to use?
Posted by wrwjpn (113 comments )
Link Flag
What about ON2 and vp6?
Your article fails to mention what appears to be the world's best (best quality at lowest bit rates) video codec, On2 Corp's vp line of codecs.

And this just a day after On2 announced a java version of the player.

A conscious omission or just journalistic oversight?
Posted by customer service (1 comment )
Reply Link Flag
MPEG-4? VC-9 and DivX offer the best performance
Actually, a comprehensive test of several codecs (Apple's MPEG-4 implementation, Apple's Quicktime, WMV9 and DivX 5.x) done by ExtremeTech.com showed DivX 5.x to deliver the best video quality, followed extremely closely by WMV9. The results for Quicktime and MPEG-4 were atrocious, to say the least.

For some reason, DivX doesn't appear to be going any further into the mainstream beyond its dominance in P2P files, so VC-9's the winner.
Posted by LANjackal (39 comments )
Reply Link Flag
 

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