Correction: this story has been corrected to remove the implication that iTunes sells audio files in formats other than AAC. iTunes did begin selling DRM-free songs earlier this year, but those files are still in the AAC format. Other stores are selling DRM-less MP3s, but not iTunes.
In 1998, the European Commission began investigating Microsoft on grounds that it was illegally using its desktop operating system (OS) monopoly to squeeze into new markets. At some point along the way, RealNetworks complained that Microsoft was repeating its kill-Netscape tactic by bundling the Windows Media player into Windows. In 2004, the EC agreed, and (among other things) ordered Microsoft to ship a version of Windows without the Media Player in Europe. Microsoft appealed, but was forced to comply while the appeal wound its way through the system.
So Microsoft shipped versions of Windows XP without the the Media Player. But because it didn't have to offer any discount, almost nobody bought these versions at retail, and hardware makers didn't preinstall them. (Even if the free Media Player version had been a few bucks cheaper, I don't expect there would have been much demand. Especially from PC makers--the more different software alignments they have to install and support, the higher their expenses.) The company followed up with similar versions of Vista in 2007.
As anybody who follows technology news now knows, yesterday a European court denied Microsoft's appeal on almost every count. (The full ruling is available from the first link on this page--it's long. Lawyer and technologist Mary Kirwan, writing for The Globe and Mail, had an excellent write-up of the ruling as it relates to Windows/non-Windows interoperability, which I'm not covering here.)
In the wake of the ruling, EC Commissioner Neelie Kroes spoke at some length about the harm Microsoft has done to the consumers, but one statement made me check my eyesight. As reported by Todd Bishop in the Seattle Post-Intelligencer, Kroes said, "Microsoft's media player format has, as a result of its conduct, come to dominate the market."
Say what? I suppose that's true if you define the relevant market as player installations--Paul Thurott reports Nielsen/NetRatings figures showing the Windows Media Player at 50 percent, with the RealPlayer at 22 percent and iTunes at 19 percent. Or if you measure it in terms of the number of commercial stores selling music in the Windows Media Audio format versus some other format.
But in terms of actual usage? Apple's iTunes Music Store owns about 70 percent of the market for legal downloads and has sold more than 2 billion songs. Those songs are in the AAC format, a variant of MPEG-4. And illegal downloads still far outweigh legal ones, and most of those are in the MP3 format. Microsoft's attempt to dominate the digital media market with the Windows Media format has failed so completely that the company is now mimicking Apple's end-to-end, control-all-parts strategy with Zune (which will be lucky to get 10 percent market share any time soon.) In fact, Microsoft's moved so far away from Windows Media, it's even licensing a new DRM technology to wireless phone carriers and handset makers that doesn't rely on or use Windows Media in any way.
In other words, Microsoft's OS monopoly hasn't helped it dominate the digital media market one bit. Turns out that users don't care so much which digital media player is preinstalled on their PC--if a competitor (Apple) sells a separate set of products (iPod, iTunes) that are good enough, people will use them. In fact, I'd argue that--apart from the profits and cash flow Windows generates, which fund money-losing businesses like the Xbox--the OS monopoly hasn't really helped Microsoft enter or dominate a new market for many years. (RealNetworks might disagree, but I wonder if its own actions did more to help Microsoft than Microsoft's monopoly. No slam on Rhapsody, which is a good service...I'm talking about the old RealPlayer and the way Real promoted it.)
Meanwhile, Microsoft's European competition just got harder--the iPhone launches in the U.K. on November 9.
The bad legal news continues for the recording industry.
After yesterday's ruling that the RIAA owes an Oklahoma woman nearly $70,000 in attorneys' fees, the European Union's top court today said that European ISPs are not required to disclose the names of subscribers whose IP addresses have allegedly been linked to illegal activity on file-sharing networks.
In the case at issue, a group of Spanish music producers filed a legal complaint about Spanish ISP Telefonica, which refused turn over IP addresses of apparent Kazaa users. Telefonica maintained that Spanish law required it to turn over these addresses only in criminal cases or matters of national security. The Spanish court overseeing the case asked for an opinion from the European Court of Justice, which essentially backed Telefonica, saying that this information did not need to be turned over in civil cases.
This opinion's not a legally binding ruling, but if the Spanish court accepts the opinion and rules accordingly, this could form the basis for similar decisions throughout the EU. This would mean that recording industry representatives would either have to convince criminal investigators--the police--to go after file-traders (unlikely), or would have to come up with some other technical method (possible) without violating the EU's stringent privacy laws (very difficult).
Meanwhile, in the U.S., the RIAA continues to spend a lot of money to get very little in return.
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