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TECHNOLOGY BRIEF

Microsoft battles over future digital Hollywood


Rob Lever | April 1, 2004

WASHINGTON — The EU antitrust case against Microsoft is a battle over the future technical standards for Hollywood films, online music and other forms of digital entertainment, analysts say.

Although competition currently exists for the technical standards of online content, Microsoft's critics say that unchecked, the software giant could use use its dominance in PC software to get a stranglehold on these emerging fields.

The European Commission last month ordered Microsoft to offer a European version of its all-conquering Windows operating system without its Media Player program -- used for digital video and audio.

Ed Black of the Computer and Communications Industry Association, a trade group of Microsoft's fiercest critics and rivals, said the EU ruling "will prevent Microsoft from controlling the platform for the delivery and subsequent control over digital content."

Black said that as computer technology and home entertainment converge, it is important to maintain competition to prevent Microsoft from "locking in" its player and proprietary format as the de facto standard.

By requiring Hollywood, the music and game industries to use the Windows format, Black argues, it allows Microsoft to impose a "tax" on this content.

"Once we live in a world with no other media player with a substantial claim to a portion of the market, then all of a sudden the power shifts," Black said.

"Hollywood won't have the choice" except to distribute on the Microsoft platform, he said, allowing Microsoft to collect the fees for relevant information to code the content for Windows.

Analyst Michael Wolf at the research firm In-Stat, said Microsoft's strategy is "to become an 'indispensable partner' to the content industry," including streaming audio and video, games and other new content.

"I think Microsoft's chances of being fairly dominant are very good," said Wolf. "I'm not going to speculate on whether that's bad or good for the industry."

Wolf said the Microsoft is shifting "from operating system vendor to media software giant" and that getting a hand in all forms of entertainment is key.

An In-Stat study projects that 280 million consumers worldwide will be able to produce their own media, such as films or music, by 2008 and that the companies most likely to benefit from this are Microsoft, Intel and Disney.

But Joe Wilcox at Jupiter Research said Microsoft is a long way from dominating this field, with RealNetworks active in media players and Apple a major force in online music.

"According to our data, 70 percent of consumers say they have Windows Media Player on their primary PC, but 60 percent say they have one of Real's products," Wilcox said.

For online music, Microsoft has won over distributors such as Roxio's Napster and Wal-Mart to its Windows Media Audio format. And Wilcox said that "we're in the early stages of a format war between Apple and Microsoft ... and Apple is the early leader." Wilcox said Microsoft has tremendous market power and is working to try to get its standards in place for music, games, video and a new format for DVDs.

"People look at Windows as an operating system, but for Microsoft it's also the greatest software distribution system on the planet," Wilcox said.

"Microsoft has huge advantages, but nothing is certain. Eighteen months ago, who would have predicted the popularity of (Apple's music player) iPod and Apple's successful online music store?" The EU antitrust case is different from the legal battle in the United States because it comes at a different juncture of the marketplace, he noted.

"In the US case, the browser wars were over, and Microsoft had had won," Wilcox said.

"With respect to the EU case, the media wars are still ongoing and there's a chance the ruling could do some good. However, one has to ask that if there is so much competition, why is there ar a need for the ruling?" –Sapa-AFP


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