• Chart: Windows Media Technology Guide

Windows Media 9 Series, the latest update to Microsoft's platform for creating, distributing, and playing digital media content, is now available in a public beta. The release contains many incremental improvements and some completely new features, and continues Microsoft's drive to popularize its Windows Media Format (WMF), which the company believes will spur sales of Windows servers, WMF-enabled devices, and desktop PCs. But even if the new release puts Microsoft ahead of rival RealNetworks in the format wars, it remains unlikely that the WMF—or any other single format—will dominate the digital media space in the foreseeable future.

Goals: Promote Format, Spur PC Upgrades

According to Chief Software Architect Bill Gates, Microsoft spent about US$500 million to develop the Windows Media 9 Series platform. This is an extraordinarily large investment considering that Microsoft makes no incremental revenue from Windows Media tools and applications, all of which are either included as part of Windows or are available as free downloads.

Yet, the company continues to invest in this area for the following business reasons:

• To increase sales of Windows servers, which are required to host and stream WMF files, and to ensure that customers don't maintain a Unix server just for streaming digital media
• To spur sales of consumer electronics and portable devices that can play WMF files, for which Microsoft receives a royalty
• To encourage consumers to upgrade their PCs to Windows XP-based models that are faster, more powerful, or otherwise better suited to storing and manipulating digital media (such as the forthcoming Media Center PCs).

At one point, Microsoft also planned to roll out fee-based hosted services for consumers to download digital media and hoped to use the popularity of its applications, particularly the Windows Media Player (which comes with every desktop edition of Windows), to drive users to these services. However, the company is no longer looking to hosted services as a major source of future revenue and is leaving digital media services to its partners, such as Pressplay, for the time being. (For background, see "Hosted Services Becoming Lower Priority" on page 22 of the Oct. 2002 Update.)

First Major Update Since 2000

The Windows Media 9 Series platform entered its first public beta in Sept. 2002 and will be released in increments over the next several months. It features updates to the major components of the Windows Media platform, including the three core applications—the encoder, the player, and the hosting software built into Windows .NET Server 2003—along with various other technologies and SDKs. (For background on the function of these components and how to get them, see the chart "Windows Media Technology Guide".)

Most of the improvements to the hosting software are no surprise, as Microsoft already announced and demonstrated these improvements early in 2002 under the code name Corona. (For details, see "'Corona' Aims to Improve Streaming Media" on page 13 of the Feb. 2002 Update.) However, most of the improvements to the codecs, encoder, and player were detailed for the first time in Sept. 2002.

This is the first comprehensive update to the platform since Windows Media Technologies 7 was released in July 2000; the fall 2001 Windows Media 8 update was limited to a new player for Windows XP and some new codecs.

Codecs Improve Windows Media Format

In Windows Media 9 Series, Microsoft has improved the codecs and the encoder application used to translate raw digital media into streamable WMF files.

Improvements to existing codecs. Microsoft has improved the compression of the standard Windows Media audio and video codecs, allowing content owners to send more streams or better-quality streams without having to invest in more bandwidth. For example, Microsoft claims that the Windows Media Video 9 codec offers twice the compression as the MPEG-4 format used by Apple's QuickTime Pro 6 authoring tool and claims that the new audio codec offers up to three times the compression of the widely used MP3 (MPEG-2, Layer 3) format. Several independent reviewers have supported these claims and have also noted that WMF 9 files look and sound better than similar-sized files encoded in Real's latest proprietary format.

New codecs. Microsoft has added several new codecs to the Windows Media platform, potentially opening new markets for the WMF. New "Professional" video and audio codecs offer better-than-DVD video resolution (up to 1,920 by 1,080 pixels) and multichannel audio surround sound. The resulting files are smaller than comparable-quality MPEG files, and Microsoft views them as a potential replacement: for example, companies could deliver these new WMF files over cable or satellite systems, or use them to fit more high-resolution material onto static media such as DVDs.

A new "Lossless" audio codec enables users to copy, or "rip," content from audio CDs onto hard disks or other CDs with no loss of quality, at one-half to one-third their original file size, which could encourage more users to use the WMF for archiving CDs (although even with the lossless compression, an audio CD would require 200 to 400MB of disk space). A new "Voice" audio codec is optimized for transmitting spoken-word material (e.g., sports broadcasts) over dial-up connections.

WMF files encoded with any of these codecs can be played on version 7.1 or later of the Windows Media Player, but some features (e.g., surround sound) might require Windows XP.

Encoder. The new Windows Media Encoder 9 Series not only allows users to create files with all the previously mentioned codecs but also boasts many efficiency and administrative improvements, such as on-the-fly digital rights management (DRM), which lets content owners protect live broadcasts from unauthorized copying and use; variable-bit-rate (VBR) audio recording, which shrinks file sizes even further by compressing simple parts of an audio track more than complex parts; and the ability to capture time-code information from an original media source to improve searching and editing of the resulting WMF file.

Player Won't Eliminate Competitors

In the enterprise, Microsoft positions the Windows Media platform as a tool for internal communication, such as training videos or speeches. To increase its appeal to these customers, the new Windows Media Player 9 Series adds administrative features, such as the ability to prevent users from using certain functions (e.g., ripping audio tracks from CDs) and no-reboot installation.

Wider use of the Windows Media Player could also dent the popularity of competing formats, as the player cannot play files in Real's proprietary format and supports ripping into the WMF by default (ripping MP3s requires a third-party plug-in). So, to encourage wider use of the player, Microsoft has improved its user interface and functionality. For example, users no longer need to select their connection speed—video files are automatically optimized based on available bandwidth—and can take advantage of many new features in the jukebox, such as the ability to rate songs and organize playlists by these ratings; automatically fill in missing artist information (e.g., album title) on downloaded tracks; and play files at up to twice their speed with no change in audio pitch.

But the new player has some shortcomings which could hamper its popularity. Windows Me and XP users cannot uninstall it (including the beta version); instead, they must use "System Restore," which rolls the system back to an earlier state, eliminating all subsequent software installations. Other drawbacks include no native support for DVD playback (a third-party decoder plug-in is required, although many new PCs ship with these decoders) and the inability to transfer files to portable audio players through a serial or parallel port. (USB and IEEE 1394/Firewire are supported.)

These problems, in conjunction with the continuing popularity of other formats, mean that most users will keep at least one other digital media client on their desktop for the foreseeable future.

Competition Remains Entrenched

According to recent statistics from Nielsen/NetRatings, Real's format is slightly more popular than the WMF—in Apr. 2002, 17.1 million unique home users and 11.7 million unique work users in the United States played a Real-formatted file, versus 15.2 million home users and 12.2 million work users who played a WMF file.

The advances in Windows Media Series 9 could help Microsoft close the gap, particularly if Microsoft can convince content providers and organizations that the Windows Media platform offers financial advantages over Real, such as the ability to send more streams or higher-quality streams over the same bandwidth. The fact that the Windows Media hosting software comes built into every Windows server will help Microsoft as well.

In addition, because Microsoft has control over the development of Windows and can influence the development of accompanying hardware such as sound and video cards, it might eventually be able to use better DRM as a selling point for the WMF. For example, the proposed "Palladium" version of Windows will feature changes to the operating system kernel and new hardware that could be used to create DRM schemes that are harder to break. Real has no such leverage. (For background, see "Palladium Plan for Trustworthy OS Revealed" on page 10 of the Aug. 2002 Update.)

But Real has one strength that Microsoft will always lack: platform agnosticism. Real's server software runs both on Windows and many flavors of Unix, including Linux. In addition, Real offers platform operators a far greater choice of digital media formats than Microsoft: its forthcoming Helix product line allows companies to stream files not only in Real's proprietary formats but also supports the WMF (including WMF 9), QuickTime, MPEG-2, and MPEG-4. The latest RealOne Player supports all these formats as well, as well as DVD playback and CD ripping in the MP3 format. Microsoft will be hard-pressed to convince content owners, enterprises, and users that they should switch to a Windows-only platform that also offers fewer format choices, unless it can clearly show how the switch will save them money or offer some other compelling advantage.

Moreover, Microsoft competitors such as Sony and AOL Time Warner have entered business arrangements with Real, in part to ensure that Microsoft cannot easily dominate the digital media market. These companies own vast quantities of valuable content and are unlikely to turn to the WMF as long as they're allied with Real.

Finally, Real has been able to generate revenue from subscription services—a task at which Microsoft has had little success to date. According to the company, the RealOne SuperPass (formerly GoldPass) currently has about 750,000 subscribers paying around US$10 a month to watch and listen to exclusive content, such as major league baseball games.

MPEG Not Going Away

Both the WMF and Real's formats will continue to face stiff competition from MPEG formats. Although the patent owners for MPEG-4 recently instituted a licensing scheme that could kill the nascent format (content owners with more than 50,000 subscribers could have to pay up to US$1 million a year for the right to stream MPEG-4 video files), its predecessor, MPEG-2, is widely established, particularly in consumer electronics devices such as direct broadcast satellite TV boxes (e.g., DirecTV), digital video recorders (e.g., TiVo, ReplayTV), and DVD players. Microsoft often boasts about agreements with consumer electronics manufacturers (e.g., Pioneer, Yamaha) and microprocessor manufacturers (e.g., National Semiconductor, Texas Instruments) that will increase support for the WMF in devices. But it's hard to imagine consumers trading in their current equipment for gear that supports the WMF unless the format offers very clear convenience or quality benefits, as audio CDs did over vinyl LP records, or DVDs did over VHS cassettes. Windows Media 9 Series does not constitute such a quantum leap.

Similarly, Microsoft's emphasis on DRM, while essential for attracting big content owners, could keep many users of the unprotected (although lower audio quality) MP3 format from adopting the WMF. Unless content owners come up with DRM-protected services that are easy to use, inexpensive, and perceived as being fair, and unless these services offer the same selection as the illegal MP3-swapping networks, all the effort that Microsoft and other companies are putting into DRM will bear little fruit.

Resources

For a complete list of links to the downloadable components of Windows Media, including the SDKs, see the chart "Windows Media Technology Guide".

The Windows Media 9 Series beta site, including detailed information and links to downloads for the player and encoder, is at www.microsoft.com/windows/windowsmedia/9series/.