RealNetworks Licenses Windows Media. What’s the Real Deal?

When Microsoft announced, with some fanfare, that RealNetworks had licensed the Windows Media Audio (WMA) format, it declared that WMA is “now poised to be the universal format for digital audio on the Web.” RealNetworks ridiculed the claim, pointing out that the deal merely added one format to its RealJukebox download software. The two companies are struggling for control of digital media, a competitive space that encompasses both audio download and streaming media. Our analysis is that this development does indicate an opening for Windows Media in the audio download space, and that Microsoft could gather momentum there. However, the deal has no impact on streaming media. A universal format is some way off.

Digital media adds sound and moving pictures to an Internet world that would otherwise be static and have considerably less mass appeal. It divides first into audio download and streaming (audio and video) categories. (See the illustration “The Digital Media Business“.)

Audio downloads are popular for storing music either on PCs or portable players. However, the commercial opportunities in downloads are limited because most downloaded music content is either not copy protected (the MP3 format allows easy duplication of content) or is illegally copied. Record labels have released little music content because of a lack of a widely deployed, secure Digital Rights Management (DRM) system.