Why Is Microsoft So Excited?
If you haven't heard this already, you're probably not in the streaming media industry (but, hey, maybe you're just busy): this week, Microsoft announced that RealNetworks had licensed its Windows Media Audio architecture and codecs for use in their client applications. They pitched this story to the media as evidence that their format was quickly becoming some sort of universal standard. RealNetworks, of course, had a different take on the deal, turning the Microsoft hype on its head and declaring their RealJukebox product "the universal player."
As is often the case in this industry, the facts of the deal are not as earth-shattering as they may appear. On the other hand, Microsoft may very well have a case to make for calling this a victory -- just not necessarily a victory over RealNetworks.
The only application affected by this deal, according to RealNetworks, is the RealJukebox, which was designed for the playback and production of downloadable audio files, such as MP3's. Before the introduction of RealJukebox, Nullsoft's WinAmp (which, by the way, supports WMA files as well as MP3's, and has done so for quite some time) was far and away the leading downloadable-audio player. I don't have any hard numbers, but I wouldn't be surprised if RealNetworks has managed to make a considerable dent in Nullsoft's lead, if not eliminate it outright, with RealJukebox. But RealJukebox isn't what people think about when they think about RealNetworks. This deal doesn't affect RealNetworks' core applications: its streaming media server (a major revenue generator for the company, if not the primary revenue generator) or its ubiquitous RealPlayer application. To stream large amounts of audio to RealPlayer, or to stream live audio to RealPlayer, companies are still obliged to purchase a relatively expensive RealServer license (or use the Free, Open Source Icecast server--but that's a story for another day).
So why is Microsoft so excited? I believe that they have good reason to be -- but not because they've made any advance at all in their competition with RealNetworks as part of this deal. They haven't. By signing this deal, they are advancing, though, on an entirely other front. In addition to its streaming component, Windows Media Audio was, and is, a direct challenge to the popular (mostly) non-proprietary MP3 downloadable format. Microsoft claims (and many sound engineers confirm) that the quality of WMA files is quite a bit greater than that of MP3 files encoded at similar or higher bitrates. That's not WMA's key competitive advantage over MP3, though. Most end-users are perfectly happy with the quality of their MP3 files, especially those that have been encoded at 128 kbps or higher. The current crop of MP3 fans -- anarchic bunch that they are -- certainly haven't jumped on the Microsoft bandwagon in any significant way. WMA does appeal to another group of people who have a lot of power regarding the future of downloadable music, though: record labels and copyright holders. WMA files can very easily be "wrapped" with a security layer, providing content owners a great deal of flexibility when it comes to controlling the dissemination of such audio files over the Internet.
Whether this security layer is meaningful or not is, again, another question. As Michael Robertson, CEO of MP3.com, said recently in an interview on the streamingmedia.com website, "If the music is coming out of your speakers, then somewhere along the process it can be captured."
Meaningful or not, popular or not, the record labels and other owners of traditional audio content are clamoring for a "secure" standard format. RealJukebox now supports numerous "secure" formats, including Liquid Audio and a2b, in addition to WMA. Given that fact, there is some truth to their recent statements downplaying the addition of WMA files to the RealJukebox repertoire.
What's interesting to me about the deal is that RealNetworks hasn't chosen to counter Microsoft's Digital Rights Management scheme with one of its own. If, in fact, the market for securely wrapped downloadable audio does happen to explode (and lots of business plans, and millions of dollars, are riding on this scenario), RealNetworks could possibly lose its leadership position in the Internet audio space if it doesn't own a dominant (or even a competitive) "wrapped" format.
So: why haven't they released one, and why are they strengthening Microsoft's secure wrapping technology by supporting it in their player? I can think of a two possible reasons:
- The security layer has little or nothing to do with the codecs themselves. RealNetworks programming engineers could probably throw together a comparable security wrapper for RealAudio files fairly quickly. Given that the market for securely-wrapped audio files is purely hypothetical at this point (and driven by content owners, not by consumer demand), maybe RealNetworks has better uses for its programmers' time. Presumably, the W3C or some other Internet standards body is going to have some interest in forming an actual, non-proprietary Digital Rights Management standard for all media files, at which point the question of "owning" such a scheme may be moot.
If given an either/or choice, RealNetworks might (wisely) choose to own the player rather than the format. I have always believed that they want to be a media giant, not just a software company. The content panes of RealPlayer and RealJukebox are very powerful portals. In fact, RealNetworks is probably, today, able to direct more ears to any audio content it chooses to promote than any other single entity. If RealJukebox can play every single file format on the web -- including those that happen to have been developed by Microsoft -- they stand to extend their media power even more. The end-user, at the end of the day, doesn't much care who happened to have written the compression algorithms behind the music.
In summation:
Microsoft's strategy in making this deal -- extending support for its format -- is obvious, and the deal is an obvious win for them. If ownership of the "standard" securely-wrapped audio format is an important goal, Microsoft has made great gains against its rivals Liquid Audio and a2b -- simply by allowing itself, like them, to be played in RealJukebox. Without RealJukebox support, WMA as a format for downloadable audio didn't stand a chance.
RealNetworks' strategy, however, remains inscrutable, despite my two guesses above. If owning the player is the end-game (and turning that ownership into media gianthood), then adding the WMA format, with its small market share, is a minor, incremental step forward (as they themselves admit). On the other hand, if they have no intention of competing directly in the Digital Rights Management space, their positioning as "the universal player" could be even more important in the future than it is today.
Joey Manley
General Manager
http://www.streamingmedia.com/