Through its investment last month in streaming industry leader Progressive Networks followed by its purchase of the smaller VXtreme earlier this month, Microsoft has essentially bought its way into the core of the market with the stated intent of developing its NetShow client-server package.
NetShow uses active streaming format, or ASF, to regulate the downloading of audio and video files from a server to a client machine. Overshadowed in the past year primarily by Progressive and its RealAudio and RealVideo software, which allows users to hear and watch stored files and live programs as they are downloaded, Microsoft now hopes to use NetShow to create a single streaming video format standard to help "grow the market."
Part of that strategy involves winning the support of other streaming media companies, often by investing in them or by buying them outright. But that move worries some who do business in the market--and has drawn the attention of the Justice Department.
Analysts say the smaller companies have every right to be concerned. "Whenever the big boys get in the game, the little guys should worry," said Carl Lehman, an analyst with the Meta Group.
Dwight Davis, editor of industry newsletter Windows Watcher, agreed. "No one really has the wherewithal to resist this move. Progressive was the biggest competition [for Microsoft] out there. Now the two have come to an understanding so they can both save face."
Progressive says it controls roughly 85 percent of the market for streaming audio.
For Progressive Networks, a pioneer in the streaming space, the entry of the proverbial 800-pound software gorilla serves to validate the market and provides an opportunity to settle on some technology standards.
"This is a very early stage in the development of streaming media," said Brett Goodwin, group product manager for applications. "There is a lot of innovation to come. We are going to compete and we are going to lead.
"The flip side is you're in such a small and insignificant space that no one pays attention," he said.
Representatives from smaller companies that haven't been invested in or bought by Microsoft also believe that the company's aggressive thrust in this area can benefit everyone by helping to standardize various video player schemes--which in turn will speed the development of the technology and, ultimately, products to market.
"It helps our job because slowly but surely there will be a file format standard for streaming media," said Daud Power, director of strategic alliances with Vivo Software. "In many ways, it should make our lives easier going forward."
Power questioned whether the video streaming market could even be considered a business at this point, given that all video players are being given away for free and are available on a plethora of sites across the Internet.
But Microsoft itself is not without competition. Earlier this month, Oracle proposed a standard for connecting video encoders and servers for delivering real-time digital video broadcasts. Analysts believe this is the first sign that the database company is positioning its video software to compete against Microsoft and Internet video market leaders like Progressive.
For this reason and others, many don't foresee a destruction of the small company in the Internet video software market, and they play down antitrust concerns.
"Microsoft isn't the major revenue maker in the [streaming] industry. And it's an embryonic market anyway. I don't see this as being an area" for the Justice Department, Davis said.
What federal antitrust regulators should be watching for, however, is how the major broadcasting conglomerates like Turner Broadcasting and Sony react to Microsoft's threat to their long-standing roots in the field of video broadcasting, said Rob Enderle, an analyst with the Giga Information Group.
Enderle said Microsoft might eventually make a move to partner with one of the conglomerates to move still deeper into the industry.
However, he added, "it's premature right now for the DOJ to act against Microsoft. I don't think they can do anything about [Microsoft's move into the market] because there are still some big players involved."