An obscure contest over futuristic video technologies is beginning to unfold in the broadcast industry, with dramatic consequences for the future of television, Hollywood and Microsoft.
The battle for now is visible only on the fringes, where experts are carefully weighing the pros and cons of two new candidates for delivering emerging applications such as Internet movies on demand, video over cell phones and high-definition TV (HDTV) programming.
One candidate, known alternately as MPEG-4 AVC or H.264, is the latest successor to the standard video format currently used by virtually all cable and broadcast TV stations. The other is Microsoft's Windows Media VC-9 format.
Microsoft seeks supremacy in a battle over video technologies that could determine the future of TV and emerging applications.
Bottom line: Although the race is too close to call for now, experts say Microsoft has successfully gained a seat at the table and remains a strong contender.
Royalty rates were set for the H.264 format in May. Final licensing terms are expected to be approved in the next few weeks, a move that will heighten already tense competition with Microsoft over technology that could one day be used to deliver billions of hours of cable TV and satellite programming.
The fight has put Microsoft on unfamiliar ground, forcing it to compete outside of the computer industry it dominates due to its Windows operating systems. But the software giant has responded with remarkable flexibility, abandoning many of the tactics it perfected in the PC world to adjust to an arena bound by consensus and open standards. Although the race for now is too close to call, experts say Microsoft has successfully gained a seat at the table and remains a strong contender.
"Almost everyone is adopting both formats because they don't know who's going to win," said Ben Waggoner, a video compression expert who has written extensively on the topic.
At stake are mathematical formulas known as codecs, or compression-decompression algorithms--an essential cog in the wheel that delivers high-resolution visual images in
Both Microsoft's VC-9 and the MPEG-4 AVC formats purport to deliver DVD-quality video at as much as half the bit rate of MPEG-2, the current industry standard. That helps open up the possibility for a cable company to offer twice the number of regular channels it has today, HDTV programming and video-on-demand services, for example.
A number of contenders have battled for dominance in this arena, including RealNetworks, Apple Computer and dark horse DivX Networks. But the fight increasingly appears to be polarizing between standards-based H.264 and Microsoft's VC-9. In recent weeks, for example, the DVD Forumset the first-round specification for next-generation High Definition DVDs that included H.264, its predecessor MPEG-2 and Microsoft's software.
Microsoft also has received a preliminary standards nod from the Society of Motion Pictures and Television Engineers for approval of its VC-9 technology.
MPEG-LA, the patent licensing-body that governs MPEG (Moving Picture Experts Group) technology, also has met with Microsoft and issued a call for patents for the VC-9 encoder in a move to set it as a new industry standard.
"We think there's an appetite for that technology, and we were asked to undertake an effort to create a joint patent license for that technology as well," said MPEG-LA spokesman Larry Horn.
The new high-compression codecs have for now been gaining acceptance on the Internet and among wireless carriers, where infrastructure is being built from scratch and bandwidth is scarce.
We think there's an appetite for that technology.
But experts said they expect the biggest codec battle to be fought in the cable and satellite business, which has relied on MPEG-2 compression technology for more than a decade. The stakes are highest in this industry because the compression technology will help with the efficient delivery of billions of hours of content viewed every year and define the way people watch television.
Marc Tayer, technology strategist for high-definition satellite TV start-up Voom, put his company on the front lines of the debate when he agreed to license VC-9 earlier this year. Microsoft quickly touted the deal as one of the first endorsements of its technology by a commercial broadcast service. But Tayer has hedged his bets, making sure Voom can also support H.264.
"For now, the plan is to keep both options open," Tayer said. "We have the luxury of a few months to decide...For us, cost and schedule and also seeing how the licensing shakes out are all important criteria."
Voom is months or even years ahead of most in the professional video business, but its dilemma is ultimately expected to become industrywide. The VC-9 and H.264 formats are in the early stages of a struggle that could ultimately define the next generation of professional video technology for a decade or longer.
More evidence of dual support of the codecs is Harmonic, a provider of codec technology to cable companies and others. While it supports H.264, it also has added VC-9 support for the company's new DiviCom real-time encoding platform.
The mainstream cable industry is deeply interested in the new codecs, although most companies aren't yet ready to take the plunge.
The biggest hurdle is the set-top boxes used to decode cable signals that are already distributed to tens of millions of households around the country. Even though chipmakers are building support for the new codecs into boxes today, subscribers typically use their old boxes for years. The cable industry can't afford to upgrade all its customers' set-top boxes overnight and certainly can't afford to lose customers using the old boxes, executives say.
Cable industry technology experts say the codecs are thus more likely to find their way first into specialized or niche services such as video on demand or high-definition stations. They also could be used for more efficient storage of video before it is converted into older formats for transmission, some say.
"I think in our world we're looking at (the codecs) to the extent that we want to be ready for them when they're in the mainstream," said Dave Feldman, vice president of technology at cable giant Charter Communications. "We're not really going to take the position of early adopter."
Microsoft set licensing terms for its technology more than a year ago, giving it a big head start over the MPEG group, which is still waiting final licensing approval for H.264.
Both technologies are very good, and, indeed, both command respect for each other.
head, MPEG Industry Forum
Technology and licensing woes have beset MPEG's efforts to update its video technology for years.
MPEG-4 Part 2, another advanced codec, was originally labeled the successor to MPEG-2, but withered on the vine in recent years because of delays and confusion in its licensing program and the perception that H.264 would eventually one-up it.
Such complications aside, H.264 is showing signs that it can compete successfully with Microsoft, putting to rest worries over the future of the MPEG-4 format following the demise of MPEG-4 Part 2.
Apple, whose products are widely used inside the professional video-encoding world, is strongly backing the H.264 format. Along with smaller companies, Apple showed off a prerelease version of the codec a few months ago at the National Association of Broadcasters trade show. It added video conferencing features last month using the H.264 codec as part of an operating system upgrade, and it plans to ship H.264 in its QuickTime player platform in 2005.
Corporate video conferencing developers also are turning to H.264 to improve real-time streaming broadcasts over the Internet. For example, Norway's Tandberg last week unveiled H.264 support as part of an overhaul of its video streaming technology.
"The industry will see a very interesting competition between (H.264) and VC9," said Sebastian Moeritz, head of the MPEG Industry Forum. "Both technologies are very good, and, indeed, both command respect for each other."
The H.264 advantage
Although Microsoft has been quicker to market, H.264 carries a major advantage in being an open standard approved by both MPEG and the International Telecommunications Union, two major international groups responsible for setting video standards.
Because Microsoft's technology is proprietary, it has been forced to reshape its business strategies for industries such as broadcast and Hollywood that are deeply steeped in standards.
"A lot of broadcasters really embrace standards and only work with those," said Erin Cullen, lead product manager for Microsoft's Windows Media division.
That's been a problem for Microsoft until recently because it has held as tightly as possible to its trade secrets, rather than opening them up to the potential indignities of a standards-setting process.
But the promise of potentially vast revenue from consumer electronics markets have prompted shifts in its plans. As far back as 1997, in a letter to investor Warren Buffett, Microsoft executive Jeff Raikes outlined the desirability of seeing Microsoft software find its way inside living room electronics.
"The real goal is to figure out a way to get an 'operating system' royalty per TV," Raikes wrote in an e-mail that ultimately surfaced in one of the class-action lawsuits against the company. "Tens of millions of TVs per year at $10 to $20 per TV is a nice little 'operating system' business."
This "operating system" strategy, which led Microsoft to purchase WebTV and invest heavily in interactive TV software, has yet to bear much fruit. But the company has seen its Windows Media video codec as a way to infiltrate the home market more effectively.
"The biggest problem for VC-9 is that it's from Microsoft," said video compression expert Waggoner. "They're working harder to resolve the substantive issues against using Microsoft" by developing an open standard.