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Microsoft's music pitch a little off-key

Windows XP's add-on packs for digital music and DVD movies could stir controversy around Microsoft's decision not to fully support the MP3 file format.

    Windows XP add-on packs offering the ability to "rip" MP3s went on sale Monday, highlighting a conspicuous gap in Microsoft's new operating system that could nevertheless help the software giant advance its digital music strategy.

    Rather than pay a licensing fee to Thomson Multimedia for the right to copy CDs in the MP3 format, Microsoft has partnered with third-party vendors who are picking up the charges. Without the add-on packs, Windows XP will play MP3s but can only be used to create copies of songs from CDs in Microsoft's own Windows Media Audio (WMA) format.

    Two sets of add-ons became available this week. For $9.95, consumers can choose either CyberLink's MP3 PowerEncoder or InterVideo's MP3 XPack. CyberLink and InterVideo also offer DVD playback add-ons for $14.95, which include a decoder and other features Microsoft left out of Windows Media Player for XP. Consumers can buy combined MP3 and DVD packs from either company for $19.95.

    The products represent Microsoft's solution to a thorny problem: How to promote its relatively unsuccessful Windows Media format without completely abandoning its chief rival, MP3, which has become a de facto standard among consumers who trade music files over the Internet.

    "Microsoft supporting MP3s is a major conflict of interest for them," said Darnell McGavock, a database administrator from Suwanee, Ga. "It is an insecure format that the record labels do not like, and Microsoft is trying to court the record labels to have WMA files on CDs. I'm not surprised that they are making people pay extra for this."

    Microsoft's decision to emphasize WMA could give that format leverage against MP3, particularly when it comes to the majority of consumers who default to Windows' bundled features. Microsoft's advantage is its monopoly muscle in Intel-based operating systems.

    "The move to omit MP3 support is probably an attempt to destroy an existing non-MS format and replace it with something built in-house," said Michael Friesen, a New Brunswick, Canada-based IT consultant. "Using a proprietary format that's built into the OS opens the door to further control of the user experience, as well as a new potential revenue stream."

    Kevin Dieterich, director of information systems at Parkview Hospital in Brunswick, Maine, doesn't see that as a problem.

    "As for ripping and burning MP3s, right now I think there are enough other companies out there with good commercial, freeware and shareware products that fill this standard XP gap," he said. "Also, because it is extra dollars" for the add-on packs, "I don't think it will attract anyone other than the newbie users."

    Friesen also questioned whether Microsoft really could displace MP3 with WMA.

    "Given that the home computer market is essentially saturated at this point, it will be interesting to see whether MS will successfully de-commoditize the digital music standard, or whether MP3 will reign as the format of choice," he said.

    Bad timing also may sting Microsoft. Windows XP contains digital rights management software--designed specifically to work with the WMA format--which has come under heavy fire. On Thursday, software maker InterTrust Technologies expanded a lawsuit against Microsoft contending that Windows XP's anti-piracy feature violates InterTrust patents. And Friday, a hacker cracked the copy-protection feature, jeopardizing Microsoft's efforts to woo the music industry to adopt WMA as a preferred secure format.

    Playing for keeps
    Microsoft considers Windows Media Player one of its most important weapons in the burgeoning skirmish over digital music and video, say analysts--so much so that PC makers choosing to put icons on the Windows XP desktop must also put one for the media player, Microsoft revealed in August. The Redmond, Wash.-based company also chose to more fully integrate Windows Media Player into XP than earlier versions of the operating system.

    see special report: The Gatekeeper: Windows XP In June, disagreements over digital-music formats and media players contributed to the collapse of negotiations between AOL Time Warner's America Online division and Microsoft. This forced AOL to cut separate deals with computer makers to ensure the online service shipped on Windows XP PCs.

    The European Union's Competition Commission is so concerned about Windows Media Player that in August it amended a Microsoft antitrust investigation to include the technology.

    In some ways, Microsoft can't win when it comes to MP3 support in Windows XP. The company has come under attack for apparently favoring WMA, but fully supporting MP3 could have led to accusations of expansionist tactics.

    "I think the only reason it's not already included is because of the potential cry of wolf about them being a monopoly," Dieterich said.

    In a July interview discussing XP's digital-music features, Windows Group Product Manager Shawn Sanford partly blamed the limited format support on the cost of licensing the MP3 encoder.

    According to its MP3 licensing Web site, Thomson Multimedia charges software developers such as Microsoft anywhere from $2.50 to $5 per unit for the decoder used to rip MP3s.

    Still, there is a lot of money to be made selling digital rights management technology to record labels through Windows XP.

    McGavock noted that, according to the Windows Media Player licensing agreement, Microsoft has the right to update the copy-protection software, which he concluded could conceivably disable some MP3s.

    "You agree that in order to protect the integrity of content and software protected by digital rights management--'Secure Content'--Microsoft may provide security-related updates to the OS Components that will be automatically downloaded onto your computer," the Windows Media Player licensing agreement states. "These security-related updates may disable your ability to copy and/or play secure content and use other software on your computer."

    McGavock's conclusion: "When Microsoft and the record labels wish to kill MP3s, they could just deliver an update that would get rid of MP3s, since the labels consider their music to be secure content. We already know that Microsoft is working to have WMA files on copy-protected CDs."

    Beefing up XP
    Still, the add-on packs could be important for Windows XP users without any other means of encoding MP3s.

    Like Apple Computer's Mac OS X 10.1, Windows XP lets users burn music or data CDs directly via the file menu; it isn't necessary to launch a third-party product. Roxio provided those features for Windows XP. But Mac OS X 10.1 users can also burn DVDs right from the file menu, something for which XP users will need third-party software, from Roxio among others.

    Mac OS X 10.1 also plays DVDs, something partially missing from XP. Besides the MP3 encoder, Windows Media Player for XP also ships without a DVD decoder--again in part because Microsoft chose to pass the licensing fee onto third parties. With the decoder installed, consumers can watch DVD movies using Windows XP's media player.

    But CyberLink and InterVideo, the companies providing the add-on packs, also sell their own branded, more full-featured DVD players. Consumers with existing DVD software from CyberLink and InterVideo won't have to pay extra, but they will have to download hefty updates. After a PC is upgraded to Windows XP, the operating system signals that a DVD software update is available for download. Although free, the typical 10MB or larger files won't be easy to retrieve over modem dial-up connections.

    In fact, those people upgrading to Windows XP this week could find themselves standing in a long line of software fixes. Besides DVD software updates, most people using Roxio's popular CD Creator and DirectCD programs also will need to download important fixes. The current versions available at retail or with new PCs are not compatible with Windows XP.

    Many consumers also will find they need to update software firewalls from NetworkICE and Zone Labs, download a plug-in to run Java applets in Internet Explorer 6 or get drivers to use USB 2.0 devices. The successor to USB 1.1, version 2.0 increases the throughput for external CD burners and other peripherals up to 480mbps from a maximum 12mpbs. But the USB 2.0 drivers were not ready when Microsoft released Windows XP to manufacturing.

    Microsoft even has a 5MB XP update ready for download the day of launch, Oct. 25. An upgrade to Windows Messenger adds support for .Net Alerts and beefs up the communications console's telephony features.