The agreement gives another boost to Microsoft's audio format, which has become popular with record labels partly because of anti-copying features aimed at thwarting online music piracy. Three of the four other major labels--Bertelsmann's BMG Entertainment, Sony Music Entertainment and EMI Recorded Music--also use Windows Media.
"What we're seeing is the emergence of a whole new business model for the music industry," said Jonathan Usher, group manager of Microsoft's Digital Media Division.
The deal also signals Warner's growing readiness to sell music online. Warner has lagged competitors in readying its catalog for the Internet, announcing a plan for download sales in September--the last of all the major labels to do so, and some 10 months after Sony Music Group announced its plans. At that time, Warner said it was working with Liquid Audio and Microsoft rival RealNetworks to develop a distribution vehicle.
As part of Wednesday's deal, downloads of Warner music are now available through CDNow, CDPlus.com and Musicland Stores' sites.
Music companies have been scrambling for years to find a viable alternative to the MP3 file format, which caught the industry unprepared when it first burst onto the Internet and spawned a free music-swapping revolution. Like Windows Media audio, MP3 is a mathematical formula that compresses hefty digital music files into a manageable size without destroying the sound quality.
Several companies have come out with competing audio formats featuring security options that could limit the number of copies made or force people to pay fees for the rights to listen to songs. Few have caught on with consumers, however, who have largely stuck with free MP3 alternatives.
With the strong endorsement of major record labels, Microsoft's Windows Media is positioned to create the most serious challenge to MP3 to date.
If Windows Media takes off, Microsoft could gain important leverage for its Windows 2000 server software, which incorporates Windows Media multimedia creation and delivery applications. The company has put multimedia at the forefront of its Windows 2000 strategy, placing it squarely in competition with companies such as RealNetworks, which also sell multimedia server software.
Although RealNetworks has said consumers do not care about codecs--the technology used to encode and decode various types of data--the company earlier this year licensed Microsoft's audio format for use in its RealJukebox digital music organizer, signaling the growing acceptance of the format among major record labels.