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Microsoft's digital media mogul

Dave Fester, general manager of Microsoft's Windows Media, needs to balance the use of digital media to boost Windows sales with the piracy concerns of the entertainment industry.

The head of Microsoft's digital media division has a problem. Should he watch the college basketball finals on television or online?

The dilemma for Dave Fester, general manager of Microsoft's Windows Digital Media, comes because Yahoo's new subscription service is using, in part, Windows Media technology to stream the National Collegiate Athletic Association tournament online.

The Windows Digital Media division is one of Microsoft's most influential--and controversial--product groups. Critics have slammed Microsoft for giving away valuable digital media technologies, much the same way it did during its browser battle against Netscape Communications. At the same time, the division is wooing customers on the merits of Windows Media 9 Series, which introduces new capabilities such as digital music with 5.1-channel surround sound.

The group's greatest challenge, however, may not be in responding to competitors or critics but in attracting content creators and consumers. At the heart of Microsoft's digital media strategy is digital rights management (DRM) technology that could advance the distribution of online digital content.

As Fester explains to CNET, finding the right balance between the demands of content creators and the expectations of consumers is a tough task.

Q: Some critics charge Microsoft has an unfair market advantage by using Windows as a distribution platform for digital media technology.
A: Digital media is and has been a feature of both Windows and (Apple Computer's) Mac OS for over a decade. Microsoft is delivering a platform that enables software developers and content providers to create their own digital media solutions. With our new licensing program for Windows Media 9 Series codecs, we expand that ability to non-Windows platforms, applications and devices.

Just because piracy continues to exist does not mean there is no point in developing content protection solutions.
We rely on developers and third parties to keep making great products based on our technology and grow the digital ecosystem. The fact that there are over 500 software solutions, services and devices in so many areas using Windows Media and other technologies is great proof of the opportunities that exist, and that many in the industry recognize.

Other companies wouldn't give away valuable DRM technology with the goal of recouping the technology investment through another product like Windows; they might sell it.
We sell Windows, and DRM is part of its overall value. It is really complementary to other types of security we have created in the operating system. Just like we have deep file-level security in Windows today, this is similar. Yet it also extends that protection as media travels across machines or over the Internet. In order for digital media to be a viable solution for the content industry, they require DRM to be a part of the platform. In order to build a healthy digital media ecosystem--with great content from content providers who can continually get paid for their work and consumers who demand great content--we built the DRM building blocks in Windows.

Last year, a research paper called "," which was independently produced by some Microsoft researchers, concluded that DRMs would never succeed in the marketplace, that consumers won't ever stop file trading. What's your response to this conclusion?
This does not reflect the position of Microsoft, and that was not the conclusion of that paper. Just because piracy continues to exist does not mean there is no point in developing content protection solutions. It's critical for the IT and content industries to recognize that while legitimate content will compete with stolen goods, legitimate content distribution can thrive with a good balance of sound technology, easy access to a broad range of content that consumers really want, and the ability to take that content with you on devices while still providing a fair exchange of value to the owner for it.

Why is Microsoft's digital media group part of the Windows division rather than operating separately?
Digital media has been a main feature of our operating system since 1991 when we media-enabled our Windows 3.1 operating system with the first Windows Media Player. Many other operating system vendors have also taken this approach.

As part of the Windows client business, our mission is to ensure that Windows offers consumers and businesses the best digital media experience for an operating system and, in the process, create a great development platform that software developers and consumer device makers can use as a foundation to create their own products. Specifically, the Windows Digital Media division oversees the development of key features in Windows clients and server products, including Windows Media Player and Windows Movie Maker in Windows XP; Windows Media Services streaming server in the upcoming Windows Server 2003; audio and video compression (codec) and encoding tools; (and) development and software development tools for developers so they can innovate on top of our audio/video, player and encoding technologies.

What is Microsoft's rights management strategy in relationship to digital media, Windows or other content?
I can speak to the digital media aspects of your question. As one of the largest intellectual property companies in the world, we are certainly sensitive to the needs of copyright holders and the problem of piracy. Here we have common ground with the film studios and the music labels...We recognize that a balance needs to be struck between respect for intellectual property rights and maintaining a great consumer experience with easy access to content. With our Windows Media 9 Series platform, we now have built-in DRM that gives copyright owners great flexibility and control over their work while providing a seamless experience for consumers.

The market will determine what level of rights protection is adequate for businesses and acceptable to consumers.
What are the design issues connected to DRM?
DRM needs to be designed in a way where it can adapt to new business models and be governed by ever-changing rules. With DRM, the key to our strategy is balance and flexibility. To create a viable business model around digital media, you have to have a way for content owners to get a fair exchange of value for their content. DRM is a great way to do that so long as it doesn't get in the way of the consumer experience. This is where you have to navigate a balance between protecting a content providers' intellectual property and delivering what consumers want. It is a tough balance but an important one for us.

Yes, but what is Microsoft's realistic expectation that content providers and consumers will embrace DRM technology for distributing "protected" online content?
In the end, consumers care about getting the content they want, when they want it, where they want it. The most successful DRM for a consumer is the kind you don't even know is there. For them, DRM should be as transparent as the encryption used on the Web site they use to buy a book on

In the past, the problem was there was no access to any legitimate content. Today we see the content companies--both on the music and film side--doing some deep learning over the past three years on what works and what doesn't. We see a lot of progress with subscription services...The next phase is refining what works, what price points are the right ones for a song or a movie, and how much flexibility content providers are willing to give consumers to burn their media or transfer it to a device.

How will the proper level of rights protection get decided?
The market will determine what level of rights protection is adequate for businesses and acceptable to consumers. The key is making sure the rights management technology is flexible and powerful enough to adapt to these forces. The technology is ready (and) broadband is growing faster than ever. There is a broad set of customers who are digital media-ready. And so now more than ever, this is poised for success.

What are your three main goals for the Windows Digital Media division?
Our first goal is to provide the best digital media platform in Windows--client and server--and be the leading digital media platform within the industry. We're delivering on that with Windows Media 9 Series, where we have done some really innovative work to enable a faster, more television-like experience with streaming on the Web. This means offering reduced costs for audio and video delivery with 20 to 50 percent audio and video compression improvements. It means creating innovative new experiences for digital media both on the Web, like 5.1-channel surround sound, and with physical formats like high-definition video at up to six times the resolution of DVD video for CDs or DVDs.

Our second goal is to enable media anytime, anywhere on multiple form factors--effectively creating a healthy digital media ecosystem for partners to build better businesses, content, products, devices and services. Certainly we're seeing progress in this area in the music, film and consumer electronic industries. Today over 200 devices now support our technology, and leading major online music and video subscription services such as Pressplay, Movielink, CinemaNow, Yahoo Platinum and MusicNow are delivering premium content to customers. (Yahoo announced) they will carry live 56 games of Internet video and audio coverage of the 2003 NCAA men's basketball championships. All of this is using Windows Media 9 Series because of our fast streaming experience and the great performance of Windows Server 2003.

Third, we want to enable new communication scenarios in business. Digital media is not just a consumer trend. Forty percent of large companies with more than 5,000 PCs are using streaming today to better train their staff and improve the speed at which information can flow across the company. In fact Mercedes-Benz is using Windows Media video streamed to a laptop right on the shop floor to help their mechanics keep abreast on the latest training information when they fix their cars.