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Apple sees big rewards in QuickTime plan

Where others would opt to make big bucks on a hot technology, Apple wants to be the "Johnny Appleseed" of the tech world by giving away its multimedia streaming server software.

Where others would opt to make big bucks on a hot technology, Apple wants to be the "Johnny Appleseed" of the tech world by giving away its QuickTime multimedia streaming server software.

By sowing those seeds, Apple Computer will gamble that the rewards will far outweigh the risks. But charging for this technology could reap tons of cash for Apple, as this is an increasingly lucrative market.

Plus, even the mightiest of PC companies are struggling to make as much money as they used to. So why is Apple doing it?

The strategy makes good sense, Apple executives say, for many reasons: It may lead to more people using the streaming technology, it helps the company's branding with more QuickTime logos and icons, and it may lead to a larger chunk of the market for servers under $5,000, the only server segment the company claims to covet. Finally, there's digital TV, where QuickTime could figure to be a key technology for broadcasters.

Apple announced earlier this week that it would make the server version of the new QuickTime Streaming software in the open-source domain and not charge any fee for it.

It's a plan of attack that is similar to what Netscape and other companies have done. Netscape originally charged for its Web browser. Later, as Microsoft garnered more market share with its free browser, Netscape did an about-face and began offering its browser for free and later released the code to the open-source community.

Giving the server software away for free "keeps us relevant and puts us on a different playing field," said Frank Casanova, director of QuickTime product marketing.

A number of things are accomplished by entering the content streaming market, Casanova said. First and foremost, QuickTime is essentially an ad for Apple. Whenever someone watches a clip via QuickTime, the logo appears. This, theoretically, works like all advertising, keeping the company's name in front of the computer user, which in turn might lead to more business for Apple.

Apple acknowledges that many customers will buy Windows NT or Unix servers to stream multimedia content, which is why they have recruited IBM and Silicon Graphics into in its camp. Sun Microsystems and Cisco are also demonstrating the ability to stream QuickTime off of their products at this week's National Association of Broadcasters convention, with plans to integrate the server software as well.

As with any free-distribution deal, companies that incorporate QuickTime into their products won't give Apple any money for including it. Although these companies might put a "QuickTime compatible" logo on their box once the software has been tested, Apple won't charge for the label.

Apple admits that it isn't a player in the "big iron" server space--IBM's server can handle 18,000 simultaneous streams, Casanova said--nor does it want to be, for now. Instead, Apple is focusing on the under $5,000 server market by offering hardware bundled with Mac OS X Server, which includes QuickTime server software, and selling people on its ease of use, said Casanova.

"Content providers would be crazy not to use [QuickTime]," said Casanova, if it becomes as ubiquitous as he hopes. To that end, Apple will jump-start a "renewed offensive in marketing and advertising" QuickTime. There will be promotions, co-operative agreements with other companies, and live events "that will raise our profile," Casanova offered.

Hype from The Phantom Menace
The company has already generated significant publicity by offering the trailers to the new Star Wars movie, The Phantom Menace, on its Web site. The movie clip has been downloaded about 8 million times, and Apple is now offering an improved version for QuickTime 4.0 playback. This was a coup for Apple, as the anticipation for this movie is palpable, with many predicting it will be the highest-grossing movie of all time.

Another technical perk: QuickTime 4.0 offers the ability to do live streaming, which allows content to be played while it is being downloaded, instead of making users wait until the transfer has finished. Previously, the main competition in this market was from Microsoft and RealNetworks.

Apple is not the only company interested in this space: The streaming market is growing like gangbusters. Real Networks, for instance, reported that revenue climbed 88 percent to $23.5 million for its most recently completed quarter, although the company has not yet shown an overall profit on its products.

Those kind of numbers are sparking speculation about QuickTime. At Apple's recent quarterly earnings conference call, analysts asked if Apple might even consider spinning off its QuickTime technologies to a separate company--one that could go public and probably expect to receive a huge market valuation, considering that RealNetworks currently has a larger market capitalization than Apple itself.

"Those are good ideas to consider," mused Fred Anderson, Apple's CFO.

Where does QuickTime go from here?
Where Apple's QuickTime fits on this new playing field is not yet clear, as emerging technology standards that are gaining acceptance in the convergence game.

At the NAB trade show, a wide array of companies are talking about the need for a technology that can move different content over disparate network types. For broadcasters, the question takes on added significance as they consider getting into the business of sending both MPEG-2 video and audio (the standard for digital TV transmission), along with data such that may or may not be related to the video content.

Media companies including Disney, CNN, and NBC have teamed up with Intel, Microsoft, CableLabs and Network Computer, Inc. to release specifications for a technology called ATVEF. ATVEF stands for the Advanced Television Enhancement Forum group that is promoting the technology. ATVEF is an attempt to use standardized technology in order to allow content providers to design interactive content once for delivery through cable, satellite, or digital TV platforms.

Without a standard way of linking TV content with Web sites, broadcasters essentially have to place a bet on the success of one type of receiver-a WebTV Internet set-top or a General Instrument cable set top, for instance. There is a big push for a standard, because content providers and distributors would be able to develop a product once, and earn money by shipping it to a variety of set-top receivers, handhelds, and other as yet unimagined products.

QuickTime is a technology that is already good at the things ATVEF is being advocated for, and indeed some parts of QuickTime are the basis for the MPEG-4 international standard, which also seeks to solve some of the same problems ATVEF seeks to solve.

Apple's Mitchell Weinstock, a senior QuickTime product manager, said Apple is closely monitoring developments in the ATVEF forum and is considering offering technologies to what is emerging as a de facto industry standard.