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Thursday, September 02, 2004 - Page updated at 09:25 A.M.
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Microsoft has new push for multimedia

By Brier Dudley
Seattle Times technology reporter

KEN LAMBERT / THE SEATTLE TIMES
Yusuf Mehdi, corporate vice president of MSN, left, displays Microsoft's new online music service yesterday in Seattle. At lower right, Rob Bennett, senior director for MSN Entertainment, operates a laptop connected to display screens.
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For people who still get their music from silver discs instead of downloading it from the Internet, Microsoft believes it's time to start going digital.

In a major platform rollout that starts today and continues into the holiday season, the company is unveiling an array of products and technologies designed to simplify the experience of buying and listening to digital music, videos and television.

"This is definitely going mainstream, and that's where we have an opportunity to really take it to a whole new level," said Dave Fester, general manager of the Windows client consumer division.

Launching today are a new online music store, portable video and music players and software for making it all work together.

Coming later this fall are new computers that further blur the line between the PC, the television, the video recorder and the stereo system.

Microsoft is selling its digital media lineup to more than just consumers, however. The fall blitz is also aimed at computer manufacturers, record labels and other industry players.

As with consumers, many of these companies are still exploring which digital-media platform to embrace. In particular they are weighing different technologies for controlling the distribution of music, and the wave of Microsoft products showcase the capability of its "digital rights management" software.

"For Microsoft this is really just one more step in a very long journey they're taking to ensure that personal-computing technology — and by extension Windows — remains a relevant and central part of everybody's computing experience," said Steve Kleynhans, a Toronto-based analyst with Meta Group.

"Digital media and everything that goes around that — they see as an emerging and important usage model both in consumer and corporate spaces," Kleynhans said, "and they want to ensure that Windows is the best platform right in the middle of it all to provide that experience."

Currently, Apple Computer, with its iPod music player and iTunes music store, is leading the digital-music market. But analysts say Microsoft has plenty of time to catch up.

"They're not late; this game hasn't started yet," said David Card, a Jupiter Research analyst in New York.

Despite the buzz around Apple's iPod, Napster and other online music services, digitally delivered music is still just a tiny fraction of the market, Card said. Jupiter expects the industry to grow from $100 million in sales in 2003 to $1.9 billion in 2009, at which point it will still be just 12 percent of the music market.

Microsoft also points to the market's infancy when asked why it let Apple build up a lead since it launched its iTunes music store in early 2003.

Currently, about 11 million downloaded music tracks are sold each month, compared with 500 million tracks on CDs, according to data provided by Rob Bennett, senior director of MSN Entertainment. Microsoft also found that users conduct 700 million searches for music annually on the MSN Web site.

"That's 700 million opportunities to sell somebody some music," Bennett said.

But selling music is just one goal of MSN Music, which offers a catalog of 1 million tracks priced at 99 cents apiece.

Microsoft expects to make more money from ads than music tracks, said Yusuf Mehdi, corporate vice president of MSN.

Mehdi said Microsoft intends the music store at its MSN site to showcase the company's digital media and search technologies.

"We want to mainstream the music opportunity with MSN Music," he said.

Microsoft also designed a new portable media player built and sold by hardware vendors starting today for about $500.

Unlike Apple's iPod digital music player, Microsoft's "Portable Media Center" device also has a color screen and can play recorded TV and videos and display digital photos. The device is designed to work best with the entertainment-oriented version of Windows.

Microsoft executives are quick to point out that Portable Media Centers are among more than 70 devices that work with the Windows Media format.

"I think we're doing a great step forward ... where we enable that broad range of choice, and we go leaps ahead of Apple in terms of not just one single solution that's closed off to only one set of customers," Fester said.

Apple declined to comment, but it did score a coup when longtime Microsoft ally Hewlett-Packard last week started selling its own version of the iPod instead of one based on Windows.

HP is playing on both sides. It began selling the "hPod" last Friday, but it's also a leading producer of PCs running Microsoft's Media Center software.

"I think it's a good thing to have a choice for consumers," said Tom Anderson, HP's vice president of consumer desktop marketing.

"Unfortunately we're in a situation where there are a number of advocates of how to do digital-rights management," he said. "Apple has one, Microsoft has one and Sony has one, and there's probably others, at least for purchased digital music."

Anderson said HP was evaluating music-store options and Apple offered to let it resell iPods. "There happened to be a number of people in HP that had iPods and used them and just felt like it was the best solution," he said.

Meanwhile, consumers are still weighing their options.

Microsoft's research found several types of potential buyers beyond the young, computer savvy, digital-media enthusiast that it refers to in-house as a "Toby."

There's also "Abby," the person who doesn't want to know all the technical details but just want these things to work for them.

"You could think of her as a soccer mom," said Linda Averett, a product manager on the Windows Media Player team.

Whether the Abbys of the world are ready for Microsoft and digital media remains to be seen, however.

"It's close. I think we're still in kind of the late phases of the early adopter," said HP's Anderson. "I guess our customers will tell us if we made it to the mass market or we're still close."

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com

Copyright © 2004 The Seattle Times Company

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