Separately, Sun Microsystems Inc. and RealNetworks of Seattle announced a partnership under which RealNetworks will develop versions of its software for Sun's computers and servers running Sun's Solaris operating system.
NetShow 3.0, which is Microsoft's latest version of its so-called streaming audio and video software, is expected to make video accessible to more Internet users, since it uses less memory than current software, Microsoft said.
"Up until now, the Internet phenomenon has mostly been one of publishing text," Bob Muglia, vice president of server applications at Microsoft said in an interview. "But for those of us raised with television, having the experience of video is becoming more important."
Others supporting the new software are Bloomberg News and Warner Bros. Online.
CNN, which currently shows news video clips on its Web site, said it plans to use the new software to build a large archive of video clips and to enhance the quality of its video and audio clips.
"It's still not broadcast quality by any means, but it's getting closer," Mark Bernstein, vice president and general manager of CNN Interactive, said.
Microsoft plans to make the software available for testing within two weeks and launch it later this year.
More than 12,000 Web sites on the Internet contained some video clips in 1997 -- triple the number in 1996, according to the Multipmedia Research Group. It projects that figure will continue to triple in the coming years.
RealNetworks is the developer of the most widely used streaming audio and video software on the Internet. So-called streaming technology is a way of moving video and audio more easily over the Internet.
The company founded by former Microsoft executive Rob Glaser is under attack from Glaser's former employer.
"They will be in pretty heavy duty competition," Alan Weiner, a Dataquest Inc. analyst, said.
"(Microsoft's) NetShow is taking dead aim at RealNetworks in terms of the dominance of streaming video. As the pipes get fatter, streaming media servers will be the backbone to serve all kinds of content in the future. It's important to establish dominance now," he said.