Microsoft blows smoke, but will the European Union smell it?

Whereas I devoted a significant amount of research and analysis to the U.S.
Written by David Berlind, Inactive

Whereas I devoted a significant amount of research and analysis to the U.S. government's antitrust proceedings against Microsoft, I've treated the European Union's deliberations over the same as little more than a footnote to the whole Microsoft monopoly saga. But, in light of Microsoft's highly unsubstantiated argument to the EU for a less burdensome settlement recently reported by Reuters, I felt as though that footnote is now worthy of promotion and investigation.

While Microsoft's antitrust dust is settling in the United States, EU regulators are still in a pre-settlement phase, trying to determine what remedies, if any, to Microsoft's alleged monopolistic practices should be ordered.

One remedy under consideration is a requirement that Microsoft remove the Windows Media Player (WMP) from the versions of Windows that are distributed within the European Union's jurisdiction. Many government regulators and Microsoft's competitors believe that when the dominant desktop operating (Windows) ships with other Microsoft applications such as WMP, the competition to those applications (such as RealNetworks RealPlayer) is unfairly stifled. RealNetworks apparently sees it that way. Last month, claiming that Microsoft's predatory practices resulted in substantial loss of revenue, the company slapped Microsoft with a $1 billion lawsuit.

The media player issue is equally important and strikingly similar to two other issues--those regarding Internet Explorer and Java --which were central to the antitrust proceedings against Microsoft because of the key role that developers play in establishing market preferences.

In the case of media players, the EU is intensely interested in the assumption that when a default media playing technology, such as WMP, exists in Windows, end users will establish a preference for that media player. As a result, content developers respond to that preference by publishing content in that player's format before publishing it in other formats, if at all. The thinking is that content developer resources are best spent on the biggest target before considering others. Whereas most players support common media formats such as MP3 and MPEG for playing music or video, they are incompatible when it comes to customizing the presentation of streaming media, and in particular, making the content interactive (something rich content publishers like to do).

Theoretically, a vicious circle ensues. As more content becomes available for one player versus the others, any hope of the others catching up is dashed. In the case of WMP's integration into Windows, that vicious circle runs the additional risk of hurting operating systems (Macintosh, Linux, PalmOS, etc.) that don't have the richest and timeliest support for WMP compared to Microsoft's operating systems and technologies (Windows, PocketPC, X-Box, etc.).

Despite a gag order on the EU's proceedings, the Reuters story reported that Microsoft argued the validity of an EU survey indicating that companies would not spend the extra money necessary to offer their content in other formats, such as RealPlayer and Apple's QuickTime. According to the news report, "Microsoft dismissed the Commission's survey as anecdotal and not statistically valid, adding that companies could afford the cost of offering more than one format."

If the report is true, then Microsoft appears to be suggesting that cost is not a factor when choosing which media players to support.

That notion is ludicrous. The cost of supporting multiple media players versus just one is not insignificant. A financial barrier exists to developing content for any but the most popular player, and it's reasonable to conclude that WMP's market prevalence, due to its inclusion in the most popular desktop operating system, makes it economically infeasible for competing players to compete, much less flourish in an open market.

As a side note, this doesn't mean that the remedy is to remove WMP from Windows.

Before checking in with some multimedia content developers to get their perspective, I checked with Microsoft to confirm the report by Reuters. Microsoft spokesperson Jim Desler emphasized that any news coming out of the hearings should be treated with a grain of salt. According to Desler, "The process is confidential. The entire Reuters story is based on sources that attended the hearing, and it's not a public hearing. It's a closed door hearing."

But Desler confirmed that Microsoft did provide evidence of multiple format support by content owners. "We provided evidence of some companies in Europe to underscore that content owners offer content in multiple formats. Take Disney, for example. It provides content in all four formats; MP3/MPEG, QuickTime, Real, and Windows. Or look at the BBC, which supports both Real and Windows" said Desler. "We were making the point that content owners and providers offer content in multiple formats and if they do, one can conclude that the cost is not prohibitive."

Indeed Disney and the BBC do offer multiple formats. But to imply that all companies have the resources of Disney and the BBC or that their provisioning of multiple formats must therefore mean that the cost is not prohibitive are suppositions that the EU is obligated to examine further. Just a day's worth of investigation would easily call Microsoft's assertions into question.

To get inside the head of a leading multimedia content developer, I didn't have to go far. Within my own company, we have to support two formats-- Real and Microsoft. In addition, we would like to support a third format-Apple's QuickTime. The cost of supporting multiple formats is one we could live without. In the name of technology neutrality, we support both Real and Windows even though the overwhelming majority selects the Windows format.

The costs involve more than just supporting media player formats. You have to support each version of each player in each browser on each operating system, where multiple operating systems are supported, according to Brooke Furey, CNET Network's broadband producer. In addition, you have to test interactivity (which includes dynamically changing, contextual links) and advertisement running in each of those permutations.

The cost to support all those permutations and to test for incompatibilities can more than double what it would cost to develop for just one format, Furey estimated. The main reason for this is that the HTML and JavaScript-based scripting for the RealPlayer and WMP are incompatible with each other.

Multiple format support also raises costs for hosting the streaming media --each supported format requires its own storage.

Granted, when Microsoft's Desler responded, he didn't mention CNET as an example of a provider that supports multiple formats, but I also contacted the BBC and Disney. While my request must still floating around the BBC's Ethernet somewhere (I haven't heard back yet), I talked to Disney Interactive Group (DIG) CTO Doug Parrish. DIG's jurisdiction covers a plethora of recognizable Web destinations including Disney itself, ESPN, ABC, and Movies.com. Parrish confirmed that DIG supports multiple formats. But not in the way you might think, and certainly not in the way that Microsoft's using of Disney as an example would lead you to believe.

With few exceptions says Parrish, "The way we support multiple formats is not the same way that others do. For example, we don't have a button for selecting a preferred player. When someone says we support multiple formats, it means that, independently within each of our properties, we are supporting a single format, but that the format may vary from one offering to the next. For example, ESPN Motion is in Windows Media and is not available in Real or QuickTime. ABC on Demand is done in partnership with Real. You don't get to pick as a user."

Parrish says the rationale for which technology is picked varies from site to site, and is all based on business value. "I don't see any key differences between the two. But, the decisions are internal to the business unit. While I can't say emphatically that there isn't a place where we provide three options, [I can say that if we do it somewhere, then] it's in a low trafficked area."

Based on Parrish's answers, Microsoft's claims that Disney supports multiple formats is technically accurate but fall apart when you look at the individual Disney properties.

If the EU is taking seriously Microsoft's position that the additional costs for supporting multiple formats is not prohibitive (based on the fact that content providers are doing it), then it should closely examine the arguments and, at the very least, the examples provided by the Microsoft.

You can write to me at david.berlind@cnet.com. If you're looking for my commentaries on other IT topics, check the archives.

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