Microsoft's aggressive digital media licensing plan for its new Windows Media 9 Series platform is creating ripples throughout the sector with one firm accusing the software giant of "undermining" the industry with an "unfair" pricing strategy.

Microsoft announced that pricing for its platform would, in some cases, be 50 percent lower than the competing MPEG-4 standard, drawing the ire of backers of the standards-based technology. While analysts are predicting an all-out price war between the rival standards (including RealNetworks, the MPEG LA group overseeing the MPEG-4 patent licensing process believes pricing won't determine the eventual winner.

MPEG LA spokesman Larry Horn dismissed talk of a price war. In an interview with internetnews.com, Horn insisted pricing won't be the determining factor in the race to make MPEG-4 the de facto standard for digital media.

"The marketplace is going to decide this. The licensing terms aren't going to be the factor that makes developers choose one over the other. At the end of the day, it boils down to open-standards versus a proprietary technology. Open standard has its own merits, proprietary has its own risks. We are comfortable letting the marketplace decide this," Horn declared.

Not many are buying this MPEG LA stance. iVAST CEO Elliot Broadwin slammed the Microsoft move in strong language. "In yet another barely cloaked attempt to extend its operating system monopoly to all consumer devices, Microsoft plans to undermine the most promising new audio/video industry standard, MPEG-4," Broadwin said in a statement.

"Is this in the best interests of the consumer? Have we forgotten Microsoft's history of predatory practices?...This is not a time to sit back and watch Microsoft extend its monopoly at the cost of consumer choice just as it has done with operating systems, Web browsers, office productivity, and streaming media software," Broadwin declared.

But Horn is pleading for patience even as another key rival, RealNetworks, is preparing to unveil its own Helix Server initiative, which sources say will mirror Microsoft's aggressive price-based licensing terms. (The server codec and licensing terms for Real's Helix Server will be unveiled at the LinuxWorld show later this month).

"I don't think we're seeing the birth of a price war. First of all, I don't think [Microsoft's] prices are half of what ours are. We have caps on our prices and, for the small user, we have a threshold level, where no royalty is paid. I'm not overly worried about Microsoft and its prices. We have to mind our own knitting," Horn insisted.

Horn did not rule out price cuts from the MPEG LA consortium to stay competitive but he said that's not something the industry should expect in the short term.

"I'm not going to bash Microsoft and I'm not going to predict what our next move will be," Horn said, leaving the door open for the patent holders to tinker with its own licensing plan. "Anything is possible. We try to be responsive to the marketplace but, like I said, licensing terms are not the only deciding factor here."

Unit pricing for Windows Media Video 9 (WMV 9) on devices and non-Windows platforms has been set at 10 cents per decoder, 20 cents per encoder and 25 cents for both encoder/decoder. By comparison, MPEG-4 video is more expensive, with a unit price for decoder, encoder and encoder/decoder licensing of 25 cents, 25 cents and 50 cents, respectively.

Subject to a $1 million annual cap, MPEG LA also has a minimum threshold so that content owners with fewer than 50,000 subscribers aren't subject to royalties. Those fees are applicable to Web site operators that benefit commercially from use of the technology, through either paid advertisements, pay-per-view services or subscriptions.

Industry analysts discuss the pitched digital media battle... See Page 2


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