Microsoft's WM9 Pricing to Draw Battle Lines? - Page 2

Despite Horn's wait-and-see stance, analysts believe a price-war is inevitable, especially with Real's pricing announcement less than a month away.

Steve Vonder Haar, an analyst with Interactive Media Strategies said the battle lines have been drawn and quartered. "What we have here is a fee change in the streaming media platform business that sets off a good old-fashioned platform war," Vonder Haar told internetnews.com. "Historically, the lines of battle had been drawn around the sophistication of the technology but now it has shifted to economics."

Because of this new platform war, Vonder Haar expects MPEG LA to reduce its licensing fees but he argues that the MPEG-4 standard still enjoys a huge fan base among software developers.

"An option [for MPEG LA] would be to come back and try to slash licensing fees in response. But, there are alternatives to pricing. MPEG LA could try to think of other ways to make the standard more appealing, he said. "There's no need for a knee-jerk reaction to Microsoft. They have to realize this is a marathon and not a sprint. The intelligent thing is for MPEG LA to make sure they support developers in an appropriate way," Vonder Haar added.

Yankee Group analyst Adi Kishore agreed. "If you are looking for a shift in pricing on the MPEG LA side, it will not be immediate. In the short run, the price difference will be significant but over the long haul, MPEG-4 can still be a better, cheaper product."

Kishore said MPEG LA's structure as a consortium representing the interests of several companies puts it at a disadvantage because it cannot match Microsoft's every move in a timely manner, but, he still believes MPEG-4 has its own advantages, primarily because it's based on open standards.

Because Microsoft is positioning itself as a full-fledged entertainment provider, on and offline, Kishore suggested money can be lost on one area without hurting the overall digital media strategy. "Microsoft has more flexibility in terms of pricing. They can lose money in one particular area and make it back up in another area. They can undercut pricing -- they have that luxury," Kishore said.

On the flipside, MPEG LA has got a standards-based product with hundreds of companies working to develop it. MPEG-4 is not going to disappear because of Microsoft's pricing," he insisted.

Vonder Haar, too, pointed to MPEG LA's popularity among developers as its trump card. "Microsoft starts this battle in the driver's seat, no doubt about that. They appear committed to devoting the time and resources to making multimedia happen but MPEG LA's biggest advantage is that it is not Microsoft. Don't count out MPEG-4. These are early days."

"Microsoft is doing exactly what they should be doing. RealNetworks is doing exactly what they should be doing. At the end of the day, there will be two camps. The actual fight right now is to see who is going to be the loyal opposition to Microsoft. Is it going to be MPEG-4? Is it going to be Real's Helix? That's the question that will be eventually answered," Vonder Haar predicted.

While the industry awaits RealNetworks' own pricing for the Helix Server, MPEG LA's Horn pleaded for patience. "Before this announcement, the marketplace was uncertain about the cost of Microsoft's codec. There was a time when people said it would be free but it's not. Also, there could be hidden costs in there, we don't know."

"Do you know you will be married to a proprietary technology? Will you have to adopt to any change that Microsoft implements? Those are risks that the industry will have to figure out," Horn added.

He refused to rule out MPEG LA price cuts down the road. "If we determine, based on responses from the market, that the licensing terms need to change, we will bring that to the attention of the patent holders and make a recommendation to that effect. But that's not a short term thing." "I never say never but it's not like I got on the phone immediately after Microsoft's announcement and started fixing a new price.