How music labels, Hollywood studios and consumers answer that question could determine whether the software giant dominates digital media the way it does Web browsers or desktop productivity applications, say analysts. The Redmond, Wash.-based company is engaged in a tried-and-true tactic of giving away highly valuable technology as a means of getting a foothold in an emerging market. The strategy, which was instrumental in Microsoft"s victory in the so-called browser wars, is replaying in the digital media market.
The stakes may be as high; analysts see digital media, like the rise of the Web, as driving the next great wave of PC sales. Microsoft, not surprisingly, wants to make sure Windows becomes a "preferred platform" for using digital media," said Directions on Microsoft analyst Matt Rosoff.
In mid-January, Microsoft unveiled a new toolkit that would let record labels create music CDs containing, along with the normal tracks, pre-ripped Windows Media versions suitable for uploading to a buyer"s MP3-type player or PC, but protected by Microsoft"s digital rights management (DRM) technology to prevent copying and swapping. The toolkit, the DRM license and the use of the Windows Media Audio format is free for the labels, despite Microsoft"s $500 million investment developing what many analysts regard as the best DRM technology available today.