Windows ME: Microsoft's Streaming Trump Card?

With the coming introduction of Windows Millennium, RealNetworks may soon know what it feels like to be Netscape. The interim update to the operating system may help Microsoft to expand its influence dramatically in the streaming media player market.

Microsoft's September release of Windows ME -- a $59.95 update to Windows 98, geared specifically for home consumers -- could have a significant impact on the media player landscape. The suite is loaded with multimedia plug-ins, most notably the Windows Media Player. The upgrade also contains other features to help users create home movies and digital photo albums. The release is a clear sign that Microsoft hopes to capture a larger share of the digital A/V market – streaming in particular.

Bundling – particularly bundling key applications with its ubiquitous operating systems -- has historically been a powerful strategy for Microsoft. This clearly begs the question of whether or not the Windows ME packaging of the Windows Media Player is a recast of the Windows 95/Internet Explorer scenario that drove IE to dominance -- and Netscape to AOL.

"The bundling concept is very powerful, and it has been for [Microsoft]traditionally," said Malcolm Maclachlan, an analyst with IDC. And while RealPlayer still leads the market, with RealNetworks claiming more than 135 million unique users, the Windows Media Player has had a stealth success so far.

According to a December 1999 IDC survey on player usage, 11 percent ofrespondents said they used Windows Media Player. But another 25 percent said they didn't know what player they used, that the player was either "in the browser" or "just there" -- strong indications that they were using the Windows Media Player and didn't even know it, explained Maclachlan.

A Real Advantage?

The release of Windows ME will likely make life harder for Real, predicted Sujata Ramnarayan, senior analyst at the Gartner Group. Still, there is a lot of content delivered on the Real platform, and a large installed base of RealPlayer users -- both factors working in favor of the RealPlayer, she said.

In fact, 85 percent of streaming content on the Web is created in the Real format, according to Real spokesperson Erika Shaffer. Coupled with the large installed base, Real is confident the release of Windows ME will have little to no impact on Real's success. "It's a new version of an operating system. We're not an [operating system] company," she said.

She also points out that the two companies have been competing with their players for three to four years now, and that hasn't hurt Real's growth and market position. "The thing about this industry is that content drives it," she said.

To that end, one of Real's advantages lies in the fact that Linux and Unix continue to be the primary server platforms for streaming. Real's streaming technology supports these platforms, while Windows streaming does not, said Ramnarayan. "It is important for Real not only to have a large installed base of players, but also to have content available in [the] Real format so the players are used," she said.

Creating a Market Presence

But while content may drive the streaming phenomenon, and technology forms the foundation of the streaming industry, marketing strategies cannot be discounted – particularly in the case of Microsoft. Real has been trying to compete as a content portal, but will need to continue to take its business in new directions, said Maclachlan.

Last week, the company announced the introduction of a new subscription service to deliver exclusive content like games, videos and music. The "GoldPass" service will cost users about $10 a month.

But this divergence -- and near-monthly shifts in its strategy -- is confusing the marketplace, said Emily Meehan, an analyst with the Yankee Group. Microsoft has a huge advantage in being able to bundle add-ons with its operating systems, she said. "Real probably sees its dominance being eaten away. Real has to pound the pavement and create its own presence," she said.

Meanwhile, Apple's QuickTime player, while lacking the numbers of Windows Media Player and RealPlayer, is likely to remain in the wings during this drama. The platform will always have a niche due to the popularity of Macintosh computers, according to Ramnarayan. Meehan added, "QuickTime is the Sprite in the Coke and Pepsi market."