e.Digital Corporation (fka EDIG)

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MP3 Rivals Find Consumer Acceptance Elusive
by Mark Lewis, June 18, 2001
http://news.webnoize.com/item.rs?ID=13402

Continuing a three-year fight to displace MP3 as a digital audio standard, everyone from Microsoft to open-source developers are butting their heads against interoperability and a lack of consumer acceptance.

Since 1999, a string of challengers have sought to topple MP3 by appealing to a particular section of the digital distribution chain. AT&T and Dolby's Advanced Audio Coding (AAC) and Lucent Technologies' EPAC tried to win the content industry by carrying the torches of better fidelity and compression, but neither was used in enough consumer encoding applications to dislodge MP3 [see 06.10.99 Bottling Digital Music: To MP3 or Not MP3].

But new challengers keep appearing, now trying to serve the music industry's prime requirements for copy-control to reduce piracy and access-control to institute "pay per listen" services.

Several small firms have tried to deliver security, but RealNetworks and Microsoft's mass distribution of millions of software players have pushed their firms to the top. Despite Real's alliance with three major labels in a forthcoming subscription service called MusicNet, some analysts and engineers see new signs that Microsoft's Windows Media could top Real. That's because Microsoft has fortified its rights management technology by deeply connecting it to its globally dominant PC operating system (OS); it's even engineered security technology so that a software hack won't work on machines other than the one used to create it. What's more, Microsoft plans to integrate its media player into its OS in the same way it bundled its Internet browser several years ago.

Microsoft's main target is acceptance by the content industry. Consumers are supposed to be tugged along because Windows Media offers them higher compression and supposedly saves them the hassle of downloading multiple plug-ins, said Geordie Wilson, a Windows Media product manager. According to Wilson, Real's early success in MusicNet with AOL Time Warner, EMI Group and Bertelsmann won't lock Microsoft out, because "the labels are interested in ultimately working with a variety of partners." Yet systems will have to work together, challenging Microsoft's long-standing view that its server software, operating system, player and rights management technology will become an interoperable standard.

"I'm not sure [interoperability] is a problem that needs to be solved right now," Wilson said. "One of the benefits, I suppose, of the kind of competition you have going on right now is that you have many companies, many parties, working very hard to build a better mouse trap."

Yet the standardization afforded by MP3 -- despite its outdated compression technology and impoverished fidelity -- was one of the main reasons that jukebox developers and device manufacturers have supported the format.

"I don't understand where the incentive is for software developers and device manufacturers to create the babble of competing formats, when their model of success revolves around MP3," said Eric Scheirer, an analyst with Forrester Research, based in Cambridge, Mass.

Like Microsoft, Thomson Multimedia is pushing a new format: a high-octane version of MP3 called MP3Pro that could earn Thomson royalty fees and advance its device business over rivals SonicBlue and Sony Electronics. The availability of jukebox encoders and interoperability with Microsoft's forthcoming XP operating system could determine MP3Pro's fate, though the MP3 namesake and better compression may lure consumers away from Windows Media [see 06.15.01 Thomson Counts on CE Makers, Consumers to Adopt New MP3 Format].

Once a defender of format neutrality, RealNetworks has become increasingly proprietary in its move to construct the MusicNet's platform, which will have to be used by distributors such as Napster and America Online. By sealing music from three major labels in its own software environment, Real gains control over consumer relationships and can further explore audience-driven business models.

Yet lingering questions about MusicNet's usage restrictions -- and the fundamental issue of whether consumers want "subscription rental" music -- mean that Real could be placing a narrow bet. Real's comeback strategy could still be a multi-format environment, and some analysts expect to see a relationship with Universal Music Group's subscription service PressPlay, which will compete with MusicNet.

Outside the margins of proprietary software is Xiphophorus' Ogg Vorbis, an open-source compression technology that developers can use free of charge. But device support from heavyweights such as SonicBlue, Thomson, Samsung and Sony continues to elude developers. According to Scheirer, the technology may a better candidate for video game developers, since they won't have to pay royalties on the hidden software that plays background music in games [see 11.22.00 Quietly Slipping into Audio Software, Vorbis Wants to Dethrone MP3].

The fate of Sony's ATRAC3 is less clear than AAC, the engine behind Universal's first download system and a strong candidate for the two companies' subscription service Pressplay. Some Sony Electronics' devices, of course, support ATRAC3, but other device manufacturers have been anxious since last fall to narrow the number of formats they support. Doubts about multiple music labels supporting either of those formats have caused some device manufacturers to place their bets with MP3 and Windows [see 01.24.01 Universal Source Says Sony Plans to Obtain Important Download Technology from Universal].

The lack of widespread applications that allow consumers to record their CDs to AAC and ATRAC3 haven't made the two formats powerful candidates for mass consumer adoption either. And Dolby Labs' aggressive attempts to prevent unlicensed AAC encoders may have worked against the technology, reserving it for a clique of content companies that promise to only use it alongside encryption technology [see 11.21.00 Pressured by Dolby, Open-Source Audio Developer Takes Down Software].