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The music industry, led by the EMI Group, presented Microsoft (Nasdaq: MSFT) with a "wish list" yesterday of what it would like to see in the next version of the Windows operating system, codenamed Longhorn, scheduled for release in late 2006.
Microsoft requested the wish list from EMI, according to a source close to the negotiations who spoke to TechNewsWorld who spoke to TechNewsWorld on the condition of anonymity.
The source would not reveal any details of the wish list, but said, "It will make sure that CDs with third-party CD protection are treated in a way that provides the best possible user experience and the greatest level of security for the labels and the artists."
The Right Way
"The feeling is," the source continued, "if you do provide things like DRM [Digital Rights Management] portability, if you support every DRM standard and every portable player out there, if you support every jukebox that anyone would ever want to use, if you allow consumers to make back up copies of their CDs -- if all that is done in a rights managed way, then consumers won't care that they can't just rip into MP3."
The source praised Microsoft's openness in the Longhorn development process. "They're doing it the right way," the source said. "They're starting early, and, just as they did with Service Pack 2 in working with all the anti-virus and firewall vendors, they're working with the labels and the software vendors for CD protection, making sure it's tightly integrated into the operating system so you have better effectiveness against ripping and a seamless experience for the user."
Apple Discounted
Asked if efforts would be made to get the largest seller of online music to alter the operating system for its computers to recognize CD protection schemes, the source responded, "The majority of iPod users are PC-based iPod users so from that point of view, Apple (Nasdaq: AAPL) is covered from Windows.
"From a Mac point of view, it's less than one percent of the PC population. In the minds of the labels, it's not posing a revenue threat in terms of volume.
"If you just cover the PC platform and left one percent of the rest of the market ripping into MP3s, you probably don't lose a lot of sleep over it."
Could Impact OS Sales
Microsoft has to walk the DRM line very carefully, according to Matt Rosoff, an analyst with Directions on Microsoft in Kirkland, Washington. "They have to give the record companies some of what they want, but recently Microsoft has been stepping the other way and giving consumers what they want," he told TechNewsWorld.
If the software colossus is perceived as being too cozy with the recording industry, it could have a negative impact on future operating system sales, maintained Jarad Carleton, an IT industry analyst with Frost & Sullivan in Palo Alto, California.
"Seeing indications of record industry pressure on the software companies that make operating systems will without a doubt have an effect on new OS sales if the record industry succeeds," he told TechNewsWorld via e-mail.
Last Line of Defense
According to Carleton, "Word of new restrictions will get out rapidly among the tech savvy, and upgrades to the new version of Windows will be sluggish in the SOHO market if Microsoft (or Apple with it's future OS upgrade) cave into overly restrictive record industry demands."
"It's sad, but true," he lamented, "that these software firms are one of the last lines of defense for the mass consumer market that is concerned about upholding the legal concept of fair use."
Babble Means More Bucks
Other analysts were skeptical of the sincerity of the record industry's negotiations with Microsoft.
"Music companies are actually generating some real revenue from downloads now -- surprisingly, more from ring tones than whole songs," Ray Wagner, a research vice president at the Gartner (NYSE: IT) Group in Stamford, Connecticut, told TechNewsWorld via e-mail. "I think they actually recognize a benefit from the current environment of multiple, mostly incompatible standards, since it means people might have to buy things multiple times."
"This is anti-user, of course, but the music industry has been partial to 'what the market will bear' for some time, and in the absence of a completely controllable DRM mechanism, they will be unlikely to move in any unified fashion," he added.
End of CD?
While recent record industry moves are aimed at increasing CD sales, those moves could have the opposite effect, argues Rob Enderle, president and principal analyst with the Enderle Group in San Jose, California.
"We're looking at the countdown for obsolescence of CDs," he told TechNewsWorld.
"What the record industry is going to do by driving this particular scheme
through is probably drive people away from CD purchases," he said. "It's
not
Microsoft that's driving that but the record industry itself."
