Years ago my father went to the electronics store to bring home a video deck for the family. Not knowing the difference between the two types of VCRs, he pondered purchasing a Betamax, only to be shrewdly steered away by my mother for the more consumer-friendly VHS machine (thanks Mom). A year later, VHS had become the dominant format, and whenever we went to the video store to rent a movie, we couldn't help but chuckle at the helpless souls selecting a movie from the paltry beta section.
While visiting my parents' home this past holiday season, I wanted to show my father a story on CNN.com about a new concept car, mainly because the story contained both text and video. Since my father is not known for his Internet expertise, I thought he would get a kick out of the ability to view a video clip on demand. But when we selected the link to the video, a pop-up window appeared and asked us which format we wanted: QuickTime, Real, or Windows Media. I turned to my father and asked which format he preferred, to which he replied, "What's the difference?" Suddenly I began having Beta flashbacks.
At this point I could have gone on and on about the differences between the formats, but to tell you the truth, it didn't seem that significant since each format does basically the same thing. I decided to select the QuickTime format, only to find that my father's computer didn't have QuickTime installed. Next I chose RealPlayer, and was told that I needed to upgrade my player to play the clip. Luckily the Windows Media format worked, or my father would've been telling his golf buddies the next morning that he was worried his son might be better off getting a job outside of the Web industry.
After we watched the video clip, my Dad raised some interesting questions:
While streaming media is still in its infancy, little progress has been made since RealNetworks emerged five years ago. The codecs used today aren't capable of delivering a high-quality presentation over low and mid-range connections, and widespread broadband deployment is still a long way off. While each format claims to be superior to the competition, the increasingly heated war over market share hasn't spurred any major improvements in the technology. The majority of the streaming clips I see today are just as bad as the clips I watched two years ago.
At the end of 2000, the streaming media industry was quick to boast of a successful year, pointing to a 65 percent growth in streaming media downloads -- from 21 million in 1999 to 34.7 million in 2000, according to Nielsen/NetRatings. However, these figures are misleading, as there was only an 8 percent increase in number of Web surfers who accessed some form of streaming media in the past year, while access to the Web rose 30 percent.
The streaming media industry would undeniably be better off if the streaming media companies could agree on interoperable standards, simplifying the end-user experience. Yet none of the big three streaming media formats are showing signs of "the Betamax syndrome" and they also aren't showing any signs of convergence.
Apple Computer (parents of QuickTime) made the first step toward creating a common standard, when they open-sourced their streaming software last year. They have also joined the Internet Streaming Media Alliance (ISMA), along with such IT heavyweights as Cisco, Sun Microsystems, Philips, and other industry leaders in an effort to promote open streaming media standards. The first standard the ISMA is promoting is MPEG-4, an audio/video compression format that has been adopted by the ISO, and it could very well change the way we get online media content.
The MPEG-4 format was designed to use high-compression ratios for deployment of video and audio over the Internet without a loss in quality. To do this, it looks at data as audio-video objects that can be manipulated and encoded independently, instead of treating the data as a continuous stream.
When the data is broken up into objects, static objects (like backgrounds) only need to be encoded once. The data is then encoded as 16x16 or 8x8 pixel blocks, encoding the object only if it changes (as opposed to encoding each frame). If you have a speaker standing in front of a static background, there isn't a lot of change in video objects. This means there is less data to encode, which translates to a smaller file size without a loss in quality. The format also offers a wide range of bit rates for transmission over the Internet (from 10 Kbps to 10 Mbps) to improve the user experience.
MPEG-4 could be a viable format to push streaming media into the mainstream business, entertainment, and education sectors. Yet in order for the format to succeed, it will need to be an adopted standard by market leaders Microsoft and RealNetworks, who continue to pursue separate paths and don't look to be joining ISMA anytime in the near future.
RealNetworks certainly had a busy year. They shook up the streaming industry when a licensing agreement was made with Microsoft allowing Real to include Windows Media technology in its products. They also made an agreement with Apple to allow RealServer 8 to support the delivery of QuickTime content.
In addition, RealNetworks announced that they've been working with Intel to develop streaming media software that rivals the quality of DVD, and revealed this technology with the unveiling of RealSystem 8. And its agreement with AOL makes RealNetworks the sole provider of streaming media for the largest ISP in the world; its software now comes bundled with AOL 6.0. As the AOL and Time Warner merger has gone through, you can bet you'll be seeing plenty of movies, music, and TV shows ready for distribution from Real.
RealNetworks also decided to step outside its role as a software company when it launched a subscription service to provide music and video content. While the subscription model has failed to gain steam, Real's free Take5 service became one of the top sources of on-demand media.
While RealNetworks is still the No. 1 choice for streaming media, its market share has been whittled down dramatically over the last two years by the Windows Media Player. Rob Glaser, RealNetwork's chairman and CEO, recently announced that the company's profits would only be up $.02 a share as opposed to the $.04 analysts were predicting. Its stock has now plummeted, with a huge drop following from the news that they would be licensing Windows Media technology. They held a 52-week high of $96 a share, and then dropped like a stone to a low of just over $5 a share.
Where RealNetworks is dependent on the streaming industry, Microsoft has other sources of income. Seeing that Real made a chunk of money by licensing its software, Microsoft began giving its streaming bundle away. In doing so, Microsoft is forcing RealNetworks' industry into a commodity market.
Microsoft also has a leg up on both Real and QuickTime as their Media Player software comes with every Windows PC purchased, and the ME edition of Windows comes with both Windows Media Player 7 (WMP7) and Windows Movie Maker, which directly competes with the Macintosh's popular digital movie feature.
While this year saw Microsoft chip even further into RealNetworks' lead, a big part of the momentum came from its release of WMP7, which has been called the first all-in-one media browser. You can rip CDs to your hard drive (but only in the WMF format), burn CDs, surf the Microsoft media guide, and change the look of the player through different skins -- all within the same application, effectively making dinosaurs out of QuickTime and RealPlayer.
Microsoft's agreement with EMI earlier this year brought the largest single release of digital music on the Web by a major record label, and the catalog is easily accessible through WMP7. Microsoft scored big again this November, when Warner Music Group decided to use Microsoft Windows Media to deliver secure music downloads over the Internet (thus creating a conflict of interest in the agreement between AOL and RealNetworks).
To combat the Intel/RealNetworks partnership, Microsoft unveiled Windows Media Audio and Video 8 beta at this year's Streaming Media West conference. This technology claims to have a 30 percent compression improvement and near-DVD quality video across Internet connections as low as 500 Kbps, and near-CD quality audio streams on a 48 Kbps connection.
According to president of the non-profit Streaming Media Alliance, Gayle Essary, multinational corporations will take a "grand leap" into streaming in 2001. Can the promise of streaming technology be realized without a single standard for service providers, network operators, equipment suppliers, content providers, and end-users? While the technology looks to be a multi-billion industry, how can we embrace this technology when it can't agree with itself? Will the battle over a dominant format stagnate the development of the technology, or spawn a better product?
The promise of a booming streaming media industry can be realized with cooperation, but many obstacles remain. While a common standard may be beneficial for the general community, RealNetworks and Windows Media have shown they are determined to push their proprietary formats on the rest of the world. As traditional media and online media converge, there will be an ongoing demand for a common format for everyone, both supplier and end-user. Then my father won't have an opportunity to choose a soon-to-be-obsolete product, and he can tell his golf buddies that I knew what I was doing all along.
Steve McCannell is a writer/producer for the O'Reilly Network and the founder of Lost Dog Found Music.
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