With news on Thursday that Apple Computer Inc.'s QuickTime player surpassed 250 million downloads, industry analysts say Microsoft and Apple are both poised to take the lead in the streaming media battle. What may make the difference is the level to which each company supports industry standards, an area where Apple has taken the lead so far.
Poised for the coming battle
Apple, Microsoft and Real Networks account for 99 percent of the streaming media market, according to market research firm Frost & Sullivan. While Frost & Sullivan declined to comment directly on specific numbers, a recent report from the researcher shows Microsoft Windows Media at 38.2 percent; QuickTime with 36.8; and Real with 24.9 percent.
"The way I see it, Apple and Microsoft are equally poised -- it can go either way," Mukul Krishna, Frost & Sullivan Digital Media analyst, told MacCentral. "It's not like before when you could say that Microsoft was going to win because Apple doesn't have the penetration -- Apple does have the penetration, it just depends on their strategy."
The strategy that Apple has adopted revolves around standards, namely MPEG-4 (which is based on QuickTime), 3GPP and 3GPP2. Apple sees the growth for QuickTime and these three standards as the future for digital streaming media. For now, that growth will be in the Pacific Rim where the networks are capable of handling video to and from cell phones, but in the future simultaneous growth in the United States and Europe will provide new markets for Apple, Microsoft and Real.
"When it comes to functionality the big three are all in the ballpark," said Krishna. "It all depends on how much flexibility the consumer has and how the carriers want to port the applications. Apple got a head-start with QuickTime and MPEG-4, Microsoft has really caught on and Real has some traction in Europe, but Asia is the market that will decide who will be the market leader."
When a 3G-enabled cell phone captures video, it does so using the MPEG-4 standard -- when that video is sent to a users desktop to be played, it will automatically open up the QuickTime player, giving Apple a tremendous distribution network for its standards compliant software. Analysts agree that the 3G space is a good investment for Apple.
"In terms of investment, it's absolutely a good place for them to focus," said Mike McGuire Research Director Gartner, M2 Media Team.
Not everyone believes in standards
While Apple has jumped headlong into supporting standards, Microsoft and Real don't seem convinced that's the way to go -- Apple continues to invite the two companies to join them to help build standards-compliant streaming media, but to date they are developing without them.
"When we created this whole new area based on standards, we openly invited Real [Networks] and Microsoft to join us because there is no such thing as a standards exclusive," said Frank Casanova, Apple's director of QuickTime product marketing. "Real has joined in sort of a proxy form in that they support standards via plug-ins, but they haven't built it into the core of their architecture -- we encourage them to do so, because that would make the experience better.
"Microsoft unfortunately has a different business model that does not include support for standards in their Windows Media architecture. We really wish they would because we think their support for the MPEG standard would be a great thing for the whole industry," said Casanova.
According to Frost & Sullivan, today's market is leaning more towards MPEG-4 than Microsoft's solution.
"Right now people don't want to be bogged down with Microsoft," said Krishna. "The general feeling in the market is towards MPEG-4 and by default that becomes QuickTime."
Marketshare or money?
There is a big difference between gaining marketshare and making money from marketshare, but Casanova says Apple's current strategy allows for both.
"In the 3G space, we have our QuickTime client and our QuickTime Streaming Server that work perfectly together on the Xserve," said Casanova. "We have an end-to-end content creation, content streaming and playback model that has piqued the interest (and purchase orders) of dozens of telcos [telecommunication companies] around the world. We are selling infrastructure products that is generating a new revenue stream for the company."
Upgrades to QuickTime Pro have also opened a lucrative source of revenue for Apple and while Casanova would not divulge revenue for the QuickTime group he categorized revenue as being "significant" and allowing Apple "to continue investing in QuickTime."
H.264, the next generation video codec
Apple is currently testing what it says is the next generation video codec. First displayed at NAB earlier this year, H.264 or MPEG-4 Part 10 is an advanced HD video codec. Unlike other codecs, H.264 is scalable, allowing content creators to write their content for everything from the newest 3G phones to HD, and everything in between.
With its ability to encode content for so many mediums, Casanova sees uses for H.264 in many of the everyday things we do today, including DVD movies, cable television providers, on-demand television in hotels and next-generation cellular telephones.
"That [H.264] is clearly going to take over," said Casanova. "It will be the most significant video codec that we have ever seen introduced from a quality and efficiency standpoint."
250 million downloads and counting
Casanova said Apple recognizes that some people had downloaded more than one version of the product, but he pointed out other factors that should be taken into account: The 250 million does not include the 225 different digital camera models that ship with QuickTime, multimedia titles, enhanced CDs, content creation tools or updates that are downloaded via the Software Update control panel or through the QuickTime update mechanism.
"We don't even count those in the download number because we don't even know how broad our distribution is in that area," said Casanova. "We are very conservative when we count the downloads. These 250 million downloads are people actually downloading the full package -- it's not incremental."
Apple also isn't counting QuickTime distribution from AOL 9, Sony Vaio and Sony Clie devices, or HP and Chinese PC maker Founder -- HP and Founder pre-install the Windows version of iTunes on their PCs, which includes QuickTime.
The overwhelming majority of QuickTime downloads are from Windows-based PCs. Every shipping Macintosh comes with QuickTime pre-installed and updates are available via Software Update.
"QuickTime is incredibly popular on the PC," said Casanova. "Ninety-five percent of the distribution from our Web site is [Windows] PC-based."
Overall, Apple is pleased with the success of QuickTime in the market and are confident in the direction they are taking the technology with standards-based development.
"We have the fastest growing, most compliant from a standards perspective, and most forward-looking video architecture in the industry," said Casanova. "We are just thrilled with the way our users have continued to come back and get the latest versions. We are honored with these numbers."
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This story, "Apple, Microsoft poised for streaming media battle" was originally published by PCWorld.