While Microsoft Corp. took the opportunity to announce a handful of new digital entertainment partnerships at the International Consumer Electronics Show (CES) in Las Vegas this week, the company has yet to unveil any broad-based initiatives to catapult it to the center of the digital music world.
Evidence has emerged that the company could be pursuing a partnership with Sony Corp. to take on current digital music star Apple Computer Inc., however. Apple’s success with its iPod digital music player and iTunes online music store has become the envy of the industry, and Microsoft looks keen to get in on the action.
Microsoft Chairman Bill Gates was quoted in The Wall Street Journal Thursday as saying that both Microsoft and Sony have incentive to work together on digital music “infrastructure,” including online music services and copyright protection.
Microsoft declined to comment further on Gates’ remarks Thursday, but issued a statement saying that the companies have ongoing conversations on a number of topics where their technologies intersect.
Sony declined to comment on the report of a possible partnership.
During a keynote address at CES on Wednesday, Gates highlighted agreements with Yahoo Inc., MTV Networks Inc., Tivo Inc. and Fox Sports aimed at increasing the amount of digital content distributed through its Web sites and mobile software but made no public mention of Sony.
Jupiter Research digital music analyst Mark Mulligan said he was unaware of any cooperation between the two companies, but that a deal would make sense if it focused on standards for delivering music in multiple formats.
But both Mulligan and RedMonk LLC analyst James Governor expressed concern over collaboration on digital rights management (DRM), or copyright protection technology, which could lock out other digital music industry players.
“I am very worried about DRM because if Microsoft and Sony control the future of DRM they control the future of digital music,” Governor said, noting how Sony’s broad music catalog and devices could be leveraged with Microsoft’s software prowess.
Current digital music market leader Apple has come under criticism on the DRM front from critics who accuse the company of locking iPod users into the iTunes music store. IPods don’t support songs purchased from other online music services, such as Napster LLC, which use a different format and different DRM. Apple uses the AAC format and its FairPlay DRM, which it refuses to license.
Microsoft should be wary of any digital music deal that shuts out software partners since it is primarily a software company, Mulligan said. And although the company clearly wants to make its Windows Media Audio format the de facto standard for digital music, it can’t risk isolating partners, he said.
“Microsoft has been treading quite a delicate line,” Mulligan said.
That’s why a partnership involving industry standards and best practices would make the most sense, the analysts said. Governor likened a potential deal to Microsoft’s cooperation with IBM Corp. on Web services.
And like with IBM, collaboration between the two formally contentious companies would be driven by a mutual desire to get a better grip on the market.
It would be “a shotgun wedding,” Governor said.
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