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Windows XP: A
bundle of trouble? When Microsoft
releases Windows XP in October, will smaller software companies benefit
from jumping aboard the bandwagon or be run over by it? That's a question
Microsoft critics, consumers and some software companies are asking as the
software giant prepares to dump more features into Windows XP than into
any version of its ubiquitous operating system since Windows 95. Windows XP--the
upgrade to versions 95, 98, Me and 2000--goes on
sale Oct. 25. Microsoft says the new OS will be the company's biggest
and costliest product launch ever--twice as much as Windows 95's
coming-out party. Among the new
features: an Internet firewall, an integrated media player with CD-burning
and DVD-playback features, remote access tools, moviemaking and
photo-editing software, wireless capabilities, broadband networking and
Internet messaging. The long list of new
features potentially puts an even longer list of companies in Microsoft's
crosshairs, including Adobe Systems, Apple Computer, AOL Time Warner,
Corel, InterVideo, MGI, Netopia, Network Ice, RealNetworks, Roxio, Ulead,
Zone Labs, Symantec and as many as 20 other companies. These companies should
be concerned about the new Windows features competing against their
standalone products, said Guernsey Research analyst Chris LeTocq. While
some of the additions are inferior in capability to third-party products,
according to analysts, many buyers will likely be content to use what
Microsoft provides. "So those
features don't look like much, but then what happens?" LeTocq said.
"The next release of Microsoft's operating system comes out with
enough features so that, for most people, they don't need anything else.
The range of the market that is addressed by the others' products is
diminished dramatically." Forrester
Research analyst Frank Gillett added: "People could look at
what's there and use that as a jumping-off point to another product with
more features. But the opposite is just as plausible, where they think
what Microsoft put in is enough and they don't look for anything
else." Gillett noted that
Windows XP extends some features from Windows Me, such as Web publishing,
photo printing and photo manipulation, that could create new road kill.
"Adobe certainly is potentially affected," he said. Adding more features
to Windows is not unusual, Gartner
analyst Michael Silver said. "We've seen this before with compression
tools, IP stacks and whatever. It does hurt to some extent, but there's
not a lot you can do about it." Microsoft has long
maintained that not only does it have a right to add new features to the
OS, but its customers benefit from the improvements. For smaller
competitors, however, Microsoft's decision to bundle technology into
Windows can be devastating. As an extreme example, Microsoft's decision to
bundle its Web browser with Windows in 1996 is credited with helping
Microsoft win the browser war against Netscape Communications' Navigator
and has been a key issue in the antitrust
case that is awaiting a decision by a federal Court of Appeals. When the company
included data-compression software into its DOS operating system in 1993,
it triggered a legal battle with Stac Electronics, then the market leader
in compression software, over patent infringement. Microsoft later lost
the Stac case for $120 million and was ordered to recall versions of its
software with the technology. It later settled with Stac for $83 million
by promising not to appeal. From another
perspective, some of the new features In Windows XP are so inferior to
third-party products that they pose no threat at all, say analysts and
software developers. Windows Media Player, for example, relies on
third-party products to fully function and so doesn't necessarily work the
way Microsoft promises without them. Some software companies say that
being included in the operating system actually boosts sales. In the crosshairs? The first category is
easily defined and has more to do with hardware makers than with those
developing software, analysts say. By adding moviemaking and photo-editing
features, for example, Microsoft could help digital camera and camcorder
sales. Support for wireless could be boon for 802.11B wireless networking.
But other features,
such as the inclusion of a personal firewall or broadband sharing, could
hurt some companies selling routers used for home networking and cable
connections, Gillett said. "There's no question these could hurt
these hardware manufacturers," he said. Interestingly, few
companies appear concerned about Windows XP's newest features--at least
publicly. "We're very
excited about Windows XP and are doing whatever we can to take advantage
of what Microsoft is introducing there," said MGI spokesman Shelly
Sofer. The Toronto-based company is best known for its PhotoSuite
image-editing and VideoWave moviemaking software. Sofer said that adding
moviemaking capabilities to Windows Me was viewed by MGI as a good thing.
For example, MGI's video business has doubled since that operating
system's introduction. "In some ways
there's an advantage to being included in the operating system, because
everyone gets a taste of that functionality," said NPD
Intelect analyst Stephen Baker. "If you can provide a solution
that enhances what's in the operating system--that has some demonstrable
benefit--and you're good at sales and marketing, you can turn that to an
advantage." In the case of Windows
XP, Microsoft has added so many digital media features that some companies
could benefit "if they recognize the opportunity," Sofer said. "What XP does is
it creates a whole new playing field," he explained. "It creates
an opportunity for new players to come into the market almost on an equal
footing with more established companies. XP almost helps the little guy
become a big player." But Tom Powledge,
Symantec's security products group product manager, said staying ahead of
Microsoft means offering more before the features show up in Windows. "If you look back
on the utility and how Microsoft has put things in the operating system,
there's always the need for us to stay innovative and close to the
customer to add value beyond what's in the operating system," he
said. "We compete against the operating system by staying ahead
technologically, staying close to customers and solving customer
problems." Media player or
media bust? With Windows XP,
Microsoft will for the first time integrate
Windows Media Player into the operating system. Unlike earlier versions,
Windows Media Player will be available only with Windows XP "because
it relies on features that are part of the operating system," said
Shawn Sanford, Microsoft's group product manager for Windows. Roxio provided the
basic CD-burning engine, which Tom Shea, the company's chief operating
officer, described as "very limited CD-burning functionality. What
they are getting from us is a very limited CD-burn engine. They have done
their own version on top of that to integrate that into their file manager
and some of their applications." In fact, Microsoft did
so little to improve the core burning capabilities that Shea sees
"huge upgrade potential" to Roxio's flagship CD Creator 5
software. Already, 40 percent of Roxio's business comes from upgrades of
its software shipped with the CD burner. Shea said he "doesn't see
that changing." Still, Windows Media
Player 8 could pose problems for other companies offering streaming video
players, such as Apple and RealNetworks. Steve Banfield,
general manager of RealNetworks' consumer products, dismissed any threat
Windows XP poses on the streaming media front. "That Microsoft is
bundling Windows Media Player in XP is pretty much a non-event." Guernsey's LeTocq sees
a more obvious reason for Windows Media Player 8 to cast off users: With
this version, Microsoft reduced the recording quality of MP3, the most
popular digital music format. "What Microsoft
has done is cut the record quality in half, so that people will want to
use the Windows Media Audio (WMA) format instead," LeTocq said. While
the typical minimum for recording MP3s is 128kbps, Windows Media Player
offers one option: 56kbps. "They want to
force people to WMA and make it the standard for digital music,"
LeTocq said. "But I think Microsoft will have a tough time displacing
MP3. The other major
feature of the new media player is DVD playback, for which Microsoft
offers sophisticated controls and smooth full-screen viewing. There's just
one problem: On its own, "the DVD doesn't work," LeTocq said. Microsoft doesn't
provide the decoder necessary to make the playback work. For that, Windows
XP users need software such as InterVideo's WinDVD or MGI's SoftDVD so
that Windows Media Player can function fully. Sanford said Microsoft
doesn't need the decoders because PC makers include them with the
hardware. But the same could be said of CD-burning software, analysts
noted. "They're kind of
apples to oranges," Sanford said about comparing CD-burning software
and DVD-playback software provided by PC makers. "When you look at a
DVD decoder, you're talking about rights to playback. There's a licensing
fee involved there." Silver said the reason
is clear: "Microsoft tries not to pay royalties on most of the
stuff."
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