Apple "Strikes Major Blow" in Streaming Media Market

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: Barry Ritholtz <ritholtz () optonline net>
Date: Tue, 17 Dec 2002 05:45:21 -0500
To: dave () farber net
Subject: Apple Strikes Major Blow in Streaming Media Market

Hi Dave,

I came across a new research 'zine -- "The Online Reporter" -- which
covers "Digital Media Initiatives of the Movie, Music, Computer and
Consumer Electronics Industries." Their current issue has a rather
insightful article on the significance of Apple's new partnership with
Japan's Docomo. Normally, their content is only available as a PDF to
paying subscribers, but they were nice enough to post this article (by
request).

I think the IPers may find it intriguing. (Apologies for the length --
the actual article is about 3 X longer )

Cheers,


Barry L. Ritholtz
Chief Market Strategist
Maxim Group
(516) 918-5529



Apple Strikes Major Blow in Streaming Media Market; Lands QuickTime
Deal with Japan's DoCoMo
http://www.onlinereporter.com/charts/tor327/tor327.html#2

EXCERPT: Japan's leading cell phone carrier NTT DoCoMo, generally
recognized as the most technologically innovative of all the world's
wireless telephone providers, has picked Apple's QuickTime 6 to be its
audio and video platform for future mobile phones. To implement
QuickTime 6 on cell phones, Apple will introduce a modified version of
the stuff this year that supports the 3rd Generation Partnership
Project (3GPP) standard. 3GPP is based on the open MPEG-4 standard for
encoding, decoding and transmitting digital video and audio to PCs,
cell phones, set-top boxes and other wired and wireless
Internet-connected devices. Besides being known for pushing the tech
envelope, DoCoMo has 44 million subscribers in Japan making it one of
the world's largest cell phone service providers.

The Importance of DoCoMo's Decision
The importance of Apple's win cannot be overestimated considering the
enormous size of the cell phone market, the desire for compatibility
that content providers will want when they develop videos to deliver on
both PCs and cell phones, the impact that DoCoMo's backing of an open
standard will have on the world's cell phone makers and service
providers and the resulting influence the decision will have in the PC
streaming market. DoCoMo is not just saying MPEG-4 is good, it's
betting its 3G future on it.

Apple's Exquisite Timing
Apple's 3GPP implementation comes at an opportune time as DoCoMo will
begin delivering three new 3GPP-compliant 3G cell phones in a few
weeks. All three phones will let users view video clips. Content
developers such as news and sports services plus developers of movie
trailers and music video teasers will be able to create videos using
Apple's Final Cut Pro product that can be viewed on DoCoMo's cell
phones.

Every Cell Phone a Video Camera
The three new phones will also have camera lenses so users can record
videos up to 15 seconds long and then e-mail the video files to a PC or
another cell phone user.

QuickTime with 3GPP
The modified QuickTime 6 that supports 3GPP, as yet unnamed, will
output both the current .mov format as well as the new slightly
different .3gp file format. Thousands of content providers will no
doubt buy Apple's software to develop and encode their content for
delivery to DoCoMo's new cell phones. Several hundred Japanese content
developers have been using a pre-released version of the 3GPP QuickTime
to develop video products to deliver to the new phones when DoCoMo
subscribers start getting them by the end of the month. Apple is
careful to emphasize that the 3GPP-compliant QuickTime is not a
splinter or "forked" product. The 3GPP code will be integrated into the
QuickTime core.

DoCoMo Endorsement Sends Aftershocks `Round the World
DoCoMo's QuickTime endorsement will influence other cell phone service
providers as well as cell phone makers everywhere when the time comes
for them to select their preferred video and audio file formats.
DoCoMo's technology moves are carefully watched by the other cell phone
companies because of its reputation as a profit-producing innovator.

Apple Is First with 3GPP Compliance
Apple is the first adherent of the relatively new 3GPP standard. DoCoMo
will become the first service provider to implement it.

"Apple has stood behind the MPEG-4 standard, and we're expanding out to
a whole new platform, going from the PC to the phone system," said
Brian Croll, Apple's senior director of Mac OS product marketing. "This
is exciting for us because the number of people using this standard is
going to explode from people using this phone."

The Big Picture of the Streaming Media Market
MPEG-4 is based on Apple's QuickTime. QuickTime is the base file format
that MPEG-4 is built on. Apple has been preparing QuickTime 6 to
compete with the two entrenched providers of proprietary multimedia
products, Microsoft and RealNetworks. Apple however has suffered two
recent losses. Despite its Hollywood connections, neither Internet
movie service Movielink nor Starz Group that launched in the last few
weeks picked QuickTime probably because it lacks adequate Digital
Rights Management (DRM) software. Movielink selected both Microsoft and
RealNetworks products. Starz selected RealNetworks. Apple says it
intends to fill the product's DRM void with an elegantly executed
solution - but doesn't say when . . .

Microsoft versus the Rest of the World
Apple feels it has put Microsoft in a defensive position where it's
"Microsoft versus the rest of the world" given the number of companies
that have endorsed the MPEG-4 standard. Conceding that in this war each
side probably has equal financial assets (Microsoft has over $40
billion in cash), Apple acknowledges that Microsoft's Windows Media 9
is an incredible technology but claims that it stands on feet of clay
because of its closed, proprietary, Microsoft-controlled architecture.
Microsoft is trying to move companies off of MPEG-2 before they can
adopt MPEG-4 but Apple believes it has "an industry worth of momentum"
behind QuickTime. Calling Microsoft and RealNetworks products "house
brands," Apple and the MPEG-4 contingent swear that there's not room
for three streaming media formats in the market, on PC desktops and
certainly not in small mobile devices like cell phones. They forecast
that most cell phones makers and providers will select MPEG-4 for their
multimedia functions. . .

"No Microsoft-Only Devices"
Coding Technologies' VP and US general manager David Frerichs says,
"There are some devices out there that support Windows Media but there
are a lot of devices that are MPEG-only, and no devices that are
Microsoft-only." He says that despite Microsoft's desire for dominance,
device makers want open standards, because once the product ships,
upgrading a compression codec is impossible. "In the computer world,
it's fairly easy to have a closed standard because you can just
download and install the new codec. In the embedded world, that's
impossible . . ."




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