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Thursday, January 06, 2005

Microsoft + Sony Alliance : Two Laggards Come Together!!

( Via WSJ) Microsoft Corp. has watched with envy as Apple Computer Inc. and its slick iPods have stolen the digital-music spotlight. Now the software titan is fighting back. Microsoft is enlisting a raft of new allies for its growing ambitions in digital entertainment and even may pursue an alliance with another industry giant galled by Apple's runaway success: Sony Corp.
At the Consumer Electronics Show in Las Vegas, Microsoft Chairman Bill Gates outlined agreements with Viacom Inc.'s MTV Networks, digital-video-recorder pioneer TiVo Inc., Yahoo Inc. and others to make more music and TV programming available through Microsoft Web sites and on devices using Microsoft software.And in an interview earlier this week, Mr. Gates suggested that both Microsoft and Sony could benefit from a broad partnership in digital entertainment. Specifically, Mr. Gates said that both companies "have a lot of incentive to work together" in digital-music "infrastructure," including online-music services and protection against improper music copying.The alliances, including a potential Sony relationship, are part of Microsoft's effort to portray itself as a defender of "choice" in digital entertainment, particularly against Apple. Apple controls commanding shares of both the market for digital-music players, with its iPod, and for online music sales, with its iTunes music-downloading service. But iTunes sells its songs in a format that can be played only on iPods -- not on the many brands of portable music players that are based on Microsoft's software. That puts these players at a disadvantage, Microsoft contends."We've got to get to the point where people see the choice -- the choice of how they buy and the choice of the device they use -- as being a huge plus," Mr. Gates said in the interview.
Mr. Gates's comments about Sony are intriguing because Sony is a highly coveted, albeit troubled, potential partner in digital music. Sony controls a record label, and has long been a leading maker of consumer audio devices, including its famous Walkman portable music players. But the Japanese giant has lagged far behind Apple and others in the new digital-music realm. Apple Chief Executive Steve Jobs has wooed Sony with a range of partnerships but complained last year about Sony's unwillingness to cooperate.
As a seed of possible collaboration between Microsoft and Sony, Mr. Gates pointed to both companies' involvement in Intertrust Technologies Corp., which makes software for sending copy-protected music and other content over the Internet. Sony owns a stake in Intertrust and Microsoft last year licensed Intertrust's software and patents as part of a $440 million settlement of a lawsuit that claimed Microsoft had infringed on Intertrust's patents.Asked whether Microsoft and Sony are discussing a broad digital-entertainment pairing, Mr. Gates replied, "We're always talking about all sorts of mutually beneficial things with Sony but we have nothing specific to say about a particular discussion." Sony declined to comment on the possibility of joining forces with Microsoft in the digital-entertainment business.Microsoft and Sony already cooperate in some areas. Sony's Vaio-brand PCs, as do most computers, use Microsoft's Windows operating system. And Sony has agreed to use Microsoft's video-compression format in a new type of video disc, known as Blu-ray. Yet Sony has resisted using Microsoft entertainment software such as Windows Media in its gadgets.
But Sony is falling behind in digital music, which may make the company more amenable to teaming up. Sony's online music service, called Connect, has been a flop and the company has yet to field a hit portable digital-music player. In November Sony revamped its digital-entertainment business, merging its digital-music and movie businesses under a new Sony division called Connect Co. and appointing two top-level managers to oversee the unit.In recent interviews, the Connect executive team said Sony is more willing to work with others and adopt technologies from outside Sony. That's a major philosophical change. Sony is long known for stubbornly championing only its proprietary technologies -- from the Betamax video recorder to the Atrac music-encoding format -- even when they prove unpopular.

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