Sunday, September 26, 2004

Microsoft hears handset market's siren song

U.S. software giant Microsoft is aiming to get its audio and video software into mobile phones before it is beaten to the 650-million-handsets-a-year market by rivals like Apple Computer.

Microsoft has quietly made preparations to make its media software available to chip and handset makers, which will enable consumers to play on their handsets music that they've saved in the Windows Media format.

"We've been hush-hush about it, so far. But we understand this is a major market opportunity," Erik Huggers, director of Windows Digital Media division, told Reuters in an interview on the fringes of the annual International Broadcasting Conference.

With Microsoft's media technology built into cell phones, consumers could buy music at Internet stores that use Microsoft's Windows Media format to encrypt and protect tracks. "The sales numbers (of mobile phones) are staggering. It's obvious that it's our goal to sign up all major handset makers," Huggers said.

Analysts have said that handsets will eventually put the dedicated portable music players out of business, because consumers will be able to store their music on their phones.

U.S.-based Motorola and Japan's NEC have Microsoft's media decoders integrated into their handsets for third-generation mobile networks, which is still a very small market. Microsoft is now looking at the entire market, and specifically at market leader Nokia from Finland, Germany's Siemens and Japanese-Swedish Sony Ericsson.

Microsoft will battle with Apple, which last month signed up Motorola to build a slimmed-down version of the music player into new cell phones. Motorola will also build into its phones the piracy protection software used in the iPod.

Apple's Frank Casanova, senior director of product marketing for the company's interactive media group, declined to say whether his company is aiming for similar deals with other handset vendors.

The company that gets the handset makers may also become the winner among the emerging Internet music stores.

Apple's iTunes Music Store, which was the first to market, is currently the most popular music download service, generating the majority of online music sales. Microsoft has just opened a preview version of its MSN Internet music store, which is aimed at competing with iTunes.

If Apple's iTunes customers want to play their tracks on the move, they have to buy one of Apple's iPod portable music players or else burn their songs onto a compact disc and play them on a portable CD player.

Apple has sold over 4 million iPods since the product's launch two years ago. That number has helped triple Apple's share price, but the numbers are dwarfed by those of the handset market. In the smart-phone segment alone, it's expected that more than 20 million units will be sold this year.

Smart phones, whose sales are expected to rise to around 40 million units next year, represent the top segment of the mobile-phone market. They typically feature slots for memory cards that can store up to 2GB, enough for some 2,000 minutes of music.

source: Reuters


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