As part of a strongly worded rebuke to Microsoft released on Wednesday, European Commission officials said they're leaning toward forcing the company either to stop bundling its Windows Media software along with its Windows operating system or to include rivals' products along with the operating system. "Microsoft's abuses are still ongoing," the Commission staff wrote.
Although the outcome is uncertain, and some analysts said a settlement that protected the status quo was likely, the regulators' stern warning raised the possibility of new hurdles for Microsoft's media strategy. The company has relied in large part on the omnipresence of its software to promote its proprietary Windows Media audio and video format to everyone from record companies to movie theatres. A forced unbundling could diminish that appeal, analysts said.
"I think if they were forced to unbundle in Europe, it could affect the Windows Media format," said Matt Rosoff, an analyst with Directions on Microsoft, a research firm focusing on the software company's strategy. "You could see (rival standards-based format) MPEG-4 become the de facto next-generation standard."
Microsoft sees digital media as a key leverage point in maintaining the dominance of the Windows operating system on the desktop, and in pushing into other markets such as servers, set-top boxes and handheld devices. Demand for digital media technology is rapidly expanding with the growth of the consumer broadband market and the impending arrival of robust home networks that promise to blur the lines between the PC and other consumer-electronics devices, such as the television.
The commission's antitrust comments, which come as much as several months ahead of an actual ruling, are among the most powerful pieces of support yet for critics' contention that Microsoft has crossed legal lines in elbowing rival multimedia technology companies aside. Companies from RealNetworks to On2 Technologies have long said that Microsoft has gained an unfair advantage in the audio and video field by including its player and media formats inside the Windows operating system.
