Microsoft released Windows Media version 8 Wednesday, a compression technology that lets companies encode high-quality audio and video into smaller packages. Promising 30 percent improved quality, Windows Media 8 lets content providers present near-DVD quality film at a bit rate as low as 500Kbits, and near-CD quality audio at a bit rate as low as 48Kbits, the company said. This compares with Windows Media 7, which required a compression rate of 750Kbits for near-DVD quality video, and approximately 64Kbits for near-CD quality audio. "You can offer the same quality in smaller file sizes or better quality in the same file sizes," said Geordie Wilson, a product manager in the digital media division at Microsoft. The company opted for the former. The release is the latest move in a heated competition between Microsoft, RealNetworks and, to a lesser degree, Apple Computer for dominance in the streaming-media and download markets. Having only released its version 7 last April, Microsoft is clearly interested in staying ahead in the race. RealNetworks argues however, that software upgrades, such as Windows Media 8, are less important for streaming quality than network infrastructure upgrades are. Last year, RealNetworks unveiled RealSystem iQ -- a data-delivery server that handles network congestion more effectively and allows content to be beamed into networks via satellite. The company continues to maintain that handling network transportation is as important to maintaining quality as codecs -- algorithms used to compress and decompress data -- are. "We're confident we have a solution that far outstrips what Microsoft is trying to present," said Ben Rotholtz, general manager of products and systems at RealNetworks. "Making an improvement to a codec is a very small part of the equation. We've made some huge strides just in the delivery of audio and video content." Video and audio quality over the Internet has been an important factor to consumers interested in viewing media online. Analysts, however, have questioned whether watching video on the Internet will ever grab hold on a larger scale. Most say that it will not until most consumers have faster Internet connections. "I think that it will be a long time coming before people are sitting [at their computer] and watching anything but very short clips," said Ben Sawyer, cofounder of the technology consulting company Digitalmill. Still, Microsoft touted the consumer benefits of its Windows Media 8. Content coded with this technology will let individuals view higher-quality video at their same bandwidth capacity, the company said. Consumers can also store more music files encoded in Windows Media 8 technology on their hard drive and portable player devices. Microsoft also listed a bevy of streaming-media companies that stand to benefit from its latest technology. Some streaming video companies, however, have clearly struggled amid the recent market downturn. Broadband media company Pseudo Networks, for example, folded last September after failing to gain more financing. RealNetworks has watched its stock fall about 90 percent, from $72 to about $7, over the last year. Video-on-demand provider Intertainer, however, was quick to tout the benefit of Microsoft's new technology, and how it would help the company reach a larger audience. Whereas previously customers needed a DSL connection of at least one megabit to receive Intertainer's service, people can now access the service with a lower bandwidth connection since the video is encoded at a lower bit rate, Intertainer said. "We're able to branch out and expand our customer base to people that don't have a full megabit of bandwidth," said Carl Segal, vice president of production for Intertainer. "We're able to lower the bar in our bit rate and potentially reach 60 to 70 percent more of a customer base." Microsoft's Windows Media 8 technology is able to offer decreased bit rates partly through the use of what is called true variable bit rate encoding. This means that portions of a video will be encoded faster than other portions to reach an overall average bit rate. Microsoft also announced Wednesday the release of its Windows Media Player 7 for Macintosh. This player is able to view all content coded in Windows Media 8. "The fact that we're releasing this simultaneously today means there's no delay for Macintosh users -- they don't have to wait [to] see Windows Media 8 content," said Microsoft's Wilson. Have your say instantly, and see what others have said. Click on the TalkBack button and go to the ZDNet News forum. Let the editors know what you think in the Mailroom. And read what others have said.