Codec Wars: The Battle in Seattle
ERadio Magazine January, 2000

John Silliman Dodge

In November of 1999, cool and civilized Seattle took a shiner when local police skirmished in the streets with World Trade Organization protesters. Behind the scenes in the Web World, another battle was raging between two streaming media titans, one ensconced in new digs near the city's bustling waterfront, the other in sprawling campuses across Lake Washington in the Eastside city of Redmond. Because the winner of this conflict may well set media delivery standards for the next generation of the Internet, we should take a closer look at the competitors.

Welcome to Codec Wars: the battle for audio/video control of the Web. In this corner, the pugnacious, the upstart, the innovative Mister Streaming Media himself, Rob Glaser, CEO of RealNetworks. In the opposite corner, the Golden Gorilla, the undisputed heavyweight champion of the Operating System, the Mighty Microsoft.

The fight is waged on two fronts, technical and marketing. And the two companies take a fundamentally different approach to both challenges. The story begins way back in digital history before the World Wide Web...

A young Microsoft manager chugs along the typical career trajectory. Bright, energetic MBA full of brains and big ideas gets a project assignment, achieves excellent results, gets a promotion and a bigger assignment, delivers even better results, etc. If your smarts come with good political skills, this can be the fast track up the ladder of MS or any corporate hierarchy. But something else happened here. Some say there were philosophical differences. Others claim it was merely the ten-year burn, statistically how long the average employee lasts before "retiring." Glaser worked at Microsoft from 1983 to 1993. He managed Microsoft Word, then moved to the company's networking group before becoming Vice President of Multimedia and Consumer Systems.

Whatever occurred, I prefer to imagine that one day Rob Glaser was sipping a triple Starbucks when Eureka! A moment of extraordinary vision when he clearly saw the Internet as the Next Big Mass Communications Medium on par with Gutenberg, the telephone and TV. He left Microsoft and in 1994 founded Progressive Networks, which later renamed itself after its anchor product, RealAudio and became known as RealNetworks. Rob's done OK. As of October 1999, more than 85% of all streaming media Web pages on the Internet used RealAudio.

Meanwhile back at the ranch in Redmond, the Windows team had their own audio/video codec called NetShow. It shipped as a feature with Windows so it was then and continues today to be the dominant player in terms of sheer desktop penetration.

(Sidebar: the word codec is condensed from coder/decoder. Media software takes analog content, digitally encodes and compresses it, then transmits or streams it in packets via the Internet to your computer where the signal is decoded, uncompressed and played. An oversimplification, but you get the picture.)

Apparently nobody at Microsoft who was influential enough to do anything about it saw the Internet in terms of the next revolutionary medium along the lines of the printing press, radio and television. Bill Gates had yet to issue his famous "Embrace and Extend the Internet" email. Perhaps in the truly skinny pipe world of 14.4 Kbps modems, they thought that delivering heavy media like full motion video was quite literally a pipe dream. Is this how Rob Glaser got such a head start? Kevin Unangst, group product manager for Microsoft's Digital Media Division says, "Rob saw the opportunity. He had a vision that streaming media had potential. He created a whole new niche and awareness and got an early lead in that space."/p>

Today RealNetworks is up to version #7 of their media player. They've developed a media language called SMIL (synchronized media integration language) and they have the #1 jukebox ripper/player on the market. By many accounts they have their eye on the music business; scuttlebutt says at least part of RealNetworks will morph into a music and video portal site and even spin off as a separate division. All this driven by a Microsoft alum and a one-time business partner. Now Microsoft is really mad.

NetShow is out and Microsoft has renamed their software the Windows Media Player. They're up to version 6.4 and serious as a heart attack about overtaking their rival. They';ve hired hundreds of smart engineers to mount this challenge. Kevin Unangst: "If you saw Bill Gates" keynote address at Streaming Media 99, you know that we see digital media as the next significant wave of computing. Consumer awareness is high, ubiquity is right around the corner, and we're building the best platform." They may do it. The way that Internet Explorer came from behind to overpower Netscape in the browser war should demonstrate one thing very clearly: never underestimate the power of a six hundred billion dollar company once they find their range and focus.

*****

That's the back story. Time to pit these two technologies against one another. Here are seven questions we want answers to:

  1. Which format is better, Real or Windows?
  2. Which has more and better features?
  3. Which has more consumer use?
  4. Do users really need two?
  5. What are you missing if you have one and not the other?
  6. What are the shortcomings of both?
  7. Does any of this really matter or are we simply being manipulated, er, influenced by each company's marketing machinery?

The blindfold, please.
Remember the taste tests they used to run on TV commercials? I wanted to experience a sonic bake-off between the Real and Microsoft codecs. I wanted a respected, neutral judge to step in there, put headphones on the average American and ask, "Which sounds better, A or B?" Consumer Reports didn't return my call so I rooted around on the Web until I found a test site with side-by-side comparisons. There are modern rock, classic rock and classical music clips in multiple bit rates in Windows Media Audio, MP3, RealSystem G2 and the original uncompressed wave file. There are even links to download the players if you require. I'll keep my personal opinions to myself for the time being but go click and compare at http://www.media.globix.net/ms_webaudio/default.htm

Four out of five doctors agree...
In an attempt to sway business and consumers into their respective camps, MS and Real put significant effort into independent testing of their codecs. What amazes me is how polar opposite these test results can be.

Regarding a head to head test in the popular MP3 format, a press release from the Real site dated November 18, 1999 states, "RealNetworks today announced the results of a study by KeyLabs, the industry's largest independent full service testing lab, which demonstrated that 7 out of 10 consumers prefer the sound quality of RealAudio or RealNetworks MP3 over Microsoft Windows Media Audio." The report goes on to describe a test involving 250 participants who listened to six different sessions of clips from songs encoded with different codecs. People listened to the original CD then each codec in turn. "Of the 1500 total responses, 71% of consumers preferred the RealNetworks format over the Windows Media Audio format. Of the 1354 responses in which consumers indicated a preference, 79% of test participants preferred the RealNetworks format over the Windows Media Audio format. RealAudio and RealNetworks MP3 codecs outperformed the Windows Media Audio codecs in all major test groups: mono and stereo, low bit rate and high bit rate, and local and streamed." Sounds darned convincing, doesn't it? Until you talk to Microsoft.

Kevin Unangst (MS Digital Media) described a recent consumer study conducted by the National Software Testing Laboratories. They compared Microsoft Windows Media Technologies 4.0 to RealNetworks RealSystem G2 at both 20 and 32 Kbps from 16bit 44kz stereo source material. Seventy-seven consumers participated in audio testing using both Rock and Classical music. Consumers were played a clip from an original CD, followed by a Windows Media clip and a G2 clip (in random order), and asked which sounded closer to the original. This test was performed at 20 kilobits per second (Kbps) and 32 Kbps data rates. After 308 comparisons, roughly 80% of those tested said that Windows Media sounded more like the original signal compared with slightly fewer than 20% for G2.

Back and forth the reviewers go. In January, Gregg Keizer of C/Net wrote, "RealPlayer has the best sound around...Its audio provides richer, fuller stereo than the competition, and the video looks smooth and crisp and nearly always syncs with the audio." Next month someone may opine, "The new Windows Media Player smokes the competition...actually better than the original wave file!" But sound quality is just one issue. Let's hear from two different business users.

Quotes from the field
RealNetworks is up to version seven of their player software. Though this is the second iteration of the G2 SuresStream technology, Tracy Barnes, president of HardRadio.com still prefers Real 5. "Old reliable," he calls it. "The best server out there. There are lots of performance issues with G2, notably memory leaks. The MS server has gotten better with each new version. Their codecs are improving. Real 7 is still unstable for my money. You need a system administrator on it all the time." The Real bottom line? "The codecs sound great but the servers have problems. Plus you're paying server license fees. Plus you see ads for all of Real's content partners in the player window." He recommends that budget conscious webcasters or those just starting out to go with Microsoft and their NT servers. "If you're big, then go with Real, Microsoft and Apple Quicktime and cover all the bases."
It's easy to focus on the server license issue, but the server is only a portion of the overall streaming deployment cost, dwarfed in most cases by bandwidth and vendor support expenses. Make sure you do a Total Cost of Ownership comparison between any solutions you're considering. TCO is the total expenditure over a specific period of time that an enterprise spends on a technology. It includes both direct costs for software licensing, hardware purchasing and vendor support contracts, and indirect costs such as internal software/hardware/end-user support, training, learning, lost productivity due to product downtime, and other hidden costs you need to include to arrive at the grand total.

I talked to another major streaming media player (executive, not software) who asked to go off-record for the sake of protecting relationships. "We've done comparisons with audiophiles and technical bench tests. And we've found that with lower bit rate codecs, 32 Kbps or below, the edge goes to Real. The MS stereo codec at that rate is a bit better. We ended up going with Real's lower bit rate mono codecs over MS stereo. (Remember, bandwidth and storage requirements double when you stream in stereo. Given the current state of the art, many decision makers feel the degree of added sound quality isn't worth the cost.) MS kind of cheats a bit by reducing the file size by removing more material. To the listener this results in sibilance. It does reduce encoding time and reduced file size though."

SureStream technology is Real's solution to net congestion and the problem of interruption or rebuffering. Their research told them that users valued a constant flow of audio even more than the quality of sound. So when net traffic or other factors affect transmission, the G2 stream responds by shifting up or down in bandwidth and quality. Contrarily, Microsoft determined that consistent sound quality was paramount. They would have to live with rebuffering for the time being. When I asked my associate why he went with Real, "Degradation is better than silence" was the response. "At higher bit rates the two codecs are comparable. If stereo is important, MS is better. At 20K mono G2 sounds better. As Real becomes more of a content player, their benefits may start to disappear. Real encroaches on the content space and forces some users to look at alternatives. Their apparent move toward becoming a music and video portal crosses the line as far as we're concerned. Alternately, Microsoft doesn't appear to be focused on a content play."

Let's circle back to our original seven questions. The answers differ with your point of view, whether you're a consumer or webcaster:

  1. Which format is better, Real or Windows? This is a toss-up. If you mean "sounds better" then at the average listening rate, between 20 and 32 Kbps, the mono winner would be Real. In stereo, MS has the edge. At higher bit rates, the codecs are roughly comparable. The fact is that any sonic lead one technology has over the other is so slight today that the advantage could shift tomorrow.
  2. Which has more and better features? Real has more bells and whistles but among the most prominent are 90+ channels, gateways to content providers such as CNN, Bloomberg, NPR and ESPN. Decide whether you want your users to face persistent temptations to click away. And whether you want your desktop to help build Real's CPM. MS is quick to point out this marketing tactic and counter that "we're not in competition with you like they are." Real correctly points out that users don't have to display these links if they don't wish to.
  3. Which has more consumer use? Real capitalized on their first-mover advantage and kills Microsoft in player downloads and usage. In an October, 1999 report of top media players, Nielsen/NetRatings reported that usage of RealPlayer outpaced Windows Media Player by a factor of 10 to one. PC Data Online's first Media Player Usage Study concluded that RealPlayer is used by more than 80% of Internet consumers who experience streaming media, and the number of active RealPlayer users outpaces the number of active users of any other streaming media player by a factor of more than 15 to 1. RealPlayer 7, first released by RealNetworks on November 8, 1999 reached the four million download mark in ten days, bringing Real's reach to more than 88 million unique users and more than doubling the RealPlayer installed base in 1999. Stats as of January 2000 have Real at 95M, MS at 50M players. Alternately, the Media Metrix Software Usage report ending September 1999 found that Windows Media Player was used by 14.3 percent of home PC users. By comparison, the RealPlayer was used by 16.8 percent, demonstrating that Microsoft continues to narrow the gap in consumer usage. This report is consistent with a recent independent study from PC Data which showed Windows Media Player as the fastest-growing player available, with a 34 percent usage increase month over month (September to October 1999), compared to 5.3 percent growth from its nearest competitor. Are these back-and-forth stats beginning to sound familiar?
  4. Do users really need two? Users need two, absolutely. Why not, the software is free. Since good content is available in both formats you need both players. If you're a content provider your decision process is different. (Unless you outsource your hosting and streaming to a service vendor, in which case this decision has likely been made for you.) Webcasters don't need both formats. Going with two systems is expensive. Double the hardware, maintenance, encoding and storage. Do yourself a favor, pick a flavor and run with it. If your content is attractive and your marketing plan is sound, your audience will find you.
  5. What are you missing if you have one and not the other? As we've discussed, some content comes exclusively in one flavor or the other.
  6. What are the shortcomings of both? If sound quality is relatively on par, the hot button for webcasters should be cost. RealNetworks and Microsoft differ in their product licensing models; RealNetworks bills on a per-client license whereas Microsoft includes this feature in the Microsoft Windows NT Server 4.0 operating system. Vendor support for RealNetworks RealSystem G2 must be purchased in an annual support and upgrade contract, while support for Microsoft Windows Media Technologies can be purchased on a per incident basis. When you take the basics into consideration-hardware, software and vendor support-Real's server license model makes it more expensive to deploy. The Microsoft solution is cheaper. Microsoft, however, has a much smaller and less-active user base. Even with the lure of good content, there are people who still hesitate to download devices of any kind from the Internet. Expect this to diminish with faster connections, more pervasive virus software, increased familiarity and source trust.
  7. Do any of these differences really matter or are we simply being manipulated, er, influenced by each company';s marketing efforts? Are you kidding? This hardball is happening across all channels-in the press, in the labs, in the business development offices, at the conventions, on the Web and on your desktop. Everyone's "why we're best" message is turned up to eleven.

Coke or Pepsi?
Cutting through and creating true brand benefit is a challenge. Consumers are about as loyal to software companies as they are to record labels or television networks. Jay Samit, Senior VP of New Media for EMI Records says as much when he admits, "The band is the brand." When was the last time you heard somebody say, "Hey, I'm an CBS guy. I don't watch NBC." It's all about attractive content. If I'm on the Web and I see that the manned Mars landing is going to be streamed over the Web by a codec that I don't have, I'll download that sucker so fast your head will spin. Because I want the show.

Real and MS know this and they both jockey to create better and often exclusive content deals. You want CNN video? You need the Windows Media Player. Prefer ABCNews.com? Exclusively Real. Want to watch the Star Wars trailer? Go get Quicktime. The race to cut technical integration and support deals is equally competitive because as the Web evolves beyond the desktop, wireless handheld devices, "information appliances" and TV set-top boxes are juicy growth targets for both companies. And the digital music industry, the "$100B business in a $40B suit," is exploding. Music and webcasting are quickly moving toward an unwired world. As AOL's Steve Case said in the February 7 issue of Business Week, "Ten to 20 years from now we'll think it was a silly notion that music was so tethered to a physical disk."

What's best, Real or Windows Media? Might as well ask BP or Texaco? Macy's or Bloomingdales? They all do a pretty good job. Beyond certain features I'm not sure there's enough true difference to make a stink over. What does matter is a marketing strategy designed to achieve ubiquity, omnipresence, being in an indefinite number of places at once. This has been both companies' angle since day one. Give the product away to gain market share and eventually become the defacto Web media delivery standard. For Real, the play is CPM and the sale of software licensing, support and upgrades. For Microsoft, the play is to keep adding richer features in the operating system and thus extend the reach of the OS beyond the desktop, whether that's Windows, Windows CE, Pocket PC or whatever comes next.

Who will win the Codec Wars? It's way too soon to tell. Both Microsoft and Real are filled with smart, driven people. In the film, "Tora, Tora, Tora" after the surprise attack on Pearl Harbor, one sober member of the Japanese admiralty warns his celebrating comrades, "I fear we have awakened a sleeping giant." Some mornings when he faces the shaving mirror, I suspect Rob Glaser feels the same way. But he puts on the armor and goes to work just the same. I have immense respect for people who do battle with giants. It isn't a foregone conclusion that Microsoft will dominate. I wish (I mean really wish) I had scooped up depressed AOL stock the day after Microsoft launched MSN. Today the would-be AOL killer is just another ISP. Whatever the outcome, this competition on a grand scale benefits business and consumers alike. This is the way capitalism is supposed to work, isn't it? We want these teams to duke it out because in the process they move the entire streaming media experience forward. The benefit for everyone is a better, cheaper, faster, richer Web. And since we're talking about the mass medium of the 21st century, you can't beat that with a stick.