Comcast swoops, Disney ducks and Microsoft scores
BURBANK, CALIF.
Just as Microsoft scored an agreement to compress Disney's content, Comcast Communications made a play for Disney. The combined events move Microsoft's technology one step closer to becoming the Windows of digital video delivery.
The deal between Microsoft and Disney comprises a multiyear agreement to develop digital media strategies, and to beef up the security of digital media transmitted into the home and between various electronic devices. Disney also agreed to license Microsoft's Windows Media Digital Rights Management (DRM) technology.
At a basic level, the Windows DRM protects content by restricting redistribution to only those devices bearing a given user's identification. Windows DRM is already installed in more than 450,000 desktops as part of the Windows Media 9 platform, according to Microsoft.
The deal with Disney is non-exclusive, and does not preclude any similar arrangement with other media players such as RealPlayer or iPod. However, as Microsoft notes, any other media player company must have Microsoft authorization before it can use Windows DRM in its player.
ENTER COMCAST
Within two days of Microsoft's Disney coup, Comcast Communi-cations entered the picture with a surprise bid to buy Disney. Comcast opened with a first-round bid of $56 billion in stock and assumption of Disney's debt of around $10 billion. The Disney board, despite a recent rash of internal dissent, initially circled the wagons and made noises of objection. They also retained Goldman Sachs and Bear Stearns to evaluate the offer.
The Comcast bid came on the heels of a much-publicized battle within the Disney board over Chairman Michael Eisner's handling of the company. Eisner's harshest critic, Roy Disney, nephew of the company's namesake, ultimately resigned from the board but continued his attack on Eisner.
In the days following the maneuver, observers said Comcast's bid was just an opening volley in what would be a long takeover battle. Comcast's recent $29 billion acquisition of AT&T made it the nation's largest cable firm with 21 million subscribers.
Comcast must pay monthly, per-subscriber carriage fees for the cable networks carried on its system. Among those, Disney-owned ESPN has come to be one of the costliest. At an estimated per-sub fee of $1 (considering a probable "most favored nation" clause giving Comcast a volume discount), buying ESPN alone could ultimately save Comcast $252 million a year.
WHERE MICROSOFT SITS
The turn of events gives Microsoft a leg up in the arena of digital video compression, where it has proffered the Windows Media 9 (WM9) algorithm as the next de facto advanced compression standard. Another algorithm under consideration, H.264/MPEG-4 Part 10, aka AVC, has been stalled by disagreement among its many patent holders over a license fee scheme.
While MPEG-2 will not likely be replaced as the compression standard for digital television, broadcasters are interested in advanced compression technology for peripheral, multicast services; DBS providers and cable operators, such as Comcast, could use it to maximize their bandwidth as they add more high-definition (high bit-rate) content.
