February 13, 2007 | By Derek Slater

Schneier: Why Microsoft Sold Out Consumers in Vista

Today, the PC industry needs Hollywood more than Hollywood needs the PC. Most consumers rely on traditional consumer electronics devices to view DVDs and TV content, but companies like Microsoft are betting on the converged digital home and desperately want a bigger piece of the media device market. Because of the DMCA, Microsoft has to get permission to build devices compatible with Hollywood's DRMed content. So when Hollywood demanded that Microsoft lard Vista with restrictions to access high-def DVD and digital cable content, the software giant was in a weak bargaining position.

But as Bruce Schneier explains in a recent editorial (via BoingBoing), Vista's DRM may also be a play to turn the tables and turn Microsoft's platform into a distribution channel on which Hollywood relies:

"[W]hile it may have started as a partnership, in the end Microsoft is going to end up locking the movie companies into selling content in its proprietary formats.

"We saw this trick before; Apple pulled it on the recording industry. First iTunes worked in partnership with the major record labels to distribute content, but soon Warner Music's CEO Edgar Bronfman Jr. found that he wasn't able to dictate a pricing model to Steve Jobs. The same thing will happen here; after Vista is firmly entrenched in the marketplace, Sony's Howard Stringer won't be able to dictate pricing or terms to Bill Gates. This is a war for 21st-century movie distribution and, when the dust settles, Hollywood won't know what hit them....

"Microsoft is reaching for a much bigger prize than Apple: not just Hollywood, but also peripheral hardware vendors. Vista's DRM will require driver developers to comply with all kinds of rules and be certified; otherwise, they won't work. And Microsoft talks about expanding this to independent software vendors as well. It's another war for control of the computer market."

Schneier overstates his case a bit when he says Microsoft could have simply refused Hollywood's demands for DRM and Hollywood would have released today's high-def video content for Vista anyway. But he's right that Microsoft would very much like to lock content vendors into a distribution channel that it controls, including for channels like IPTV and digital downloads. And the more Hollywood depends on Microsoft, the more Microsoft may be able to limit competition from other tech companies' platforms and devices.


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