EC wins appeal, but Microsoft dominates market

The European Commission won an appeals court challenge from Microsoft on Monday, but its 2004 antitrust decision has done little to change the competitive landscape for media players in Europe.

[Plus: A precedent for IT in Europe | Ruling renews hope for developers ]

The Commission decision forced Microsoft to sell a separate version of Windows without its Windows Media Player as well as disclose key interoperability information to competitors.

RealNetworks, maker of the RealPlayer multimedia application, dominated the market until 1999, when Microsoft started bundling its own media player with Windows. That effectively ended the ability of RealPlayer to compete with Windows Media on the "basic intrinsic merits of the two products," according to the Monday appeals ruling from the Court of First Instance in Luxembourg.

In 2003, RealPlayer, which most users had to download, was only on 60 percent to 70 percent of PCs compared to a 100 percent install rate for Media Player on Windows client PCs, the appeals ruling noted.

"We think they [the court] are absolutely right to uphold the Commission's conclusion," said Piers Heaton-Armstrong, general manager for RealNetworks Europe. "Microsoft can't use its operating system to provide its applications with an unfair advantage."

As part of the Commission's remedies, Microsoft was ordered to sell a version of its OS minus the media player, a version "N." Few copies of that version were sold. That move was intended to give consumers more choice, but the Commission allowed Microsoft to continue shipping its media player with Windows.

Since the 2004 decision, RealPlayer never regained its market-leading position.

According to the figures from July from Nielsen//NetRatings, the top three multimedia applications were Windows Media Player at 41.1 percent market share, followed by RealPlayer at 24.3 percent and Apple's QuickTime at 18.5 percent.

Competition commissioner Neelie Kroes told journalists on Monday there are no plans to rework the 2004 bundling remedy even though the Commission agrees that it failed.

But Monday's ruling still sets an important broader precedent on bundling, not just in media players, said Philip Lowe, director general of the Commission's competition department.

"It's not for us to change the remedy, it's up to market players to take advantage of the ruling now," Lowe said.

RealNetworks understood the media-player market situation years ago. Since 2000, RealNetworks moved into other business areas, such as online music with its Real Music premium radio service in six European countries and short-form video content and partnerships with news providers for online news, Heaton-Armstrong said.

In October 2005, RealNetworks settled its U.S. and European antitrust complaints against Microsoft for $460 million in cash as well as other arrangements to promote digital music and games.