CNN/Money 
Technology > Tech Biz
graphic
Can music keep Microsoft growing?
Watch for Janus this summer. Its adoption will say a lot about Microsoft's growth prospects.
April 21, 2004: 2:56 PM EDT
By Eric Hellweg, CNN/Money contributing columnist

Sign up for the Tech Biz e-mail newsletter

SAN FRANCISCO (CNN/Money) - When Microsoft reports its third-quarter earnings tomorrow, expect renewed debate over whether the company still deserves its designation as a growth stock.

Detractors will point to the fact that its next big new product, Windows Longhorn, won't arrive until 2006. While I'm hardly a Microsoft cheerleader, I do think the company has quite a few more surprises in store.

For my money (though I don't have any investments in Microsoft (MSFT: Research, Estimates)), the company's formidable research and development budget gives it ample claim to growth status. Despite its massive R&D operations, Microsoft is often chided for unveiling "me too" technology, advances that merely catch up to the market.

But I'm watching a development from Redmond's Windows Media labs that's scheduled for public unveiling in July. If you're a Microsoft investor -- or a fan of (or investor in) digital-music services -- you'll want to pay close attention as well.

The technology is called Janus, and it could significantly alter the existing digital-music market.

The digital-music models

Here's what it's all about. Right now, several digital-music entities offer subscription models instead of, or in addition to, pay-per-download services.

This means that customers of RealNetworks's (RNWK: Research, Estimates) Rhapsody service can pay $9.95 per month to have access to the 625,000 songs the company offers in a streaming format.

Roxio's Napster lets people download as many songs as they want per month, as long as they continue to pay their monthly subscription fee. If a user stops paying, those songs disappear from his or her hard drive.

Recently in Tech Biz
graphic
The truth about Veritas
Amazon's search play
It's the consumer, stupid!

These services have yet to catch on and capture the zeitgeist as Apple's (AAPL: Research, Estimates) iTunes Music Store has, for a couple of key reasons.

First, consumers haven't yet glommed on to the idea of a subscription for music; they don't relate to music the way they do to, say, cable television or an Internet service provider.

Second, and I think just as important, is that these subscription services don't yet allow users to play their songs on portable devices such as the iPod or Dell's (DELL: Research, Estimates) Digital Jukebox.

Without portability, these services are missing out on a huge market segment. Last week In-Stat/MDR released a study that found that 23 percent of U.S. households currently own some kind of portable digital-music player.

Meet Janus

Microsoft's Janus technology allows subscription services to offer users the ability to carry their subscription songs on portable devices, with the same caveat: If the user stops paying his or her subscription fee, the songs disappear.

With Janus, however, subscribers can sync up with their music services and throw 100,000 songs onto their portable players in one sitting. Or they could check in every Tuesday to automatically download all the new releases for that day.

"Janus will dramatically change the proposition of the subscription services," says Gene Munster, an analyst with Piper Jaffray. "It's pretty significant." Piper Jaffray has had an investment banking relationship with Roxio in the past 12 months.

If Janus is released when expected in July (Microsoft wouldn't comment on the technology or its release schedule), it could shake things up for companies such as Apple.

"Janus is clearly aimed at Apple," says Phil Leigh, an analyst with Inside Digital Media.

I've long argued that 99 cents per song is too expensive, and now that the labels are experimenting with charging more than that amount -- and significantly more than the usual $9.95 for an album -- I think a window of opportunity is emerging for Microsoft's Janus technology.

YOUR E-MAIL ALERTS
Microsoft Corporation
Janus
Earnings

One music industry executive told me about some upcoming music service launches and said, "We're all excited about Janus. We think this will change the landscape in a big way."

So will Janus alone fuel Microsoft's continued growth? Of course not. But I'm bullish on Janus's long-term prospects, and I think it could serve as an example of the kind of market-shifting technological advance Redmond can produce to keep Microsoft in the good graces of growth investors.


Sign up to receive the Tech Investor column by e-mail.

Plus, see more tech commentary and get the latest tech news.  Top of page




  More on TECHNOLOGY
Gadgets to make you a superhuman
Jack Ma was happy making $20 a month
How much does your iPhone really cost?
  TODAY'S TOP STORIES
Billionaires are hoarding more cash
Checking accounts with no checks
Is the economic recovery real?




graphic graphic

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.