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Disney embraces Redmond

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The Disney Corporation has signed an agreement to use Microsoft's DRM technology to lock-down its digital media. In doing so, Microsoft has snagged two of the biggest 'content partners' for its technology, following on from last year's deal with Time Warner which signaled the end of the latter's browser ambitions. As was the case with Time Warner, Microsoft has signed a long but non-exclusive deal.

Microsoft ensured it won an opt-out for its DRM technology in the initial Antitrust settlement, and licenses the technology at no cost.

Chairman Bill Gates recently demonstrated Microsoft's Personal Media Player, which it hopes will spur a new device category. Given a low-price and decent performance, such a device could appeal to affluent families seeking a portable digital pacifier for their children.

The deal is already being interpreted as a snub to another pioneer of the mouse, Apple and Pixar CEO Steve Jobs, who walked away from renewing his deal with Disney two weeks ago with some acidic, but well-made comments about his former business partner.

Too much can be read into the timing of the Disney DRM deal. Nonetheless Disney has reminded Jobs that class is no substitute for clout. Complacent and unimaginative they may be, but when two giants the size of Microsoft (FY 2004 gross target, $36 billion ) and Disney (FY 2003 gross, $27 billion) converge, the effect can eclipse Apple (FY 2003 $6.2 billion) and Pixar (FY 2003 $262 million).

Disney wants to lock down its content with restrictive DRM to foil file sharers. But a 2002 report presented to the ACM concluded that the 'darknets' would ultimately defeat such attempts to distribute DRM media. The report was written by Microsoft Research

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