DRM investor could swing EU Microsoft enquiry

A third company is looking to join Microsoft and Time Warner as an investor in digital rights management firm ContentGuard, a move that may help Microsoft reduce European antitrust concerns regarding its stake in ContentGuard.

Under the proposed deal, announced on Monday, Microsoft, Time Warner and the third company, Thomson, would each own a third of ContentGuard. Thomson owns trademarks such as RCA and Technicolor and provides media companies with technologies and services.

Earlier this year, Microsoft and Time Warner pitched a deal under which each would own half of ContentGuard, but that proposal triggered an in-depth review by European antitrust regulators.

Ron Grant, a Time Warner senior vice president, said: "We hope the European Commission will have a positive response to [the Thomson proposal], but it was not the driver of the deal. There were so many other positives in this deal."

Thomson, which has had a long-time relationship with Time Warner, is expected to bring its experience in intellectual property licensing to the table. Monica Coull, a Thomson spokeswoman, said it also will support ContentGuard's licensing efforts for digital rights management.

Financial terms were not disclosed.

Last April, Microsoft, a long-time investor in ContentGuard, announced plans to increase its stake in the company to 50 per cent, with Time Warner coming in as a new investor and acquiring the other 50 per cent.

But in August, the European Commission announced it would take a deeper look at the deal, saying it was concerned that a 50-50 ownership split might "create or strengthen a dominant position by Microsoft in the market for digital rights management solutions".

Microsoft packages digital rights management with its Windows Media Player, which in turn is bundled with its operating system. The Commission was not only concerned that the joint ownership would put Microsoft's rivals at a competitive disadvantage but also that it would slow down the development of interoperability standards.

In October, Thomson's newly arrived chief executive and chair, Frank Dangeard, outlined his five strategic points for the company, which largely centred on media technologies, content distribution and content research and development.

Thomson's Coull said Monday's "announcement with Microsoft and Time Warner has totally to do with these moves that he outlined last month, and digital rights management is part of that".

It's not yet known how the Thomson arrangement could affect the Commission's final decision, due on 6 January, in this second-phase investigation.

Dirk Delmartino, a Microsoft spokesman, said: "We have informed the Commission about the [Thomson] investment and have to discuss this with them in the coming days. We don't know what the impact will be."

Dawn Kawamoto writes for CNET News.com.