The companies said the new format will be compatible with existing MP3 content and players. It will be available in mid-2001. Although MP3 remains the de facto Web audio standard, it faces growing competition from companies such as Microsoft and RealNetworks, which are making inroads with more efficient formats. Open-source programmers also are working to offer a license-free alternative, and standards groups are developing a next-generation audio and video format that may supersede MP3 but is not compatible with existing MP3 players. The MP3 format is the most popular with music listeners and should remain so for some time, but it likely will be replaced by formats that offer better sound quality and take up less encoding space, said Ben Sawyer of Digitalmill, a company that consults on emerging technologies.

I'm surprised that (Thomson) reacted to the threat so quickly," Sawyer said. "But if they (had) continued to sit idly by, their technology would fall by the wayside." MP3Pro is being developed by Coding Technologies, a spinoff of the Fraunhofer Institute for Integrated Circuits, which shares patent rights to the MP3 format with Thomson. Thomson and Fraunhofer charge licensing fees for the use of MP3, and with MP3Pro the companies may be looking to create a format compelling enough for music distributors to buy. One key factor in keeping formats relevant is the "bit rate" at which audio files are encoded. MP3 streams at a bit rate of 128 kbps. Some competing formats stream at a bit rate of 64 kbps, offering the same quality while taking up less bandwidth for streaming companies and less memory for consumers. Thomson said MP3Pro will match the 64 kbps, allowing streaming companies to save money on audio delivery and customers to store more files on limited memory devices such as portable MP3 players.

"The race is who can give you quality at the lowest bit rate-obviously because you have smaller files, and you can pack more onto, for example, a Flash memory," said Gartner analyst PJ McNealy. "Right now the battle is at 64 (kbps). Who can stream best at 64. It's no longer at 128." With MP3Pro, Thomson is challenging competitors such as Microsoft and RealNetworks, which have released formats that some industry analysts say are superior to Thomson's current MP3 format. Microsoft's Windows Media format already offers a 64 kbps encoding rate and is positioned to create the most serious challenge to MP3 to date. In addition to pioneering a lower bit rate, Microsoft technology supports anti-copying features that has made it a leading choice among record labels gearing up for commercial online distribution plans. The MP3 format does not support encryption or other digital rights management features. Sawyer agreed that Thomson's biggest asset may be the MP3 name and brand, which is one of the most recognizablenames on the Web, synonymous with Net music in the way Kleenex stands for tissue paper. "There are going to be a lot of competitors for the next few years," Sawyer said. "The MP3 craze happened almost by accident, but now there is a real race going on."

In arrangement with India.CNET.com