Kodak had accused Microsoft of foul play in how Windows XP handles digital photos. The photo products maker said Windows XP limited consumer choice in the default application for manipulating photos and steered consumers to Microsoft's preferred online photo processors.
The CEOs for the two companies--Steve Ballmer from Microsoft and Daniel Carp of Kodak--resolved many of their major differences last week, although some issues remain, sources close to the companies said.
Beta testers of Windows XP, which is set for commercial launch this fall, dispute the legitimacy of Kodak's claims, however.
Kodak's criticism appears to have been quelled by Microsoft changing one dialog box affecting how Windows XP handles imaging devices, such as digital cameras and scanners. Kodak agreed that its software would not automatically become the default for any digital camera attached to a PC--including competitors'--and to publicly support Windows XP.
Kodak also plans to pull back some of the pressure it placed on Charles Schumer, a Democratic senator from New York, to question whether Windows XP's photo features are anticompetitive. The companies are expected to announce the resolution of their differences Monday.
"We are pleased to have worked together with Kodak to resolve any perceived issues regarding how Kodak's cameras and software work with Windows XP," said Jim Cullinan, Windows XP lead product manager. "Kodak is an important partner for Microsoft, and we welcome feedback from Kodak on ways to improve the digital photo experience in Windows XP.
"We think this is a positive move by Microsoft," Kodak spokesman Anthony Sanzio said Sunday morning. "We're happy that our EasyShare cameras will work well with Windows XP. We look forward to moving ahead with Microsoft to making further improvements with the digital photography experience."
Before the changes, connecting a camera to Windows XP would bring up Microsoft's Scanner and Camera Wizard, which displayed a pull-down list of installed software capable of accessing the images on the device. Microsoft had not made allowances for camera makers to use their own software to connect with device by default, although the user could choose a default program from the menu.
With the changes, rather than automatically bringing up Microsoft's wizard and pull-down menu of choices, connecting a camera will summon a single box of software choices capable of connecting to the camera.
"The Scanner and Camera Wizard will be clearly labeled as a Microsoft function, not a generic function," Sanzio said. "Microsoft has agreed finally to sign third-party picture protocol drivers, so that if a camera manufacturer wants to use the standard Windows implementation they can, or they can use their own drivers for their own cameras."
The driver issue had in some ways been the most contentious issue, with both sides accusing the other of trying to take control over all digital cameras to a Windows XP PC.
"We are in the process of submitting the driver for review and hopeful approval," Sanzio said. "We will be able to bypass the dialog box and go directly to our software when our cameras are connected."
Playing the political cards
Kodak's troubles with Windows XP have helped churn up the controversy building around the new operating system.
In late July, Schumer asked the Justice Department and 18 states to seek an injunction delaying Windows XP's scheduled Oct. 25 launch. Schumer largely attacked Windows XP technologies affecting AOL Time Warner and Kodak, both of which have headquarters in New York.
Schumer's call for trustbusters' action against Windows XP came the week following a Microsoft tour showing off photo and imaging features to the media and days before a New York event showcasing the enhancements. Kodak, which had been invited to participate in the event, took it as opportunity to accuse Microsoft of using its Intel-based operating system monopoly to wrestle control of processing and sharing digital images.
Kodak is ready to pullback the concerns it raised with politicians about Windows XP's handling of digital photography and imaging, Sanzio said.
"We think Sen. Schumer as well as other legislators were instrumental with helping us get where we are," he said. "Certainly we will let all of the legislators and all of the people involved with this know what the current situation is. We're pleased with where we are, but there is some more to do. We hope to do that in private with Microsoft."
"Microsoft has taken a big step in starting to resolve some of these issues, meaning going back to being more consumer friendly," said Phil Singer, spokesman for Schumer's office. "We still need to take a wait-and-see approach, but this is obviously a positive thing. I don't think it ends the issue."
The Kodak-Microsoft rift underscores photofinishing's shift away from print to combined print and digital or just digital services. Online photo processing services, for example, allows consumers to shoot pictures using a digital camera that can be printed by Kodak or one of its rivals and picked up at a local drug store.
Market researcher IDC predicts retail kiosks will help satisfy consumers' growing demand for images printed instantly while the Internet will become "the backbone" for transferring images.
Digital devices captured 9.1 billion images last year, with that number expected to reach 29.5 billion in 2005, IDC concluded. Digital cameras will account for the bulk of digital images captured: 17.4 billion. Consumers will dominate the need for photofinishing services, accounting for 11.4 billion images printed compared with 4.2 billion for businesses in 2005, the market researcher concluded.
In a July report, Gartner analyst Andrew Johnson concluded more consumers are interested in viewing and sharing images online than getting the same output as film, which is facilitating a change in the business model for photo processing. The market researcher estimates 8.9 million digital cameras would be sold this year, reaching 12.5 millions in 2005.
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