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VXtreme Inc. was founded in 1995 to develop and market a complete software solution for high-quality business video over the Internet. The company's scalable software-only video solution allowed organizations to create and deliver high-quality, real-time Internet video without costly upgrades from existing computers and networks. VXtreme's product family consisted of the Web Theater Server, Web Theater Client, and Web Theater Producer.^[1]

VXtreme was born out of a Virtual Classroom project at Stanford University led by Anoop Gupta, a professor of Computer Science and Electrical Engineering at Stanford University. At that time there were only a small group of companies working on streaming media led by Real Networks. Other founders included Diane Greene and Navin Chaddha.

In the summer of 1996, VXtreme signed its first major deal with CNNfn which represented a huge upset to the market leader, Real Networks.^[2] As a watershed moment in the industry^{[citation needed]} this immediately signified that VXtreme's products were ready to compete at the highest level.^{[dubious – discuss]} CNNfn utilized the software to produce the first automated archival system for broadcast content being encoded real time and made available on the Internet and ignited a race by other broadcasters to follow.

On Aug 5, 1997, Microsoft acquired VXtreme. The fairly small technical team was moved to Redmond, Washington and became the key engineers in the Windows Media division taking over the NetShow product line. VXtreme was days away from releasing version 3.0 of their product but due to the acquisition, this release became much of the code base for the Windows Media Services and was finally released in 1999. Since then the core Windows Media code base has been mostly untouched for 8 years. Although the Windows Media Player has gone through a few facelifts and minor feature updates and a new VC-1 compliant codec has been introduced, the introduction of SilverLight by Microsoft in April, 2007, represents the first new component to the Windows Media system in nearly 8 years.

VXtreme's main codec internally was called "Squeeze" and to the public it became known as "VXtreme Video Codec V2". After being purchased by Microsoft, portions of this codec were published as suggestions to the MPEG world to become the standard for MPEG4. Initially this caused a bit of an upset with the MPEG Committee, a standards body responsible for reviewing and publishing the final MPEG standards. However time passed and the final MPEG4 specs were released based on global community input.

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