Microsoft gets Real with digital entertainment

Oct 12, 2005: From antitrust to ally - Microsoft have settled their dispute with Real Networks and announced a trifecta of agreements that will see both companies partner in the world of digital music and games.

Two years ago, Real was an instigator of the antitrust case in the USA, and a major supporter of similar actions across the globe. The case focussed on Windows media player, like Internet Explorer, locking competition out of the picture through its tight integration into the Windows operating system.

The first of the three agreements is a settlement worth $460 million to resolve Real's antirust disputes worldwide. Real will end its involvement with the case, allowing Microsoft to focus on competitors like Google, and importantly to the second announcement - Apple.

The second announcement is a wide-ranging digital music collaboration between the two companies that will see Microsoft make a $301 million cash payment to Real and provide services to aid its product development. The hard cash can however, be offset by credits earned from subscribers delivered to Real through MSN. Real's leading digital subscription service Rhapsody will also be promoted and marketed throughout MSN properties.

The last agreement will see Real's digital games service offered through MSN games and Xbox Live Arcade for Xbox 360.

Real will gain access to a broad range of Windows platform technologies, expanded access and long-term licenses to a Windows Media and security technologies that will allow real to build services and software that seamlessly fit in to and take advantage of innovations being brought forth in the upcoming Windows Vista.

"Today we're closing one chapter and opening a new one in our relationship with Microsoft," said Rob Glasser, founder and ceo of RealNetworks. "The legal chapter is being closed with an appropriate and fair outcome that sets the stage for a very productive and collaborative relationship between our companies."

Quite a boon for Real, $761 million in agreements and a whole lot of coverage with MSN, however, whilst great appeasement seems to have been the order of the day, Microsoft will also greatly benefit in a number of ways. Firstly, it will be able to use Real's technologies to facilitate greater functionality in MSN by integrating a broader range of digital entertainment services. For example, MSN Messenger users will be able to share and play music while chatting, from Rhapsody's million plus song library, MSN search will use be able to use Rhapsody's music editorial catalogue and both companies will be developing search integration so MSN can be scoured from within RealPlayer.

Microsoft may not be gaining much in the way of technology and content, however settling the case with real is what this is all about. "This deal ensures that Microsoft can innovate and that other media players can compete in a broad marketplace" said Brad Smith, senior vice president and general counsel at Microsoft. "We've resolved our disagreements from the past and put in place a foundation for collaboration in the future."

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