Microsoft, Real Find Harmony in Settlement

Updated: Microsoft and RealNetworks settle their antitrust suit and enter a licensing arrangement through which they will partner in the multimedia software and content space.

Microsoft Corp. and RealNetworks Inc. announced a settlement in their long-running antitrust suit Tuesday, with the two companies agreeing to collaborate in the multimedia software and content space.

Under the terms of the deal, through which the companies said they have settled all antitrust litigation worldwide, Microsoft agreed to pay Real $460 million in cash to resolve the antitrust claim, and an additional $301 million in cash to provide the company with product development, distribution and promotional services.

Redmond, Wash.-based Microsoft also extended a licensing agreement to the multimedia software maker to support Reals Rhapsody digital music subscription service on its MSN Web network properties, and agreed to offer the Seattle-based multimedia specialists digital video games through its MSN Games and Xbox Live Arcade services.

As part of the announcement, the companies said that Microsoft will earn credits at a predetermined rate to be applied to the $301 million portion of the payout, in return for attracting subscribers to Reals digital content services.

The firms estimated the total value of the agreement at approximately $761 million.

Rob Glaser, chief executive of Real, and former Microsoft employee, said he was eager to begin working more closely with the software giant again.

"Were ending one chapter, and opening a new chapter and relationship between RealNetworks and Microsoft," said Glaser. "By allowing our products to compete on their merits and have greater interoperability, customers can choose which media player technology and which products work best from them.

"Weve laid the foundation to bring our two companies together around entertainment areas that allow consumers to get what they want, where they want it, when they want it, and how they want it."

Microsoft Chairman Bill Gates said the new partnership should yield future opportunities for both firms.

"Its important for us for you to see that this [relationship] goes beyond the settlement," said Gates. "Theres some innovation in terms of the ways that were integrating Reals services into Windows and MSN software, and we think this is just the beginning.

"There are a lot of things here that can be beneficial not only to these two companies, but [to other] people working with music."

For its part, Real said it will support MSN Search in its products, while the two companies will jointly promote use of Microsofts Windows Media technologies with Reals Rhapsody to Go music download service.

/zimages/6/28571.gifRead more here about Rhapsody to Go.

The companies said they would collaborate in the so-called "casual games" arena, which includes digital versions of low-tech games such as Scrabble and Solitaire, with Real agreeing to create a new subscription service for those games to be offered on MSN Games. Real will also build new games for distribution on Microsofts upcoming Xbox Live Arcade service.

As part of the antitrust portion of the settlement, the companies said they have resolved their disputes in the European Union and Korea, in addition to the United States, with Microsoft promising to open up its Windows operating system and Windows Media Player software to Real in order to help improve compatibility between the two companies technologies.

Microsoft also said it will work to build new interfaces between those products and pledged to offer Real broader access to its distribution channel of PC makers.

In addition, Microsoft said it would make it easier for Windows users to access Reals multimedia software from Windows, and to set preferences for usage of the firms respective applications on their computers.

Microsoft said that its next-generation version of Windows, known as Vista, will direct users to a Web page where they can download any needed Real software if they choose to access a file that demands those programs.

Next Page: Interoperability issues.