Real Says Yes to Microsoft

Microsoft is buying its way out of antitrust litigation from the European Union, as well as settling legal differences that are too distracting for the software giant. Microsoft agreed to pay Novell $536 million last November under the condition that Novell would agree to drop out of the European proceedings. The same requirement was attached to the $1.95 billion deal with Sun Microsystems and the $750 million peace treaty with AOL Time Warner, and Microsoft also settled a lawsuit with IBM.

Money talks, and legislatures walk.

Just last week, Microsoft agreed to a settlement with RealNetworks that effectively removes the competitor from the European legal action — but there may be some good news for Windows users. There has been copious news coverage of the Microsoft-RealNetworks settlement. Here’s a quick summary, from C-NET News.com, “Real, Microsoft reach truce“:

Microsoft and RealNetworks announced a sweeping deal on Tuesday [Oct. 11, 2005] that puts aside their legal differences and aims to shore up their respective digital-music strategies. Under the deal, Microsoft will pay $460 million in cash to RealNetworks to settle antitrust claims. It will also pay $301 million in cash to support Real’s music and game efforts, and Microsoft will promote Real’s Rhapsody subscription music service on its MSN Web business…

RealNetworks had alleged in its December 2003 lawsuit that Microsoft had abused its “monopoly power to restrict how PC makers install competing media players while forcing every Windows user to take Microsoft’s media player, whether they want it or not.” Real originally sought $1 billion in damages. As part of the deal, Real will also end its direct involvement in antitrust investigations across the globe, including probes in Europe and Korea.

The two companies said they will work to make their respective digital rights management technologies interoperable. “Microsoft will also enable Real to facilitate the playback of content on non-Windows portable devices and personal computers using Windows Media DRM,” the companies said in the press release announcing the deal.

More to the point, Rob Glaser, CEO of RealNetworks, had this to say to CNet News.com about what motivated Microsoft to settle (from “Glaser on finding harmony with Microsoft“):

We had solved a lot of the hard problems associated with how you move things in a trusted domain from one format to another, and we did it with both the Apple format, FairPlay, and Windows Media…

If someone had a piece of content on a Windows device that had security rules, there would not be a trivial way to move that content into a device that had Helix or OMA (Open Mobile Alliance) or what have you. Our relationship with Microsoft puts us for the first time — and I think puts anybody for the first time — in a position of being able to solve that problem.

Glaser also said that while Real and Microsoft will cooperate in a lot of areas, they will continue to compete in other areas — such as with the RealPlayer jukebox, which competes with Windows Media Player.

One change that favors consumers is that Microsoft will help Real improve the performance of RealPlayer on Windows. Microsoft also will make it easier for consumers to modify their preference for playing media files in Windows. In addition, MSN Messenger users will be able to play music from the Rhapsody catalog of 1 million songs while chatting. And when using MSN Search to find music, consumers will be presented with the Rhapsody catalog.

In all, RealPlayer users and Rhapsody customers should benefit from this settlement, and RealNetworks get a cash infusion. But Windows Media Player will still be bundled with Windows — and be nearly impossible to unseat as the dominant player.

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