RealTime IT News

Microsoft, RealNetworks End Legal Battle

UPDATED: A bitter legal battle ended today when Microsoft and RealNetworks announced a $761 million settlement of Real's antitrust lawsuit against Microsoft.

The deal closes a two-year-old lawsuit that accused Microsoft of abusing its monopoly to limit choice in digital media players, hurting distribution of RealPlayer.

"This goes beyond the settlement," Bill Gates, Microsoft's founder, said at a news conference in Seattle. "There is some innovation here."

Besides formally dropping the antitrust suit, today's deal outlines two areas of cooperation between the companies in hotly contested spaces.

A Digital Music Duet

First is a wide-ranging digital music collaboration that will promote Real's digital music subscription service, Rhapsody, on MSN properties.

Engineers have been working for weeks to integrate the offerings. In a demonstration today, Rhapsody tabs were displayed on the MSN Music page, MSN Messenger interface and in MSN search results.

"Our view is that digital music is still at its early stages," Gates said, noting that issues such as hardware and software interoperability and digital rights management are still being hammered out.

As part of the negotiations on digital music, Real has agreed to support Microsoft's digital rights standards for audio and video and will have the right to buy ads on MSN Search and the MSN network to promote Rhapsody and its 1 million-song library.

Both companies will promote the Rhapsody To Go service. Neither company would estimate how much they planned to spend to market music services, but both will be trying to spread the word and dislodge Apple from its perch atop the digital music industry.

The second area of cooperation is games. The companies will collaborate on "casual games," which include titles such as Bejeweled and SuperCollapse and standbys such as Scrabble and Solitaire. Real will create a new subscription service for MSN Games, as well as a series of new games for Xbox Live Arcade for Xbox 360.

A Future of Cooperation and Competition

The settlement news conference in Seattle put Real CEO and Founder Rob Glaser on the same stage with his former employer. Glaser moved to Seattle 22 years ago for a job with Microsoft and was at the company for 10 years. He held a number of management posts, including vice president of multimedia and consumer systems.

"We're ending one chapter and opening a new chapter in the relationship between RealNetworks and Microsoft," said Glaser, who called the settlement "an appropriate and fair outcome."

He said the settlement lays the ground rules for cooperation, but that the companies will continue to compete in systems software and media players.

Real's primary charge against Microsoft was the same as the European Union's, which brought its own action against Microsoft. In March 2004, EU officials