Once Bitter Rivals Link Up

RealNetworks Inc. Tuesday officially ended its war with Microsoft Corp. by agreeing to add support for its Windows Media format.

With the about-face, RealNetworks (RNWK) joins a number of other companies supporting Windows Media, which Microsoft hopes will lead to the first
common, secure digital media format across every major portable digital
music device, digital media player, jukebox and content provider.

With
Windows Media Format poised to become a universally adopted digital media
format, music labels and artists will have an open,
highest-common-denominator platform that offers unmatched consumer reach,
the highest-quality audio, and digital rights protection.

“By licensing its audio, security and digital rights management technology to
RealNetworks, Microsoft (MSFT) recognizes the music industries need to deliver its
music in a single download format, reaching the broadest number of music fans
without regard to the software player they use,” said Paul Vidich, executive
vice president, Warner Music Group.

Tuesday’s announcement is the latest in a bumpy relationship between the two companies. At one time, Microsoft was a large investor in RealNetworks. However, it later sold its stake as the two companies’ plans began to diverge. As part of those plans, Microsoft began aggressively marketing its Windows Media formats and aggressively competing with Real by deeply discounting prices of its streaming server software.

Server software revenue is one of Real’s largest sources of revenue since it gives the basic versions of its RealPlayer away.