Microsoft Settles Antitrust Dispute With RealNetworks
Microsoft said it agreed to provide RealNetworks $761 million in cash and services under 3 agreements to settle an antitrust lawsuit filed Dec. 2003, the companies said at a Seattle news conference Tues. Real had accused Microsoft of illegally forcing Windows consumers to use Microsoft’s own digital music player instead of Real’s Rhapsody or others.
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Two of the deals call for Microsoft to pay Real $301 million in cash and provide services over 18 months in support of Real’s product development, distribution and promotional activities. These deals will bring Real’s Rhapsody subscription service and Real’s online games “to millions of Microsoft’s MSN users,” the companies said. In a “wide-ranging digital music collaboration,” they said, Microsoft will provide promotional and marketing support for Rhapsody on MSN properties. Rhapsody will be featured within the MSN home page, MSN Music, MSN Search and MSN Messenger. MSN Messenger users will be able to share and play music from a library of more than a million songs while chatting online. The companies said they will “jointly develop and implement a search integration plan which will enable Real’s customers to easily use MSN Search from within RealPlayer.” MSN Search will also feature Rhapsody links to music in music-related search results and Real will be able to buy advertising on MSN Search and the MSN Network to promote Rhapsody. The companies will also promote the use of Windows Media portable devices for use with the Rhapsody to Go download service. They also said Microsoft “will earn credits at predetermined market rates to be applied to” the $301 million for subscribers delivered to Real by MSN.
The companies said Microsoft will also offer Real’s casual digital games through MSN Games and Xbox Live Arcade for the upcoming Xbox 360 console, shipping next month, Microsoft Chmn. Bill Gates said. Real’s game offerings include Bejeweled, Scrabble, Solitaire and SuperCollapse. The companies said Real will also create a new subscription service to be offered on MSN Games and will develop casual games for Xbox Live Arcade.
Real CEO Rob Glaser said the antitrust and technology assurance agreement reached resolves all antitrust disputes it had with Microsoft. Microsoft agreed to pay Real $460 million in cash “up front” and a series of technology licenses and commitments were agreed to that will give Real “long-term access to important Windows Media technologies that will enhance [its] media software solutions,” the companies said. Glaser said some of the efforts will start this year and others in 2006.
Glaser also said he didn’t think the Microsoft relationship would “have any impact on the work we do with Google.” He said “we expect to work with both companies.” Real made the Google toolbar available to consumers who install the RealPlayer as part of a deal announced last year.
“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,” said Glaser. He said that “by integrating Real’s premier music and games services into Microsoft’s very popular MSN service, we will reach more consumers today and deliver even better products and services tomorrow.” Gates said the deals will “provide MSN’s millions of customers with easier access to subscription services for the music and games they love.”
Separately, a Microsoft spokesman said the company is “taking appropriate action” after 10 Xbox 360 software development kits (SDKs) were stolen from a Duren, Germany warehouse. But he said the company “cannot comment on the specifics of ongoing legal issues.” Published reports said images of 4 of the kits appeared on the website of hacker group SmartXX a few days after a shipment of SDKs disappeared. The site said the SDKs had been “lost” in Aug. Reports said Austrian and German police raids led to the recovery of 3 of the stolen SDKs but the other 7 hadn’t been found. There is some concern that hackers might now be able to defeat the console’s security features before it even launches. One report said Microsoft is now making sure to include location trackers with each SDK to help find them if stolen in the future.
Speculation continued to grow, meanwhile, about a possible PS2 price cut ahead of the Xbox 360 launch in the U.S. Nov. 22. Wedbush Morgan Securities analyst Michael Pachter said in a research note that he expects Sony to cut the PS2’s price by $50 to $99 before Nov. 22. But Pachter said he didn’t expect Microsoft to cut the price of its current Xbox console to match PS2. He predicted, however, that Nintendo of America will lower the price of its Game Boy Advance SP by $20 to about $50 “before year- end.”