'Real' Money

Real-ly, it was not a settlement made over gin and tonic. But when a

689-employee digital media company squares off with 60,000-strong Microsoft, it

wouldn't be. The battle for the future of digital media over the Internet has

been for over a decade in the making and the result is clear-RealNetworks is

richer by $761 mn at the end of a legal tangle stretching back to December 2003.

Experts are skeptical that Microsoft will indeed end up shelling out all the

cash. For, it is evident that Redmond will provide a combination of cash and

promotions for Real's music and game services through Microsoft's online

services and software. Note that under the agreement, Microsoft will give over

$300 mn to RealNetworks in cash and services designed to help the latter's

products reach a wider audience.

RealNetworks had alleged that Microsoft was using its Windows OS dominance to

restrict RealNetworks' position in the market for media software for the PC.

Okay, point taken, settlement made. But the two litigants could collaborate more

intensely on future technology initiatives. And, why not?

Sony is right now a credible answer, and could be the only real challenge

ahead to Apple and Microsoft. The alignments in recent months speak for

themselves. Note that Sony announced a while back that AOL and RealNetworks

would be its partners for online entertainment on PlayStation 2. Real is

planning the same with Xbox. The nuts and bolts of the Microsoft-Real Networks

settlement will strengthen Xbox as well as Real's huge online multimedia

gaming database.

In a clear step beyond cellphones and the PC, RealNetworks' casual

downloadable games will be available via Microsoft's Xbox 360 console for at

least six months and still work with Sony on the PlayStation 3. The point here

is that Microsoft's innovation efforts and market share today extend well

beyond the jaded precincts of Windows Office. Developing the Xbox 360 as a

platform that goes beyond extreme gaming has included casual gaming

capabilities, and even RealNetworks would not abandon the opportunity this

holds.

The $761-mn Microsoft-Real settlement is small change in comparison with the

growing consumer base which Real's gaming content can attract to the Xbox.

However, the allegation of restrictions placed by Windows on competing players

did stick with the court. Real's initially claimed damages were in excess of

$1 bn.

No matter if Microsoft has already settled most of the big anti-trust suits

filed against it-Sun Microsystems for $1.6 bn, and $750 mn to the Netscape

division of former America Online Inc. Among the next crusades to

"settle" will be an anti-trust ruling against it by the European

Commission. Clutches of other anti-trust cases continue to plague Redmond. Some

Windows are still there to be closed.

Ravi Menon