'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