At a press conference in Seattle, Microsoft chairman Bill Gates and RealNetworks chief executive Rob Glaser, long-time rivals, outlined a set of agreements that will also see Microsoft plug RealNetworks’ Rhapsody music services on MSN.
The choice of music played during the event was quite illustrative too, unless we’re reading too much into it.
Microsoft will pay RealNetworks, which sued under US antitrust law in 2003, $460m in cash up front, somewhat less than the $1bn RealNetworks had been seeking.
Microsoft will also, on paper at least, pay $301m in cash and services for 18 months in support of Real’s product development, distribution, and promotional activities.
But Microsoft will earn credits to be applied against this $301m by using MSN to obtain subscribers for Rhapsody, a music download service.
RealNetworks had claimed that Microsoft illegally used its operating system monopoly to put the squeeze on RealNetworks by making Windows Media Player a part of Windows.
That was also the subject of the European Commission antitrust finding against Microsoft, which forced the company to make a version of Windows without the bundled player available in the EU.
The two companies playing nicely extends only as far as music and games services, however. There are few concessions on the software side of things.
We’ll cooperate in many areas… but we will also continue to compete in systems software and media players, Mr Glaser said during the press conference.
(He played a snippet from The Rolling Stones’ song ‘Start Me Up’, but didn’t let it play long enough to get to the line I can’t compete with the riders in the other heats)
The settlement was not surprising. Microsoft has been settling all its outstanding suits for the last few years, and few observers believed RealNetworks would prove the exception to the rule by actually making it to trial.
There’s also a personal story in the settlement, as it appears to draw to a conclusion a decade of animosity between not only the two companies but also their respective founders.
Mr Glaser worked for Microsoft for many years, joining the company when it had just a few hundred employees, but quit ten years ago to form RealNetworks.
(He played a portion of Kelly Clarkson’s ‘Behind These Hazel Eyes’, just enough to hear the opening lyrics Seems like just yesterday, you were a part of me.)
It has never been much of a secret that Mr Glaser and Mr Gates dislike each other. Mr Glaser is often characterized as a rebellious Mr Gates protege who left Redmond following a disagreement with Mr Gates and has been fighting back ever since.
When a reporter asked him at the conference how easy it was to surmount the personal differences between himself and Mr Gates when negotiating the settlement, Mr Glaser denied personality was a factor. That’s never been an issue, he said.
(Mr Gates played some of Gwen Stefani’s latest single, ‘Cool’, a song about being buddies with an ex-boyfriend ten years after breaking up).
There is one man that they both dislike even more than each other of course – Apple chief executive Steve Jobs, purveyor of the closed and proprietary, yet still wildly successful, iPod and iTunes businesses.
Mr Jobs gave Mr Glaser a red face last year by leaking an email that suggested RealNetworks was ready to switch from RealAudio to Windows Media unless Apple opened up its iPod digital rights management technology.
Under yesterday’s settlement, the two companies will work to enhance interoperability between Windows Media and RealNetworks’ Helix DRM systems, and RealNetworks will be able to make software for playing Windows DRM content on non-Windows devices.
Both companies have an interest in breaking Apple’s grip on the portable music player and music download markets, and believe that interoperability, which gives users more flexibility, is the key to doing so.
We have a good competitor now we mutually will look at how we can do even more to be in competition, Mr Gates said.
As for the EC case, which Microsoft is appealing, it will likely continue. But the latest settlement means RealNetworks will not be wading in with objections and amicus briefs in opposition to Microsoft, which may smooth things out a little.
It’s up to the EU to choose what they want to do about it, Mr Gates said. Hopefully it’s a positive thing from their point of view that we took whatever issues we had between the companies and in this agreement came with a satisfactory resolution.
