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Microsoft settles RealNetworks’ antitrust claim

Microsoft agreed yesterday to pay RealNetworks $761 million to settle antitrust claims arising from the Justice Department's case against Microsoft in the mid-1990s. The firms will also work together to create a new partnership in the digital music and games sector.13 Oct 2005

Advert: Free OUT-LAW breakfast seminars, UK-wide: Marketing and advertising on the web; and Ownership and sharing of customer dataRealNetworks sued in 2003, accusing Microsoft of illegally using its monopoly power to restrict competition in the field of digital media. In particular, said the company, Microsoft was able to restrict how PC makers installed rival media players, such as RealNetworks’ RealPlayer, while forcing every Windows user to take Microsoft’s media player, whether they wanted it or not.

In addition to direct action, RealNetworks was one of the companies involved in the European Commission’s investigation into Microsoft, and is participating in the ongoing antitrust investigation into Microsoft by South Korean regulators.

As part of the settlement deal announced yesterday, RealNetworks will abandon its antitrust claims in the US and will stop participating in the European Commission and South Korean actions.

The settlement is made up of three agreements, which will net RealNetworks around $761 million.

The first of these resolves all the companies’ antitrust disputes worldwide, on the basis of a $460 million cash payment by Microsoft, and a series of technology licenses and commitments under which RealNetworks will obtain long-term access to important Windows Media technologies.

The second provides for collaboration on digital music, including the promotional and marketing support of RealNetworks' digital music subscription service, Rhapsody, on MSN properties, while the third agreement provides that Microsoft will offer RealNetworks’ digital games through MSN Games and Xbox Live Arcade for Xbox 360.

Microsoft is scheduled to pay RealNetworks $301 million in cash in respect of these music and games agreements, and will provide services over 18 months in support of RealNetworks' product development, distribution, and promotional activities. The $301 million will reduce, however, by the amount of an undisclosed credit to be applied each time MSN delivers a subscriber to RealNetworks.

In addition, RealNetworks will take steps to support MSN Search, while both firms will jointly promote use of Windows Media technologies with Rhapsody to Go.

“Today we’re closing one chapter and opening a new one in our relationship with Microsoft,” said Rob Glaser, Founder and CEO of RealNetworks.

According to Brad Smith, senior vice president and general counsel at Microsoft, “This agreement ensures that Microsoft can innovate and that other media players can compete in a broad marketplace.”

“We’ve resolved our disagreements from the past and put in place a foundation for collaboration in the future,” he added.

The settlement is the latest in a series of agreements designed to reduce Microsoft’s backlog of antitrust disputes, dating back to the software giant’s 2002 settlement with the US Justice Department.

Most recently Microsoft agreed to pay IBM $775 million to settle antitrust claims, while Novell and the Computer & Communications Industry Association settled their claims in November last year.