Streaming Deal Could Aid Cable

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Real Networks Inc. and Microsoft Corp. said they’ve settled anti-trust lawsuits between them — and that they’ll integrate Real’s music and gaming content within Microsoft properties and collaborate on the development of media players and digital rights-management software.

The agreements, valued at $761 million, also include cash payments to Real and a closer alignment of its product offerings with Microsoft’s MSN and Xbox 360 products.

Microsoft will pay $460 million up front to resolve all damage claims worldwide, while Real will gain long-term access to Windows Media technologies.

RHAPSODY GAINS SLOTS

Microsoft is scheduled to pay Real $301 million in cash and to provide services over the next 18 months to support Real’s product development, distribution and promotional activities.

The deal allows Microsoft to “earn credits at predetermined market rates” that can be applied to the $301 million for subscribers delivered to Real through MSN.

Microsoft will create a section for Rhapsody, Real’s subscription music service, on MSN’s home page and on MSN Music, MSN Search and MSN Messenger, Microsoft chief software architect Bill Gates said during a joint conference call with Real chairman Rob Glaser.

Real’s digital games will be offered through MSN Games and Xbox Live Arcade for Xbox 360.

The deal gives MSN an instant music subscription service to market.

Two weeks ago, Microsoft said it had broken off talks with music labels about building a subscription music site, presumably with the Real Networks deal in mind.

Analysts have criticized Microsoft for ceding the music space to Apple Computer Corp.’s popular iPod devices and iTunes software, and for yielding to Google in the portal space. This deal at least gives the Redmond, Wash., software giant a play on the growing subscription music and gaming side of the Internet aisle.

The greater collaboration on the media-player front was a key point in Real’s antitrust suit against Microsoft.

Real has battled Windows Media Player for market share among PC users.

DRM BOOST TO CABLE?

The agreement calls for the companies to work to enhance the functionality and performance of Real’s software products and to boost the interoperability of Windows Media and Real’s Helix Digital Rights Management System.

That could be good news for cable, as it could ease the way for DRM solutions that work across both platforms and that can be extended to the PC, TV and set-top box.

Microsoft said it will develop additional Windows Media interfaces that will enable Real to build richer media experiences and enhance consumers’ abilities to access Real’s software products.

Microsoft also said its new Windows Vista product will be designed to allow users to download and use the RealPlayer software.

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