Microsoft and RealNetworks have amicably settled their lingering antitrust dispute asnd enjoined a new collaboration. Values have been assigned that compensate Real for its complaints, but the more important news is the upcoming cross-promotions. Particularly, Real's subscription Rhapsody service will be implanted in the MSN home page, MSN Music, MSN Messenger, and MSN Search. This is not to be underestimated, though a good deal of the success of this agreement will depend on how the service is integrated in the MSN experience. Billboards won't cut it. The market needs to be led by the hand until it realizes the joy of music access. Microsoft and Real have a good opportunity to make some ripples. [See conference call notes below. Integration will be pretty slick, apparently, porting Rhapsody's 25 free monthly streams, offered to non-members, being planted throughout MSN products, including Messenger.]

I'm waiting for a news conference and Q&A to start, and will blog it…

Bill Gates and Rob Glaser walk to the podium. Rob talking; announces settltement. Ends one chapter; begins new chapter between the two companies. “Global settlement of the antitrust issues between us.” Ground rules of cooperation. Will also contineu to compete.

Rhapsody will be integrated throughout MSN. Great news for consumer; easier than ever for them. On the the game side… new game subscription service built around new Xbox Live Arcade.

Rob reminiscing about his early days at Microsoft when it was a 50M-dollar company.

BILL: Glad to be working with Rob. Excited. This is just the beginning; the new foundation goes beyond the settlement. Our view is that digital entertainment is just at the beginning. Find music everywhere you want it … there’s a lot still to be done. It’s going to take this partnership to bring those realities to fruition.

We’ve agreed on the Windows front to make our platform as effective as possible for Real. Ease of engineering for Real; ease of use for the consumer. Real has agreed to support strong interoperability with DRM format. Their support will make a big difference. How can we tie Rhapsody into search results? We’ve put our engineering teams together. [Bill references “concrete” developments, but does not describe them.]

ROB and BILL: On-screen demos. They have put full-length track streaming into search results (!). Free to consumers up to 25 songs; this has been in the latest Rhapsody for a few months. [Putting it in search opens the platforms; Linux users who don’t have access to Rhapsody can get the 25 free tunes in MSN Search.] Much point-and-click track streaming embedded in MSN.

In MSN Messenger: Will add a Rhapsody tab in Messenger. Small home page with featured artists. Users can view what chat friends are listening to; playlist sharing via MSN Messenger. Again, full-track streaming within Messenger, up to 25/month.

Some of these developments will appear by the end of 2005; others early in 2006.

Q&A:

—Does this solve MSN Music subscription, or is that project still alive?
—(Bill) No announcement about that today, but we love Rhapsody as a subscription service.

—Any offline marketing associated with this deal, and amounts?
—(Bill and Rob) We’ll explore many promotional opps, online and offline.

—How were you able to overcome your personal tensions? How will this affect competition with Apple?
—(Rob) I’ve always had immense admiration for Bill. When we came out with Harmony over a year ago, I contact Bill, and it began a dialogue that was the antecedant of our present discussions.
—(Bill) That fact that we knew each other was an asset.
—(Rob) Apple has a great product, but in the end we think consumers want choice and openness. Microsoft has the same philosophy.

—What does this deal mean to your Google relationship? [for Real]
—(Rob) No impact.

—Is this a stepping stone to other collaborations?
—(Bill) Many things need to happen for digital music to be mainstream. These are early days. All things are going to be discussed.
—(Rob) Digitization of media is a 20-year trend. At best, we are 10 years into it.

END OF FORMAL NEWS CONFERENCE. Legal counsels of both companies take the stage for questions.