More on AOL-Microsoft Settlement

Microsoft’s $750 million settlement with AOL Time Warner comes at an important juncture for the software titan. Certainly, Microsoft benefits from eliminating a potentially troubling court case and the sweeping technology agreements with AOL. But there could be a more important benefit: The settlement could help Microsoft gain traction with other media companies that have been wary of using Windows Media technologies.

AOL Time Warner has rights to use Microsoft Windows Media 9 Series technologies, but is under no obligation to do so. AOL Time Warner has given no timetable for adopting Windows Media. During a conference call with analysts and the media yesterday, AOL Time Warner chief executive Dick Parsons repeatedly raised the piracy issue and the promise of digital rights management for enabling broader content distribution. To get Microsoft’s DRM, AOL Time Warner would have to use Windows Media 9 Series technologies.

But even if AOL Time Warner decided to immediately adopt Microsoft’s digital media technologies, there would still be a considerable lag bringing content or services to market. So, Microsoft is not likely to see any immediate benefit from AOL Time Warner’s using Windows Media technologies--if ever. But the settlement and technology agreements do send an important message to other media companies interested in Microsoft’s DRM, yet hesitant to adopt the software giant’s technologies.

Remember, Microsoft received a considerable public image black eye throughout its antitrust case with the Justice Department and 19 states. Additional lawsuits, AOL Time Warner’s among them, have kept Microsoft in the doghouse, so to speak. Also, throughout the government’s antitrust trial, Microsoft repeatedly positioned AOL Time Warner as a dangerous competitor--to show the software giant, in fact, faced considerable competition.

Microsoft’s image problem and attacks on AOL Time Warner may have contributed to some media companies’ reluctance to use Windows Media technologies, even though they would benefit from the included DRM. Burying the hatchet with AOL Time Warner sends a message to other companies that it is possible to partner with Microsoft in some areas, while competing in others. Remember that MSN and AOL online services remain rivals.

The timing is important for Microsoft, which launched Windows Server 2003 last month and plans to release a rights management update to the OS later this year. Windows Media 9 Series technologies also run on Windows Server 2003. Microsoft already has successfully courted many consumer electronics manufacturers to support Windows Media file formats. If more media companies follow AOL Time Warner’s lead, Microsoft would benefit from increased Windows Server sales and wider adoption of Windows Media file formats.

Posted by Joe Wilcox at May 30, 2003 09:38 AM