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Real-ly, it was not a settlement made over gin and tonic. But when a 689-employee digital media company squares off with 60,000-strong Microsoft, it wouldn't be. The battle for the future of digital media over the Internet has been for over a decade in the making and the result is clear-RealNetworks is richer by $761 mn at the end of a legal tangle stretching back to December 2003.

Experts are skeptical that Microsoft will indeed end up shelling out all the cash. For, it is evident that Redmond will provide a combination of cash and promotions for Real's music and game services through Microsoft's online services and software. Note that under the agreement, Microsoft will give over $300 mn to RealNetworks in cash and services designed to help the latter's products reach a wider audience.

RealNetworks had alleged that Microsoft was using its Windows OS dominance to restrict RealNetworks' position in the market for media software for the PC. Okay, point taken, settlement made. But the two litigants could collaborate more intensely on future technology initiatives. And, why not?

Sony is right now a credible answer, and could be the only real challenge ahead to Apple and Microsoft. The alignments in recent months speak for themselves. Note that Sony announced a while back that AOL and RealNetworks would be its partners for online entertainment on PlayStation 2. Real is planning the same with Xbox. The nuts and bolts of the Microsoft-Real Networks settlement will strengthen Xbox as well as Real's huge online multimedia gaming database.

In a clear step beyond cellphones and the PC, RealNetworks' casual downloadable games will be available via Microsoft's Xbox 360 console for at least six months and still work with Sony on the PlayStation 3. The point here is that Microsoft's innovation efforts and market share today extend well beyond the jaded precincts of Windows Office. Developing the Xbox 360 as a platform that goes beyond extreme gaming has included casual gaming capabilities, and even RealNetworks would not abandon the opportunity this holds.

The $761-mn Microsoft-Real settlement is small change in comparison with the growing consumer base which Real's gaming content can attract to the Xbox. However, the allegation of restrictions placed by Windows on competing players did stick with the court. Real's initially claimed damages were in excess of $1 bn.

No matter if Microsoft has already settled most of the big anti-trust suits filed against it-Sun Microsystems for $1.6 bn, and $750 mn to the Netscape division of former America Online Inc. Among the next crusades to "settle" will be an anti-trust ruling against it by the European Commission. Clutches of other anti-trust cases continue to plague Redmond. Some Windows are still there to be closed.

Ravi Menon

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