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BY RICHARD COLE
New developments in the love-hate relationship between giants AOL Time Warner and Microsoft could create ripple effects for other in the broadband arena, notably AT&T Broadband and RealNetworks.
?REALNETWORKS HAS OBVIOUSLY HAD SOME STRUGGLES OF LATE, WHICH IS WHY THEY HAVE ENTERED INTO THE DEAL WITH INTEL.?
jim stroud, carmel group
AOL and Microsoft often act like deadly competitors. Last week, in the wake of AOL's decision to increase the price of its Internet-access product, Microsoft launched a $50 million advertising campaign seeking to persuade users of the dominant ISP to switch to its MSN service.
But at the same time the rivals sit down to cooperate. The two companies are in talks aimed at renewing the preferential placement AOL gets in Windows' operating systems, a deal that ran out in January and AOL wants to renew before the new Windows XP software is shipped later this year. AOL in turn uses Microsoft's Internet Explorer as its default Web browser, even though it owns rival Netscape.
And, according to a Wall Street Journal report, AOL is now talking with Microsoft about offering subscribers its streaming technology, including the Windows Media Player. That would be a major blow to RealNetworks, which has an exclusive deal with AOL that expires in July. But it makes excellent sense for AOL, which at least gets a competitor for RealNetworks and possibly an eventual replacement, says Carmel Group analyst Jim Stroud.
?I think it's a real possibility,? he says. ?RealNetworks has obviously had some struggles of late, which is why they have entered into the deal with Intel,? he says.
That deal has RealPlayer and RealJukebox shipping with Intel desktop boards and follows RealNetworks deals with Sony for its PlayStation 2, as well as with Nokia and its Media Terminal.
While AOL could be looking to offer competing media players for its customers, that isn't likely to last in the long run, Stroud notes.
?AOL's style is you click once and you get what you click for,? he says. ?If AOL keeps with its current corporate policy, they will go with one choice.?
But while Microsoft may play footsie with AOL to benefit its Windows Media Player, it also considers AOL Time Warner a dangerous competitor, which feeds speculation that Bill Gates is interested in buying AT&T Broadband. (An analysis explaining the benefits of such an acquisition from Kagan World Media, the media-industry newsletter and databook publisher that like CableWorld is a subsidiary of Media Central, was posted on Inside.com, also owned by Media Central.)
Microsoft already owns 10% of Comcast and has invested $5 billion in AT&T. Buying the nation's largest cable company would give Microsoft a variety of marketing and other advantages, besides making it a tougher rival for AOL Time Warner.
?There's a very good fit for Microsoft in AT&T,? Stroud says. ?It enhances their interactive television position with their Microsoft TV platform, and it obviously gives them a way to promote their MSN service as a broadband service through cable and DSL lines.?
The antitrust issues could bar such a deal, although the Bush administration's more laissez-faire approach to regulation could come into play, the analyst notes. ?It's more likely for a potential deal now than it was two years ago,? says Stroud.
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