MICROSOFT, AOL SQUARE OFF
Despite past alliances, the two companies are fierce rivals. And current events such as Microsoft’s campaign to lure AOL subscribers away in favor of its MSN service (hitsdailydouble.com, 5/29) may be playing a part in souring the negotiations.
Talks broke down Friday (6/1) without the two sides reaching an agreement. And even though the talks resumed over the weekend, there is a good possibility, the Journal reports, Windows XP won’t offer a direct link to America Online when it debuts Oct. 25.
At issue is Microsoft’s announcement that it plans to bundle its instant-messaging service into Windows XP, another in the company’s aggressive moves to lure customers away from industry-leader AOL.
That the IM service will be hardwired into Windows is a big point of contention to AOL, which has been lobbying government regulators against just such enhancements. Hearkening back to the government’s antitrust suit against Microsoft, AOL lobbyist have called Windows XP "anti-innovation, anticonsumer and anticompetitive," taking advantage of the company’s monopoly power to move into new markets.
Microsoft and AOL have long been odd bedfellows, striking a bargain in 1996 that saw AOL bundled into Microsoft operating systems and Microsoft’s Internet Explorer as the core of AOL’s browser. That agreement expired January 2001. The companies have been negotiating ever since.
Another factor making the negotiations more and more dicey is AOL’s recent pact with RealNetworks to use Real technology solely to play Internet audio and video. Microsoft has a competing media player in its cleverly named Windows Media Player.
AOL is also linked to RealNetworks in the forthcoming MusicNet subscription service, the joint venture of AOL parent company AOL Time Warner, Bertelsmann, EMI and RealNetworks (hitsdailydouble.com, 4/6). And Microsoft’s MSN has also signed a marketing deal with swappery Aimster (hitsdailydouble.com, 6/1), which itself has been embroiled in a legal hoop-de-doo with AOL over the rights to its website URL (hitsdailydouble.com, 5/23).
It’s a tangled, tangled web.
Even though talks continued, AOLTW Executive VP Ken Lerer admitted, "this is not a high priority for us." He added, "If we’re able to come to terms that make sense, that’s good. If not, that’s OK as well. Microsoft is both a competitor and a partner and I’m sure will remain both regardless of the specific outcome of our current conversations."
Microsoft seemed to be taking the same attitude. "We are pleased to be back at the table," a Microsoft spokesman said, "but the parties remain far apart."
