AOL Time Warner and Microsoft Strike a Deal

The two companies agree to collaborate on digital media initiatives and settle pending litigation.

(Newstream) -- Microsoft Corp. (NASDAQ:MSFT) and AOL Time WarnerInc. (NYSE: AOL) today announced an agreement to collaborate onlong-term digital media initiatives that will accelerate theadoption of digital content, and to settle the pending litigationbetween their companies. The two companies have also agreed to anew royalty-free, seven-year license of Microsoft's browsingtechnology and a variety of steps designed to ensure that theirproducts work better with each other.

Under the digital media agreement, the companies will worktogether on a series of initiatives to support the more rapiddeployment of digital media for consumers and support new businessmodels for content owners through digital rights managementtechnology. The companies aim to help develop a successful digitalmedia environment that is secure from piracy, open to all companiesacross multiple industries, and offers consumers access to broadcontent in a compelling manner that is easy to use. As part of thisagreement, the two companies have entered into a long-term,non-exclusive license agreement allowing AOL Time Warner to useMicrosoft's Windows Media 9 Series and future software forcreating, distributing and playing back high-quality digitalmedia.

The legal settlement resolves the private antitrust lawsuitfiled against Microsoft in January 2002 by AOL Time Warner'sAmerica Online Inc. unit on behalf of its subsidiary, NetscapeCommunications. As part of the settlement, Microsoft will pay $750million to AOL Time Warner.

In addition, as part of the announced settlement, Microsoft hasagreed to provide AOL Time Warner's AOL online service with anew distribution channel for its software to certain PC usersworldwide. Also, the two companies will cooperate to ensure thebest possible AOL member experience on current and future Microsoftoperating systems, including commitments by Microsoft for technicalcooperation and information disclosures.

"With Microsoft's media technology expertise and AOLTime Warner's content expertise, we believe we can acceleratethe adoption of digital media for the Internet and help contentproviders across the entire industry," said Bill Gates,Microsoft chairman and chief software architect. "While ourcompanies will continue to compete, I'm pleased that we'vebeen able to resolve our prior dispute and I'm excited aboutthe opportunity to work together collaboratively to make thedigital decade a reality."

AOL Time Warner Chairman and CEO Dick Parsons said: "Wewelcome the opportunity to build a more productive relationshipwith Microsoft. Our agreement to work together on digital mediainitiatives marks an important step forward in better servingconsumers and protecting the interests of all content businesses.We look forward to others in the media and entertainment industriesjoining together with us to help to advance the digitaldistribution of content to consumers while maintaining copyrightprotection."

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