Commentary: The pace of digital media

By Chris Charron, Group Director

The $750 million agreement between Microsoft and AOL Time Warner to settle litigation and work together on technical issues helps both companies, but it will mean little for the adoption of digital media.

The agreement, announced Thursday, is classic Microsoft: Extend technical influence, make an enemy a friend and dish out some cash to take a legal liability off the books. AOL Time Warner's troubles are well documented, and the cash will come in handy. But here are the real impacts of the deal:

• Consumers, not Microsoft or AOL, drive digital media. Bill Gates claims that the deal will "accelerate the adoption of digital media for the Internet." Not likely--it's going too fast already. Half of all

		Related story Microsoft wins in digital media The software maker's deal with AOL brings it a powerful ally in extending its digital media technology.

• RealNetworks starts to feel lonely. The company's RealOne SuperPass shows that a media player can be used as a vehicle for content revenue. The Microsoft-AOL pact will extend the reach of Windows Media Player to close to 60 percent of households and will improve consumers' dissatisfaction rate with players. Watch for Real to cozy up to Yahoo for preferred distribution. Disney may also back Real to counterbalance AOL Time Warner's influence.

• IM interoperability gets closer to reality. Instant messaging usage grew 57 percent last year, but 97 percent of IM users can't talk to everyone because of the closed systems of AOL, MSN and Yahoo. The Microsoft-AOL collaboration will bridge the network gap, leave Yahoo IM in the dust and create a platform for actually charging consumers and businesses for a range of IM services.

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