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Streaming media war rages
May 30, 2001: 1:18 p.m. ET

RealNetworks, Microsoft continue to jockey for stronger market positions
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NEW YORK (CNNfn) - The battle between the two leading suppliers of Internet streaming media technology continued to rage Wednesday, each of them aligning with powerful allies to help expand their spheres of influence.

RealNetworks, which claims its Internet audio and video technology is used by roughly 200 million people, said Wednesday it has signed an agreement with Intel under which its media management technology will be shipped with two new Intel motherboards.

Under the terms of their agreement, Intel will include RealPlayer and RealJukebox software with the two new motherboards that support its Pentium III and Celeron processors, the company said.

"We are excited to extend our relationship with Intel to include new distribution channels for RealPlayer and RealJukebox," Richard Cohen, senior vice president for consumer products at RealNetworks, said in a statement.

"The inclusion of RealNetworks software with Intel motherboards will enable PC manufacturers and end-users to quickly install and begin using the world's most popular Internet media management applications," Cohen added.

Wednesday's agreement is the latest in a strategic relationship between RealNetworks and Intel, which began working together last year to develop the underlying technology that enables Web users to download and play Video content. It also comes amid broad speculation that RealNetworks soon may lose its exclusive distribution arrangement with AOL Time Warner, the parent company of CNNfn.

CNNfn confirmed Wednesday that America Online and Microsoft are discussing a potential distribution deal under which Microsoft's Media Player software would be packaged with AOL's Internet service.

Microsoft has poured a lot of its resources into developing its Media Player, which is a standard part of its Windows operating system, and it has been trying to displace RealNetworks' streaming media products and technology, which users typically must download and install, with its own.

Shares of RealNetworks (RNWK: up $0.28 to $10.90, Research, Estimates) plunged more than 19 percent Tuesday on speculation of the AOL-Microsoft talks but recouped some of those losses in early afternoon Nasdaq trade Wednesday. Microsoft (MSFT: down $1.02 to $69.32, Research, Estimates) shares were moving lower amid a broader decline in the technology sector which drove the Nasdaq composite more than 3.5 percent lower.

An alliance between AOL and Microsoft on streaming media technology could boost Microsoft's efforts there, but it is unclear how it would impact RealNetworks' arrangement with AOL. Under its contract with AOL, RealNetworks cannot be bumped from the service even after the exclusivity provision in the contract ends this summer, according to published reports.

Neither AOL nor Microsoft would comment specifically on the streaming media talks. "Real Networks is a good partner and we look forward to working with them," AOL spokesman Jim Whitney said.

AOL and Microsoft have been in negotiations regarding including AOL's version of Internet software with the next version of Microsoft's operating systems software, called Windows XP, due out this fall after an earlier deal expired in January.

Several reports have surfaced recently saying that a deal was imminent, but so far both companies have declined to comment on the talks, leading to speculation that Microsoft's media technology may be on the table as part of those talks. graphic