Microsoft and AOL Time Warner abandoned talks last weekend over
whether to include a link to AOL's Internet service with
Microsoft's newest operating system, Windows XP. The talks
collapsed after the two companies failed to come to terms over a
number of issues, including support for competing media
players.
"As it was reported by the media, Microsoft and AOL could not reach
an agreement and the discussion is over," said Tomoyo Nagao, a
spokeswoman for Microsoft Japan. "But we still hope to develop the
AOL service on Windows XP. We will remain open to AOL and, if there
is any opportunity, our company is willing to have another meeting
with them in the future."
At the heart of the negotiations between the two companies was
disagreement over AOL's presence on the new operating system,
including the placement of an AOL icon on the Windows XP desktop
interface.
For months the two companies had attempted to reach a deal that
would have kept AOL's icon on the operating system and worked out
issues, such as which media player AOL would support, and
interoperability concerns between both companies' instant messaging
applications, said Chris Le Tocq, principal analyst with Guernsey
Research.
"The issue here with AOL and the other online service providers
hasn't just been over where would their icons appear," Le Tocq
said. "The discussion is really about whether AOL will get an icon
in the (operating system) at all."
"I think it will come down to what concession AOL will make," he
added.
One of those concessions would have involved AOL altering its
relationship with RealNetworks, which supplies the media player on
AOL's service. Microsoft has embedded its own media player that is
incompatible with the one from RealNetworks, into Windows XP.
Negotiations between the two companies began after AOL's contract
with Microsoft expired in January. AOL had been contractually
obliged to support the Internet Explorer browser for the past five
years in exchange for its services being included with the Windows
operating system.
While interoperability between Microsoft's and AOL's competing
instant messaging applications was not an issue in the discussions,
both companies said it has become a point of contention between the
two industry giants, according to a report in the Wall Street
Journal.
Windows Messenger, which allows users to engage in text and chat
messaging as well as video and audio conferencing with other
Windows XP users, will be bundled with Windows XP when it is
released on 25 October. The product combines MSN Messenger and
Microsoft's collaboration software NetMeeting.
As the battle for instant messaging users heats up, Microsoft's
move to include its own product in the operating system gives the
company a strong advantage over its competitors, such as AOL.
A spokesman from Microsoft's Windows XP development team said at
the company's TechEd conference in Atlanta that AOL's Internet
service was never included in early builds of the operating system
but is technically equipped to run on the platform.
He added that users were likely to see AOL's logo on versions of
the operating system that come preinstalled on a PC from
manufacturers. Computer makers such as Dell can still make deals
with software and Internet service providers to include their icons
in the startup menu, despite the fact that AOL's icon won't be
included on the boxed version of the operating system.
Microsoft said it didn't expect the two companies to resume talks
soon but analysts say there is more battling to come. Research
company Gartner issued a report last week that predicted
competition between the two industry giants would only get more
heated as Microsoft turns its .Net concepts into reality.