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Week in review: Microsoft makes nice

Microsoft buries the hatchet with RealNetworks and forms an alliance with Yahoo, but it's unlikely to cool the regulatory heat it's under.

Microsoft has buried the hatchet with RealNetworks and formed an alliance with Yahoo, but such moves are unlikely to cool the regulatory heat under the software giant.

Microsoft and RealNetworks announced a sweeping deal on Tuesday that puts aside their legal differences and aims to shore up their respective digital-music strategies. Under the deal, Microsoft will pay $460 million in cash to RealNetworks to settle antitrust claims. It will also pay $301 million in cash to support Real's music and game efforts, and Microsoft will promote Real's Rhapsody subscription music service on its MSN Web business.

RealNetworks had alleged in its December 2003 lawsuit that Microsoft had abused its "monopoly power to restrict how PC makers install competing media players while forcing every Windows user to take Microsoft's media player, whether they want it or not." Real originally sought $1 billion in damages.

As part of the deal, Real will also end its direct involvement in antitrust investigations across the globe, including probes in Europe and Korea.

RealNetworks was the largest corporation participating in the European Union's antitrust prosecution and must withdraw from those proceedings under the terms of the settlement. But that likely won't make things easier for Microsoft during its appeal.

"The settlement strengthens the Commission's case," said Thomas Vinje, an antitrust attorney with Clifford Chance in Brussels, Belgium. "Real has already provided evidence for the case, and that record is complete and in Luxembourg."

Some CNET readers scorned the deal. "MS continues to staunch legal wrangles by infusing cash into the former competitors," . "Sounds like the Michael Jackson approach to me."

Perhaps ironically, Apple Computer may have given RealNetworks an incentive to strike a deal with Microsoft. In early 2004, RealNetworks Chief Executive Rob Glaser made several appeals to Apple Computer CEO Steve Jobs, asking him to make the popular iPod compatible with other companies' music services. Jobs later told Apple shareholders that working with RealNetworks was simply "not worth it."

Three months later, the shunned RealNetworks announced that it had successfully reproduced Apple's iPod technology with its new "Harmony" music tool. Glaser said the development of Harmony, which also provided compatibility with Microsoft software, helped improve the relationship between RealNetworks and the software company.

Whatever its impact on RealNetworks and Microsoft, the deal is unlikely to change the dynamics in the broader digital music market anytime soon, analysts said. Apple's iTunes music store and its iPod music player each retain more than 80 percent of their respective markets. That dominance has been locked in place by consumers' ongoing love affair with the iPod, and rival MP3 manufacturers' inability to create a similarly popular product.

At least one top record company executive said the deal could help push Apple toward offering its own subscription service, a business model that Jobs has criticized in the past. But the same label executive, who asked not to be named, said Microsoft and its hardware allies still need to make better, simpler, more widely compatible MP3 players if they are to encroach on Apple's share.

Microsoft also buddied up to Yahoo, announcing plans to make their instant-messaging services interoperable. Analysts called the move a shot at market leader America Online's AOL Instant Messenger and a defensive jab at newcomer Google. Beginning in the second quarter of 2006, customers of Yahoo Messenger or MSN Messenger programs will be able to exchange instant messages, see the presence of their contacts, share emoticons, add friends from either service and make PC-to-PC voice calls.

Multiprotocol IM clients like Trillian and Fire seem seamless enough for many users, enabling them to use several instant-message programs under one interface. But Yahoo and MSN have tried to wall out third-party integrators, calling their moves preemptive measures against IM spam, or spim.

But the partnership has a flipside, an instant-messaging security expert said. "As Microsoft, Yahoo and others connect their global IM networks, IM worms will spread faster and attack a larger population of end-users," said Jon Sakoda, chief technology officer at messaging security company IMlogic.

Watching TV without your TV
No time for "Lost" last night? Just download it and watch it during your commute. That's what Apple Computer hopes you will do with the unveiling of its long-rumored video iPod and an updated version of iTunes that lets users buy music videos, TV shows and movies. The music players, which come in black or white with a 2.5-inch screen, will be available in a 30GB model for $299 and a 60GB version for $399. The new devices hold up to 15,000 songs, 25,000 photos or more than 150 hours of video.

With the new version of iTunes, unveiled five weeks after the debut of iTunes 5, consumers can buy non-burnable music videos for $1.99. In addition to music videos, consumers will be able to purchase TV shows one day after their initial broadcast. It will take 10 to 20 minutes to download an episode. Each will cost $1.99 and will be ad-free.

Apple kicked also announced a new iMac G5 desktop computer that will be similar to the current model but thinner. The 17-inch 1.9GHz goes for $1,299; the 20-inch 2.1GHz model is $1,699. The iMacs will come with a built-in, Webcam-style iSight camera with still and video capabilities, and a new Apple remote that lets consumers control music, photos and video from 30 feet away.

The release of Apple's new iTunes store for videos provides a look at a business model likely to unsettle the movie, television, advertising and retail markets for years to come.

With this first step into the video sales market, Apple is taking a path similar to the one followed by its initial iTunes music store, which started with a relatively number of titles that were accessible only to the relatively small number of Macintosh computer users out there. But it was an effective way to persuade a formerly reluctant music industry to allow broader online distribution.

Apple's deal with Disney appears to include a similar foot-in-the-door strategy, starting with a small amount of content to which it will add much more in the near future. It does go beyond anything else online, however, offering consumers the ability to download a purchased version of several shows the day after they air, along with back episodes.

EchoStar Communications is also getting into the portable video player market. PocketDish can download, record and play content from a PC or Mac, digital cameras, mass-storage devices, as well as from sources such as digital video players, camcorders and video cassette recorders, the company said. It is compatible with most television sets and consumer electronic devices currently available.

In addition, customers of EchoStar's Dish Network can dock PocketDish to select DVRs, using a USB 2.0 connection for fast video transfers. An hour of Dish programming can be transferred to the portable device in about five minutes, the company said.

Intel's chip secrets
CNET got a look at Intel's confidential road map, which shows plans for a dizzying array of single- and dual-core chips for 2006.

Performance-enhancing features such as hyperthreading, 64-bit functionality, execute/disable and virtualization will appear together, separately, in varying combinations or not at all, depending on the chip and the type of computer in which it will be used. Of course, chips will vary by speed, cache size and bus speed.

The chipmaker's first round of Viiv entertainment-branded PCs will be included on Intel motherboards code-named Bad Axe, Palm Canyon and Bear Canyon. Each motherboard will include LGA775 packaging for 3.60GHz and higher processor frequencies. These computers will rely on the upcoming Yonah notebook chip.

Yonah, a new notebook chip coming from Intel early next year, will run slightly faster than expected, but may also consume more power than its contemporaries. Intel road maps indicate the next-generation Pentium M will debut at speeds up to 2.16 GHz and possibly 2.33 GHz--slightly faster than the 2GHz or less anticipated by sources in August. Yonah will also come with a 667-MHz bus, which is a channel for ferrying data between the processor and memory; today's Pentium Ms feature a 533-MHz bus.

Yonah chips, though, will carry higher maximum-power-consumption ratings than current Pentium Ms. Most likely, that's because most Yonahs will sport two processing cores, rather than the single core found in today's notebook chips.

Intel is expected to begin the introduction of its "Montecito" processors with three models running at 1.6GHz and 1.4GHz, but by the end of the first half of next year, at least six more are scheduled to arrive. The plan also shows an even broader portfolio of Xeons, a vastly more popular server chip that, unlike Itanium, can run the same software as other x86 chips such as Pentiums.

The road map also shows that Itanium clock speeds will get a 200MHz boost from the addition of Intel's new "Foxton" technology, which lets chips run faster as long as they don't get too hot.

Violence, viruses and video games
If life can imitate art, can life imitate video games? Some scientists will tell you yes.

Violent video games appear to put the human brain in a mood to fight, according to a new study from Michigan State University. In the study, 13 males played the first-person shooter game "Tactical Ops: Assault on Terror" while in a functional magnetic resonance imaging (fMRI) system, which measures brain activity. The brain scans of 11 of the subjects exhibited "large observed effects" characteristic of aggressive thoughts. The researchers said the pattern of brain activity can be considered to be caused by virtual violence.

"There is a causal link between playing the first-person shooting game in our experiment and brain-activity pattern that are considered as characteristic for aggressive cognitions and effects," said Rene Weber, assistant professor of communication and telecommunication at MSU. "There is a neurological link, and there is a short-term causal relationship."

However, online video games may also hold clues to deadly viruses. A plague that hit the virtual game "World of Warcraft" in late September quickly propagated, causing the temporary death of innumerable players and significant damage to large numbers of others.

But to some scientists and educators, virtual reality outbreaks could prove a valuable tool for studying the spread of infectious diseases and the public response to them. The correlation between online and real-world behavior in the face of epidemics, they say, takes on heightened significance in the face of public-health threats like a potential avian flu pandemic.

Virtual online worlds--where players' economic and social behavior is often a microcosm of their off-line behavior--are a perfect place to compare real-world infectious diseases with those comprised only of digital ones and zeros. Among other things, she explained, virtual environments can allow researchers to see how social ostracization occurs as a disease spreads and people try to avoid going near the infected.

Speaking of realism in video games, CNET's Daniel Terdiman joined a small crowd of journalists invited to try their hands at 12 titles expected to be ready in time for the Xbox 360 launch next month. He calls Microsoft's next-generation video game console an "impressive machine."

The invitees were immediately immersed in a magical world of stunning graphics that brought even the blades of grass to life. The level of detail was monumental. "The attention to detail on "Project Gotham Racing 3" was indeed noteworthy: spectators who reacted individually when my car got too close, glare on the window, even a realistic reflection in the side-view mirror," he writes in his reporter's notebook. "And the driving, I have to admit, was pure fun."

Also of note
Hidden images built into chips have yielded a catalog that now boasts more than 100 images of extremely small automobiles, dinosaurs and cartoon characters...Google and Comcast are in serious talks to buy a minority stake in Time Warner's AOL, according to sources familiar with the matter...Microsoft detailed changes to its server product licensing to better accommodate virtualization software, an emerging technology that big companies are eyeing as a way to consolidate servers and cut costs.