system, including Windows Media Player, and access for Real to a broad range of Windows platform technologies.
"We've agreed, on the Windows front, to make our platform as effective as possible for Real," Gates said on a conference call.
With Windows Vista, the new version of the operating system that is due to arrive next year, Microsoft will add in code so that if someone seeks to play a Real media file and does not have the proper software, he or she will be redirected to a Web site to download the player.
"It's more advantageous than it might have been before," Gates said.
The two companies said they will work to make their respective digital rights management technologies interoperable. "Microsoft will also enable Real to facilitate the playback of content on non-Windows portable devices and personal computers using Windows Media DRM," the companies said in the press release announcing the deal.
Microsoft also said it has provided Real with contractual assurance that it will have broad access to distribution via new computers.
Finally, the two companies will collaborate in the game arena. Real will create a new subscription service to be offered on MSN Games and will also develop a series of new casual games for Xbox Live Arcade for the Xbox 360 console.
The two companies demonstrated some of the planned technology, including a version of MSN Messenger with a link to Rhapsody's music library. Glaser said that some of the joint products will come by the end of this year, while the remainder will be released by the middle of next year.
Glaser said that while Real and Microsoft will cooperate in a lot of areas, they will continue to compete in other areas--such as with the RealPlayer jukebox, which competes with Windows Media Player. However, even in areas where the two companies are rivals, Glaser said Real will be better off for the added technical access it is getting.
"We look forward to making the most of our new relationship," Glaser said.
For its part, Microsoft noted that the agreements with Real over Rhapsody are not exclusive, meaning that Microsoft could partner with others or offer its own subscription service. Gates stressed that the company has not announced any plans to do so, and both he and Microsoft general counsel Brad Smith characterized Tuesday's announcement as a first step toward what's possible between Real and Microsoft.
But, Smith added, "There's no guarantee that further steps will follow."
Both companies agreed that the deal will fundamentally change a longstanding relationship of animosity between the two competitors, however.
"Coming out of this, we wanted peace," RealNetworks's general counsel Bob Kimball said in an interview. "We didn't want to exchange a hot war for a cold war. We wanted collaboration, that's what we got out of the deal."
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