AOL and Microsoft Announce Browser Agreement

Posted on June 6, 2003

Microsoft Corp. and AOL Time Warner Inc. have announced an agreement to collaborate on long-term digital media initiatives and to settle the pending litigation between their companies. The two companies have also agreed to a new seven-year license of Microsoft's browsing technology (Internet Explorer) and a variety of steps designed to ensure that their products work better with each other. The agreement also allows AOL Time Warner to use Microsoft's Windows Media software.

The legal settlement resolves the private antitrust lawsuit filed against Microsoft in January, 2002 by AOL Time Warner's America Online, Inc. unit on behalf of its subsidiary, Netscape Communications. As part of the settlement, Microsoft will pay $750 million to AOL Time Warner.

"With Microsoft's media technology expertise and AOL Time Warner's content expertise, we believe we can accelerate the adoption of digital media for the Internet and help content providers across the entire industry," said Bill Gates, Microsoft Chairman and Chief Software Architect. "While our companies will continue to compete, I'm pleased that we've been able to resolve our prior dispute and I'm excited about the opportunity to work together collaboratively to make the digital decade a reality."

Microsoft has provided AOL a royalty-free, seven-year license to use Microsoft's Internet Explorer technologies with the AOL client. To optimize the performance of the AOL service on Microsoft's operating systems, the two companies have made several additional commitments. These include a commitment by Microsoft to make available technical information contained in test or "beta" versions of its Windows operating system to AOL at the same time that Microsoft makes them available to other independent software vendors. Microsoft will also ensure that AOL can participate in other programmatic offerings relating to the development of Microsoft's next-generation "Longhorn" version of Windows on the same terms and at the same time as other independent software vendors.

This browser portion of this agreement means that Microsoft will not have competition from Netscape (owned by AOL Time Warner) as a browser. Microsoft has already grabbed over 90% of the browser marketplace, but the AOL deal will help solidify Microsoft's domination of the browser market. Other potential competitors of the IE browser include the open source Mozilla browser and Apple's Safari.