$478 million in cash expected by next week

Elaborating on information revealed earlier today, Real CEO Rob Glaser and CFO Roy Kimball clarified the extent of what their company is receiving in the deal: Microsoft is to pay RealNetworks $460 million USD to settle the antitrust claims, in a lump sum that the company expects to receive within five business days. This amount is expected to show up on the company's financial statement as a "negative operating expense," in a single line item, marked "antitrust settlement."

Over the next 18 months, Real is scheduled to receive $300 million additional as part of its music collaboration agreement with Microsoft. An $18 million "down payment" toward an installment plan is expected over the next five business days. The remainder of the agreement amount would be payable quarterly, in installments of $40 M, $58 M, $62 M, $61 M, and $61 million in the first quarter of 2007. However, any amount that Microsoft would have to pay in cash may be offset by bounties that Microsoft would earn through the generation of new RealNetworks customers through services such as MSN. The net value of customers gained through these services will be ascertained, Glaser said, using the same formula Real uses to assess new customer bounties for its other partners. Theoretically, Microsoft could erase this part of its debt over time if it were to generate 7.5 million new customers for Real.

In the joint news conference earlier today, Microsoft's Bill Gates was asked if this deal affected Microsoft's own plans to launch a music service in the future. In an attempt to decline specific comment, Gates stated now was not the time for such an announcement from Microsoft, leaving open the door for creating its own music download service in the future. The agreement had earlier been characterized as promising Real prominent placement for Rhapsody in MSN Search and other services. However, in response to a reporter's question during the conference call later that afternoon, Real's Roy Kimball opened the door for Microsoft a crack wider: "Parity is the situation for the next 18 months," referring to the relative placement of a Microsoft-based service alongside Rhapsody in Microsoft promotions. "If they did launch a service," he added, "it wouldn't have to be less prominent than Real's; it would have to be at, at least, parity."

Earlier in the conference call, Kimball told reporters that, in what may be an unprecedented move by Microsoft, it has agreed to give Real assurances regarding the operating system behavior of Windows, and the company's own business practices, as well as opening up APIs for Real's own research. "For example, Real will have access to a variety of Windows Media, security, and operating system technologies," said Kimball, "that will enable Real to build services and software that enhance consumers' experience with Real's products and services on Windows. For example, Microsoft will open new APIs into its media infrastructure in the operating system, and will open APIs to enable Real to get direct access to the Windows protected media path for our digital rights management and content." Collaboration with Microsoft, said Kimball, will enable a new level of interoperability between Real and Windows' DRM, allowing RealPlayer to access more types of content.

Real's Rob Glaser closed by characterizing his company's three agreements with Microsoft, including the antitrust settlement, as follows: "This by far exceeds the expectations that I personally had, as to the kind of outcome we'd have, both in terms of the economics that we achieved in a zero-risk way, in a timely way, and also in terms of the opportunity for leverage that comes out of the business relationship."