AOL and Microsoft: Nothing to Talk About

Microsoft has confirmed that it was unable to reach an agreement with AOL Time Warner to ship the America Online (AOL) client with Windows XP. This will be the first time since 1996 that an AOL icon will not be guaranteed to appear in a folder called Online Services on the Windows desktop. However, AOL might pursue agreements with OEMs to include its client software on new Windows XP PCs, and future agreements between the companies have not been ruled out.

The two parties tell different stories about why negotiations broke down in June. AOL claims it ended the talks because Microsoft insisted that AOL use Microsoft’s Windows Media Player, rather than the competing RealPlayer, as its default multimedia playback client. This allegation echoes the complaints that landed Microsoft in its current antitrust trouble-for example, the claims that Microsoft pressured OEM partners to exclude the Netscape Navigator Web browser as a precondition for selling them Windows. Whether true or not, AOL’s allegation could have an impact on the outcome of the antitrust case, or form part of the basis for a new lawsuit. Microsoft’s position is simply that AOL offered insufficient business incentive for Microsoft to do the “hard work” necessary to integrate AOL with Windows XP.