AOL, Microsoft talks break down

AOL Time Warner and Microsoft Corp. abandoned talks over the weekend aimed at including America Online software in Microsoft's new XP operating system set to debut this fall.

An AOL Time Warner spokeswoman confirmed published reports that discussions reportedly broke down over issues related Microsoft's operating system itself, as the software behemoth is building functionality in services that duplicate services AOL software provides its users. "The talks ultimately became about music," the spokeswoman said. Specifically, the issue is Microsoft's desire to control the digital music business online. The Redmond, Wash. software behemoth wanted AOL to drop its support of RealNetworks' RealPlayer for streaming audio and video in favor of Microsoft's Windows Media Player.

The failure of the companies to reach accommodation means Microsoft risks alienating some 30 million AOL subscribers from its XP software. It also raises antitrust concerns about the new operating system, as Microsoft awaits resolution of the judgement against it in the Justice Department's antitrust suit, now being considered by an appeals court. - Richard Tedesco