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Talks between AOL-Time Warner and Microsoft to extend their technology sharing/distribution agreement have collapsed, the two companies said today.

Microsoft will no longer bundle AOL access with its Windows operating system, following AOL's refusal to support the Windows Media Player on its Web sites. AOL is a proponent of rival technology from Real Media.

And, Bloomberg reports, Microsoft "also sought a guarantee that AOL-Time Warner wouldn't lobby lawmakers, complain to antitrust enforcers or bring legal claims alleging that Windows XP violated antitrust laws, according to people familiar with the talks".

According to an unnamed AOL source cited by Bloomberg, the talks foundered over Microsoft's attempt to secure preferential positioning for Media Player. An equally anonymous MS spokesperson denies this.

Whatever the details, there is more than enough suspicion between the two companies to make any deal fail.

Microsoft and AOL were uneasy bedfellows at the best of times. They square up on browsers; Internet access (US-only); and Internet content (just about everywhere).

Microsoft is the blot on AOL's landscape. AOL is more than capable of looking after itself: the world's biggest ISP, and parent company AOL Time-Warner is the world's biggest media company.

But is Time Warner a help or a hindrance for AOL in the battle for Internet supremacy? MSN may want some Time Warner material for its sites, but it can always look elsewhere. Microsoft can always look elswhere for its advertising elsewhere too. When you have levers...

Anyone know how much MS spends each year with Time Warner? ®

Related link

Bloomberg: Microsoft-AOL Talks Fail; Software Bundling to End

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