Microsoft Courts Hollywood Allies

When Apple Computer Inc. transformed the digital music scene in April 2003 by selling songs over the Internet, the richest man in the world was not amused. Microsoft Corp. Chairman Bill Gates had struggled for a decade to get his software into consumers' home entertainment systems. Now the digital media party was finally starting, and he wasn't invited.

But the blow gave Gates new insight, motivation and some needed humility — and it intensified work on what might prove the turning point in his quest to extend Microsoft's supremacy from the office into the living room.

Just weeks after Apple's seismic announcement, Gates and new AOL Time Warner Inc. Chairman Richard Parsons settled America Online's claim that Microsoft had crushed its Netscape software subsidiary with illegal monopolistic behavior. More important, Gates and others said in recent interviews, the settlement led to a new relationship that has changed the course of Microsoft's fractious dealings with Hollywood.

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