Microsoft Settles Suit With AOL

A potential AOL-Microsoft linkup is only the latest development to shake the nascent online music business. This week, the Rhapsody online music service launched an offering that will allow members who pay a monthly fee to download songs for 79 cents apiece. The move came as RealNetworks (RNWK Quote), a shareholder in the rival MusicNet online music service it owns in conjunction with three major record labels, launched Rhapsody as a replacement for MusicNet. And only last month, Apple (AAPL Quote) got the ball rolling by offering 99-cent downloads without a monthly fee.

How the AOL-Microsoft thaw affects RealNetworks' relationship with AOL will surely be on investors' minds in coming days. Parsons noted that its agreement with Microsoft wasn't exclusive, and said AOL Time Warner would continue to work with RealNetworks. On Thursday, RealNetworks dropped 38 cents during regular trading before falling a further 16 cents to $8.61.