AOL Time Warner has updated its popular Winamp MP3 player, adding video capabilities that bring the program into direct competition with streaming media giants Apple Computer, Microsoft and RealNetworks.

With the addition of video playback and streaming, Winamp graduates from being a mere audio player to a full-fledged media player. And with the ability to stream Microsoft's Windows Media formats, and the intention to add RealNetworks formats, Winamp could be in the position to let AOL Time Warner muscle its way up in the fight for media player dominance.

Should a video-enabled Winamp start to cut into media player competitors' market share, that could spell trouble for a key alliance forged between AOL Time Warner and RealNetworks to thwart Microsoft's aggressive media ambitions.

"I think AOL does want to be in the top three, absolutely," said Yankee Group analyst Mike Goodman. Winamp3 "positions AOL to have its own product to compete against Microsoft. But the interesting thing to watch is the impact that this has on AOL's relationship with Real. Does this create a schism?"

RealNetworks and AOL Time Warner collaborate on a number of media fronts. The latter claims to be one of the largest licensees of Real technology, and the Winamp-based media player in AOL Time Warner's proprietary online service supports Real formats.

Winamp3, however, does not. An AOL Time Warner representative said the company was "actively working with Real to permit support for Winamp" but would not say whether that work was strategic or technological.

RealNetworks declined to comment.

Microsoft, which plans to launch a new beta version of the Windows Media Player on Sept. 4, shrugged off any threat from AOL Time Warner and Winamp to its own player, pointing to Winamp's support for the Windows Media formats as a strategic plus for the Redmond Wash.-based company.

"The release of Winamp3 is proof that Microsoft is realizing one of its key goals for digital media--to deliver technology that others can build on in creating their own products," Jonathan Usher, director of the Windows Digital Media division, wrote in an e-mail. "For example, Microsoft has worked to ensure that it is easy for developers to build support for Windows Media playback into their applications. So we're pleased to see the addition of Windows Media Video playback as a key feature of Winamp3."

RealNetworks recently put significant parts of its technology into an open source development organization called Helix, which is intended to give developers of devices and applications more freedom to build support for Real's formats. AOL Time Warner called it "too early to tell" whether Helix would permit Winamp to add Real support.

Meanwhile, Winamp3 supports a long list of audio and video formats, including MP3 and MP2; MPG and MPEG; Microsoft's WMA, WMV and ASF; the open source and patent-free Ogg Vorbis audio format; MIDI (musical instrument digital interface); and others, as well as its own Nullsoft Streaming Video, a codec-agnostic video format.

The player does not support MPEG-4, a widely touted multimedia standard, or Apple's Quicktime format.

In addition to the video capabilities and attendant strategic complications, Winamp3 introduces a number of new features. Nearly a year after its release in a test, or beta, version, Winamp3 launched with features that let users change not only the look and feel of the application, but the user interface.

AOL Time Warner credited the program's flexibility to Wasabi, a new development environment, developed by AOL Time Warner unit and Winamp originator Nullsoft. Nullsoft's Wasabi is no relation to Wasabi Software, which makes 3D rendering software.

Wasabi is both the kernel of the new Winamp and a development environment for building around that kernel. Winamp enjoys a large following of developers who design "skins"--essentially the look of the player--as well as functional plug-ins.