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RealNetworks's Rob Glaser has a problem - a problem much bigger than the bug that caused Windows to disable his company's RealPlayer. His dilemma is how to survive in a Windows world, and what kind of company RealNetworks should be.
In a 1997 deal that gave new meaning to co-opetition, RealNetworks agreed to sell Microsoft a 10 percent interest and license its technology to the software giant, an up-and-coming competitor in the streaming-media market. The problems with this partnership made headlines one year later when Glaser testified about Microsoft's unfair business practices before the Senate Judiciary Committee, including allegations that the bug was intentional. The OS glitch was quickly corrected, but the life-and-death competition beneath the veneer of cooperation remains.
RealNetworks has no intention of becoming a behind-the-scenes technology vendor, Glaser insists. "We're more like a brand of TV," he says. "People care about having Trinitron because it has a better picture." But to reach consumers RealNetworks needs space on the Windows desktop, which means the video software maker depends on Microsoft, a competing software maker. And why should Microsoft help a competitor?
In response, RealNetworks has branched out from the tools business, inking exclusive content deals with the likes of CNN, ABC, and Viacom. And its Real Broadcast Network partnership with MCI positions the company as a sort of portal for streaming media. But while the content strategy gives RealNetworks a certain independence from Microsoft, it also brings the company head to head with media players that could be its best customers.
Glaser is clearly willing to lose a few deals in order to transform RealNetworks from a Microsoft-dependent tech company into a strong consumer brand.
Ron Rappaport, an analyst at Zona Research, thinks it's a gamble Glaser can win. "RealNetworks has built up solid cachet," Rappaport says, "and it could use that to keep its name in the eye of an industry that has grown accustomed to Microsoft technology."
Of course, branding isn't everything. In a marketplace connected more by phone lines than fat cables, RealNetworks's reputation for cutting-edge compression and playback technologies is also key. The number of Web sites using streaming technologies has tripled in the past nine months, and 85 percent of those sites use RealNetworks products. A September study by Media Metrix found that the RealPlayer had picked up 4.3 million users in the second quarter of 1998, bumping it into the top 10 most popular consumer-software applications.
And there's more good news for Glaser: An alliance with Intel marries the chipmaker's proprietary compression technology with RealNetworks's video software. Intel, desperate for a killer app for its new 500-MHz Pentium chips, can bless Glaser's company with powerful marketing resources. More important, the hybrid system promises broadcast-quality streaming rates, even on older Wintel machines.
"If there's one thing streaming-media users appreciate," Rappaport says, "it's better-quality streaming." At the end of the game, that may still be the ace up Glaser's sleeve.
Original story: "Real Revolution," Wired 5.10, page 122.
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