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Wednesday, 3 May, 2000, 19:14 GMT 20:14 UK
Stream Dreams
Real jukebox
Real struck a deal with archrival Microsoft for its jukebox software
by BBC News Online's Tim Weber

Downloading music on the internet is all the rage.

What a pity that the development threatens to bypass Real Networks, the company that made audio and video popular on the web.

Granted, the company is still the market leader for media streams, with more than 100 million unique users and a market share topping 70%.

But despite the impressive figures, Real Networks is now facing the real threat that it could suffer the same fate as Netscape and be overwhelmed by rival Microsoft in a software war.

And Real could count itself lucky if Microsoft were its only competitor.

Competing - or catching up - with Realplayer 7 and the RealJukebox are products like Windows Media Player, Napster, Shoutcast, MPeg4, MP3 and many others.

Nifty business model

Real made all the right moves. It did not repeat the Netscape mistake of charging for its consumer software.


real.com screengrab
Free downloads have made Real's software popular
By giving away its Realplayer for free - only charging for advanced versions of the software - the firm managed to rapidly build up a large customer base for audio and video files using its streaming technology.

The Seattle-based company made money by charging content providers for software licences to encode audio streams. Revenue grew in line with the number of users.

Real's chief executive, Rob Glaser, knew the Microsoft ways, he once worked for the company.

But now Microsoft is delivering a double whammy.

The first hook came from the left, when the Media Player was distributed free as download and bundled with newer versions of Windows.

The second punch could prove to be a body blow. Microsoft is now packaging the software to stream media files with its Windows 2000 operating system for servers - effectively giving it away for free.

Not all is lost, as Microsoft is far from dominating the server market. But Napster software, for example, can turn every online PC into a server for media files - so who needs Real?

U-turn

Real Network executives deny it, but the company is trying to do the business equivalent of a hand-brake turn.

To survive in the hyper-accelerated internet world, Real has to move fast to get its new business model working.

Investors have already turned sceptical. From a $96 peak in February, Real shares now trade at just under $50 - although up from an April low of $30.

Mr Glaser hopes to turn the tide by focusing the company around three revenue streams.

  • Infrastructure solutions
    Server and infrastructure solutions for media distribution are still at the heart of the business, although much of the money will not come from consumers, but business-to-business and intranet media streams.
  • Multiplayer platform
    To preserve marketshare, Real has done a string of deals - including one with archrival Microsoft - that has transformed the firm's jukebox software into a multiplayer platform.
  • Eyeballs
    Most importantly, though, Real is trying to turn itself into a portal for multimedia content.
With up to 200 million of page views and 13 million unique users a month, Real can offer advertisers plenty of eyeballs around the world, especially as Realplayer will soon be available in seven languages other than English - including customised channels.

Income from banner ads already provides a hefty chunk of revenue.

'We are not a portal'

But don't call the real.com web site a "portal" or content provider to the face of Real executives.


Realplayer screenshot
Editorial content like Take5 sits right next to paid-for channel advertising
Mark Hall, vice president in charge of programming for real.com, insists that his 25-strong team, scouring the web for good ram-files, acts not as a portal but a "trusted guide" for the millions of users of Realplayer.

Real.com compiles hundreds of media streams, while 'Take5' provides a selection of what the editorial staff believe are the five best media files of the moment.

The "trusted guides" are treading a fine line, though.

Mr Hall says that real.com choices are made on purely editorial grounds. That sits uneasily with Real's "channel deals", where content providers like Fox, Bloomberg and ESPN pay to feature on the Realplayer's channel bar.

And through its web site Real can promise companies using its technology to drive users to their broadcast streams. During the first 100 days since launching RealPlayer 7, the site directed 140m "stream views" to sites using its server technology.

The costs of web listening

Another Real problem is that the business model of tying in banner adverts with watching or listening to long media streams works only in the US market, where internet access is rarely metered.

In other parts of the world, most web users still have to worry about their phone bill as they listen to the latest news bulletin or watch a concert.

And anyway: Why should web surfers go to real.com, if they can get a more comprehensive package of multimedia content - including text and other services - from true portal sites.

Joining the browser war

But far from being daunted by the competition, Real has now moved a few of its troops onto the battlefield of the browser wars.

A customised version of its Realplayer, written for web broadcaster Global Media, allows users to browse the internet and display flash animation.

Should Microsoft or Netscape integrate media players directly into their browsers, Real would be ready.

However, it is doubtful whether Real would be able to grab marketshare from two such established players. Its web technology is not particularly distinct as it is based on the open-source code from mozilla.org.

And there is another big problem, Real's conspicuous absence from the world of mobile internet access. Microsoft's PocketPC operating system, for example, comes with an MP3-ready media player.

Kevin Foreman, who manages partner relations for Real Networks, acknowledges that availability will be the key to success.

The broadband test

The real test for the company's ambitions will come with the spread of broadband technology.

For years web users have put up with crackly sound, fuzzy stamp-sized video images, and waited for Real streams to worm their way through network congestion.

Mr Foreman says the company is well prepared for the challenge. Flaunting its RealServer software, the company has signed a number of broadband deals, for example with satellite broadcaster PanAmSat.

But if things go wrong, Real will have to transform itself from a software innovator to a content host.

Real's stream dreams will hinge on whether it is nimble enough to adapt to a marketplace that is changing so quickly that the rest of the web might appear to be at a standstill.

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