RNWK--AOL-RealNetworks deal boon to content plays
July 13, 2000
by Ryan Tate
America Online's (AOL) decision to deploy streaming media technology from RealNetworks (RNWK) could mean more business for cash-squeezed broadband content plays, media analysts said Wednesday.
AOL said it will spend an undisclosed sum to license Real's streaming media server, RealServer 8, across its massive internal network. It will also incorporate some of Real's technology into the next version of its client software, AOL 6.0.
Industry watchers say the deal promises to bring broadband interactive services into the mainstream, as more and more of AOL's 23 million subscribers take advantage of the technology. Indeed, AOL's last major technology push, AOL 5.0, now accounts for 75 percent of the company's internal traffic just nine months after its release.
The uptick in AOL 6.0 users could be good news for broadband content plays, struggling to raise cash despite a dropoff in tech stocks and tighter venture capital since March. One such concern, video-streamer FasTV.com, folded less than two weeks ago after burning through $40 million.
Scrambling for customers
But the worst may be over. Broadband service providers like SBC Communications (SBC) and AT&T (T) are scrambling to sign up more customers. As part of that effort, SBC is giving PCs to new DSL users with no cash up front, while newly formed Verizon Communications (VZ) last week cut its consumer DSL prices 20 percent. AOL itself is expected to announce a broadband version of its service for Time Warner (TWX) cable customers. The proliferation of high-speed Net connections, coupled with AOL's wide deployment of RealNetworks servers -- sources quoted in The Wall Street Journal valued today's deal at $20 million to $30 million -- is good news for streaming plays like FasTV.
"We will be seeing in the next six to 12 months a tremendous upsurge in the value of [broadband] content," said Jack Meyers, who has been retained as an interactive TV consultant by such companies as Time Warner's Turner Broadcasting, AOL, ESPN, Microsoft (MSFT) and Discovery Networks. "Whatever position you have in the industry, this type of announcement is positive in terms of ... the power of AOL and its almost 25 million users."
Who will benefit
Standing to benefit from a larger streaming media audience are companies like ACTV, The Feed Room and Zatso, which deliver customized video feeds synchronized with graphical and textual Web content and with links.
Streaming audio plays could be on the winning end of the deal as well, including players like AOL's own Spinner.com, a RealAudio-based Internet radio tuner and network, and Web-based networks like Live365.com. In fact, the AOL-RealNetworks deal is "big" for Spinner, said Jupiter Communications' Billy Pidgeon, because RealNetworks agreed to bundle the already fast-growing Spinner system with its popular RealPlayer software.
Other streaming media concerns stand to benefit from the deal too, Pidgeon said. "It adds potential to streaming media because AOL support is essential for a large number of users. They have an undeniably large audience," he said. Meanwhile, he added, users will be flooded with streaming media technology choices and installations as Real, Microsoft and AOL compete to distribute players.
In the end, the tools will matter far less than the content, which will come from AOL and other streaming content providers. "It has more to do with mindshare than market share," Pidgeon said.
Content-rich AOL is uniquely positioned to provide streaming media content, thanks to its pending acquisition of Time Warner. But AOL spokesperson Wendy Goldberg said the company has "no initial plans" to offer rich content from Time Warner media properties on its streaming network.
Indeed, the first content offering to come out of the deal is between AOL, Real and Viacom's (VIA) CBS. That leaves room for the broadband content startups to gain a wider following. "Industrywide, it really means that streaming is going to enter even more of the mainstream," Zatso spokesman Joshua Weinberg said.
Ryan Tate covers digital entertainment for UpsideToday.
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