For the people who own RNWK :Glaser to Move RealNetworks
Beyond Battle With Microsoft
By KARA SWISHER
Staff Reporter of THE WALL STREET JOURNAL
Rob Glaser, who helped give the Internet its first real voice, poses a pair of inextricably intertwined questions on his company's fifth anniversary:
"Why are people so obsessed with our relationship with Microsoft?"
"When will the statute of limitations expire on calling my company 'the next Netscape'? "
Maybe never, Rob.
That's because Mr. Glaser's RealNetworks Inc., which first broadcast audio and video over the Internet in a technology called "streaming," makes software and services that Microsoft Corp. has targeted as central to its future.
Thus, some immediately make comparisons between RealNetworks and Netscape Communications Corp. -- another Internet pioneer that got slowly but surely weakened from an ugly head-to-head battle with the PC software giant until it was finally sold last year.
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Rob Glaser
Age: 38
Hometown: Yonkers, NY
Last book read: 'The Operator: David Geffen Builds, Buys, and Sells the New Hollywood' by Tom King
Last album bought: 'Dream All Day: The Best of the Posies'
Favorite recent web site: Thesmokinggun.com ('I like it because it speaks the truth about power.')
Latest gadget bought: The 'Rome' MP3 player, which is shaped like a cassette tape
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And there are personal reasons, too. The barrel-chested Mr. Glaser was once a high-ranking Microsoft executive, and founded his company in a trendy Seattle neighborhood only a short drive from his old employer. Like Microsoft's ubiquitous Bill Gates, Mr. Glaser cuts a strong profile in the sometimes-claustrophobic Pacific Northwest-tech scene, complete with a stake in a local baseball team and a variety of civic endeavors. He lives, too, with his fiancee in a stylish apartment (wire, glass, concrete, stainless steel and black-and-white color scheme) that is often visited by former and current Microsoft employees.
While Microsoft does permeate his world, perhaps Mr. Glaser has a point when he says that thinking of Real as simply a two-horse race with Microsoft is "rear-view mirror stuff."
But before handicapping his chances, let's give Real and Mr. Glaser credit for seeing the trends early. (Personal note: Mr. Glaser is a small investor in a company run by my partner.) When he launched his first product in April 1995, it was roundly dismissed as a silly and not-very-elegant sideshow to Web explosion. The reason was simple: Sound sounded very bad on the early Internet.
Nonetheless, Mr. Glaser had been clanging along on the multimedia bandwagon for a much longer time, agitating for more audio and video functions in Microsoft's Windows software while a fast-rising young executive there. In his first job, the Yale University graduate developed a reputation as an extremely talented but particularly disputatious executive in a company full of them.
He left in 1993 with $15 million in his pocket. He originally called his new company Progressive Networks, a name that spoke to his liberal politics. Real now has more than 115 million registered users of the PC software used to play streaming audio and video, and a dominant market share in server software to disseminate that content. It also offers a popular software "jukebox" for storing and playing music on PCs.
Responding, Microsoft is pulling out the same playbook it used to compete with Netscape, leveraging its control of Windows and its massive financial strength. It bundled its Media Player software into the desktop version of Windows and placed its server technology into Windows NT and 2000 -- all for free. Microsoft has been gaining more users in the streaming arena and recently introduced its own jukebox. The encroachment, along with a broad weakness of Internet stocks, has caused Real's share price to shrink to nearly $31 from highs of near $100 earlier this year. The share price might improve this week, when Real announces what are expected to be strong earnings.
Despite the downdraft, Real has many options. Here are the likely possibilities:
PLAN A(nywhere): Real dominates the streaming arena, but faces more problems. The company has its own downloading format, but is more widely associated with the popular and piracy-prone technology known as MP3, as well as secure formats.
To gain favor with the record labels -- and counter a Microsoft format that has copyright protections -- some people think Real should buy a company, such as Liquid Audio, that makes software for securely downloading music.
Some also suggest Real should work with hardware makers to create Real-branded devices to play tunes in whatever file formats become popular. The idea: Move Real more aggressively off the PC and spread its brand much more widely.
PLAN B(roadband): With more consumers using high-speed Internet connections, there is a chance to create the hot destination for audio and video on the Internet. Real has already been moving to become a kind of Internet portal, and it is a natural to be a force as more programming is available with better sound and image quality.
This effort, of course, runs it smack into competitors like Yahoo! Inc., which paid a fortune for Broadcast.com last year and is trying to expand its franchise in multimedia. To complicate matters, Yahoo is an important Real software customer, too; it recently had a tussle with Real over the price of its latest deal for servers.
PLAN C(ontent): If profits for its software products -- upgrades for which it charges -- are likely to erode eventually, why not compete more broadly? Why not buy up or invest in content (music, news, etc.) to capitalize on the giant distribution network that Real has created with the free players over the years?
Again, the move puts Real in direct competition with the many content players who are software customers. If Real doesn't want to compete with these customers directly, however, it may be able to strike more complex strategic partnerships with them.
PLAN M(ore of the same): Whatever its success in moving into new fields, the one thing Real can't afford is what many consider a key mistake of Netscape -- the slowing down of innovation and spending to improve its browser after the company made it free. Real must continue to add popular features on its key software -- like the player and the jukebox -- to avoid losing repeat users, who can quickly drop software that no longer meets their needs.
In other words, if you don't want to be like Netscape, don't be like Netscape.
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