RealNetworks and Microsoft Hold Hands, Butt Heads
by Joe Nickell
5:02am 30.Jan.98.PST
As the race heats up for dominance in the
emerging streaming-media market, the two
biggest players, Microsoft and RealNetworks, find
themselves engaged simultaneously in cutthroat
competition and hand-in-hand cooperation.
The Redmond software behemoth owns a
10-percent stake in the Seattle-based upstart and
is actively working with it on streaming standards,
but the two companies go head-to-head in the
sales arena. Both are hawking competing server
technologies to big corporations ready to put
training videos and other programming onto their
intranets, and both are trying to gain market share
for their RealPlayer and Windows Media Player
clients.
"The relationship is developing like a double-helix,
where both companies are competing and yet
ensuring that they cooperate with each other on
standards," said Ron Rappaport, an industry
analyst with Zona Research.
RealNetworks calls the relationship "multifaceted."
Microsoft calls it "coop-etition." And both see it as
a bizarre necessity in the market they're each
fighting to conquer.
"You really have to recognize that Microsoft really
is the environment," said Brett Goodwin, media
systems group product manager at RealNetworks.
His CEO must certainly agree, as Rob Glaser
spent a decade singing Microsoftian praises as
one of Bill Gates's top dogs, before heading out to
found up the streaming start-up.
"The success of Windows has been incredible,
and we build software for that platform," Goodwin
added. "On the server side, Windows NT is a very
popular platform, and taking advantages of the
enhancements there is important for us."
For Microsoft, the necessity of cooperation was
born out of its competitor's lead on the technology
- and its acknowledged dominance in the
marketplace. Some 85 percent of all streaming
content online is formatted in RealNetworks files,
according to the folks at Real.
"The Microsoft investment in RealNetworks was an
ante to get the technology they wanted," said
John McCarthy, group director of new media
research at Forrester Research. The deal allowed
Microsoft to license playback technology for
RealNetworks streamed media, which Microsoft
then incorporated into its Media Player.
"I think that in the end our shared goal is to push
toward standards," said Gary Schare, product
manager for Microsoft's Netshow streaming server
software. "We're working together in general to
grow the market."
In the two years since RealNetworks (then called
Progressive Networks) first introduced its
RealAudio technology, which allowed real-time
audio over the Internet, a number of other
companies have joined the race for primacy in the
streaming market. In addition to Microsoft,
Vxtreme, VDONet, and a slew of smaller players
jumped into the fray, offering competing products -
and, just as often, competing format standards.
As quickly as competition reached full steam, it
dawned on the major players that the market
couldn't develop without some degree of
cooperation.
"Without a standard underneath their products,
and without interoperability, user frustrations will
run high," said Ron Rappaport, an industry analyst
with Zona Research, who believes that most
end-users don't want to worry about which file
types can be viewed or heard on which players.
That recognition was likely the driver behind an
announcement this week that Microsoft's
Windows Media Player will read content files
formatted for the RealSystem 5.0 RealServers.
Still, Microsoft's introduction last weekend of its
own new streaming software package, Netshow
3.0, spelled out a clear message: While the two
companies will support each others' file formats,
they'll continue to butt heads over who will sell the
software to create, send, and play back the files.
As the browser war taught Netscape, the battle
here is not about the clients, but which company
will sell its server software packages.
RealNetworks' RealSystems 5.0 is widely touted
as the industry standard; but when Netshow 3.0
hits the streets in two months, the game is once
again wide open.
"RealNetworks is definitely still leading the pack,
but Microsoft is coming on," said Rappaport. "The
gap is now measured as a couple of months rather
than a couple of quarters."
RealNetworks' latest strategy for selling its server
technology has it partnering with one of Microsoft's
most bitter rivals, Sun Microsystems. This week,
RealNetworks announced that it would be porting
its server software to Sun's Solaris platform.
RealNetworks already runs on Windows, NT,
Macintosh and Unix.
Analysts agree that the partnership between Sun
and RealNetworks gives a strategic advantage to
both companies. "It's a very synergistic
arrangement," said Forrester's McCarthy. The
arrangement with Sun will mean that, "instead of
having to run three or four NT servers, you can run
one big Sun server."
And that's good ammunition for Sun's marketing
guns. "The deal will get the Sun sales force out
there selling the bigger deals for RealNetworks,"
said McCarthy.
But when competing with Microsoft, a battle of
sales forces is almost inevitably an ugly one.
Therefore, analysts believe RealNetworks' focus
must remain on its products.
"This game is around RealNetworks' ability to
innovate and stay focused," said McCarthy. "As
long as they can continue to add value and
services, they'll be able to sell their software and
keep sites in the fold. If they continue to offer a
higher-end server, they can make it." |
