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Real Differences
by Jon Leland
Originally published in Videography Magazine, June 2001

RealNetworks demonstrates that there is more to being an authentic streaming leader than tweaking codecs and distributing software. To be a leader on today’s video Web, a company also needs to demonstrate viable business models, solve significant customer problems, and — at least in my opinion — have a heart.

Rob GlaserThe Vision Thing
I’m the last one to suggest that RealNetworks (with its RealSystem and RealPlayer) is the only game in stream-town. Far from it. Apple’s QuickTime is an important multimedia platform which I believe, in some ways, is the most elegant rich media architecture. And, many people are impressed, rightfully so, with the quality of the images produced by the latest codecs from Microsoft and their Windows Media Player. I also hope I made it clear in last month’s Video Web column that Macromedia Flash is my personal dark horse favorite as a multi-purpose, video capable online multimedia delivery platform.

However, as a company, taking real leadership in helping this very young industry to navigate its way around some awfully treacherous corners, I think that RealNetworks is a different kind of player (pun intended) — one that in its own way is demonstrating meaningful leadership.

First of all, companies in the streaming space need to be shown how to make money.

Here are three of the biggest challenges that are being faced by the emerging video Web. This month’s column will then report the ways that I have observed RealNetworks acting (not just talking) like a leader in addressing these challenges.

First of all, companies in the streaming space need to be shown how to make money. We need viable business models. Secondly, customers have some big problems. Music companies, for example, are seeing their revenue platforms being confronted by Napsterization; and radio stations are being challenged by some crazy union rules that are threatening to take station webcasts off the Internet “air.” And finally, we need to overcome the greed mentality that powered the “irrational exuberance” of the Internet bubble in order to find some real heart. In other words, we need to put some humanity in our businesses so that we driven, at least in part, by a more sustainable energy.

New Business Models
The business news of the last nine months, especially in Internet related businesses, couldn’t have made it more clear that having a business plan and making it successful are two very different things. Not only has RealNetworks, Inc. been profitable as an Internet-only business for the last seven consecutive quarters, but it has done so with an intelligent mix of server sales, consumer upgrades (RealPlayer Plus), and services that include both the Real Broadcast Network (RBN) and the new Gold Pass paid subscription service

With their recent milestone of 200,000 paid subscribers to Gold Pass (all of whom, according to Real, have paid for at least 3 months of service), Real has demonstrated a crucial business model. Internet enthusiasts WILL pay for content. Do the math. 200,000 subscribers, each paying $9.95 a month: that’s $2 million a month or $24 million a year. Not a bad start, and that number must be expected to grow because Real has recently announced major contracts with two of the largest professional sports leagues on the planet, the NBA and MLB (Major League Baseball).

In other words, not only is Real’s Gold Pass service demonstrating the fastest growth of any online media subscriber service model, it proves that there is an audience for paid content. We need that proof… now, more than ever.

And something that I like even better is what is being built around Real’s valuable three-year exclusive deal with MLB. As if “Not just any game, but every game” (i.e. live audio feeds of every game) is not enough. (And, according to Real, that’s roughly “5,000 game feeds” including the broadcasters for each city’s team, i.e. both home and visitor team broadcasts as well as any foreign language versions.)

What I like even better is that through a collaboration with the video search and indexing company, Virage, Real and MLB are getting ready to leverage what video on the Web does best. They are going to give people what they want, when they want it. Without question, fans want highlights of their favorite teams and favorite stars; and, in my view, they shouldn’t have to wait through a TV newscast to see them. With the new “Gold Pass Plus” or whatever they decide to call it, Real will offer baseball fans the ability to search, find, and personalize the delivery of their own MLB highlight reel. Demonstrations of this new service at NAB showed a San Francisco Giants fan finding the highlight clip of Barry Bonds’ historic 500th home run. The customer selected the team, the player and the type of play, and then he/she was offered a selection of clips that met those criteria. This impressive service is promised to be available sometime this June.

Solving Customer Problems
I’m sure that you know by now that the music industry is a mess when it comes to figuring out how to deal with commercial music distribution on the Web. But very few people realize that perhaps the most viable alternative to Napster’s free distribution model (which I believe has its place) is Real’s solution called MusicNet.

... not only does Real have three of the major music labels on board... but, rather than making it exclusive, in true Internet fashion, Real is leveraging the opportunity by offering MusicNet as a B2B (business-to-business) platform that will be licensed to other web sites.

Following on the heels of RealJukebox and over-shadowing the talk of Sony & Universal and their Duet service which is yet to create a real technological platform and MSNMusic which offers “glorified music stations” that don’t even let a user specify a specific song, Real claims a complete development team, already hard at work, preparing for a late summer launch of a more Napster-like service with built-in, yet flexible payment plans.

And not only does Real have three of the major music labels on board (more than any other solution) — AOL Time Warner, Bertelsmann and EMI — but, rather than making it exclusive, in true Internet fashion, Real is leveraging the opportunity by offering MusicNet as a B2B (business-to-business) platform that will be licensed to other web sites. It’s nice that AOL (who already uses a customized version of the RealPlayer as their media player) and Real will be the first to roll out MusicNet, but it’s even better to know that Real is Net-savvy enough to make its service something that its affiliates (such as other Internet music sites) can profit from.

Aftra's Foolishness
In a more direct problem solving mode, how about this challenge? AFTRA (the American Federation of Television and Radio Artists), apparently in some fit of Internet euphoria, decided that under their current three-year contract, AFTRA members are to receive 300% of their normal radio station fees for commercials. Hello? What’s a radio station to do? Pull its webcast because it would cost too much to run the commercials again on the Internet?

Enter Real Broadcast Networks and a sophisticated ad insertion technology that allows the station to choose whether to run a terrestrial ad or to replace it and save the ridiculous (in my opinion) AFTRA fee. Real’s position, “We care about broadcasters and content producers.” That’s right. They are your customers. You should care, but I’ve not heard of any other streaming company who is providing this kind of technology — at least not as widely — in order to solve this very real problem.

Having Heart
Here’s another challenge. I know that most of you think that the almighty dollar is the real bottom line, but personally, I’m not willing to live that way. Apparently, neither is RealNetworks and its CEO, Rob Glaser. As Lisa Amore, Sr. PR Manager, RealNetworks described Glaser, “Rob is passionate about making a difference, and he’s passionate about using our technology to make that difference.” We can only tell if that’s true by his actions; and, fortunately for all of us, they speak quiet loudly. Not only does Real fund and operate (a pro bono project that is a great source for non-profit news and webcasts) and RealImpact which provides high quality technical and creative services to progressive organizations, but RealNetworks gives away 5% of its pro forma net profits (well above average corporate giving).

Most recently, at NAB, Glaser announced an online PSA campaign to use his media company to help confront the global AIDS crisis. His practical solution: A commitment of an impressive 1 billion advertising impressions (85 million a month over the next year) using any and every kind of Real media property to get the message across. And, he challenged broadcasters to help extend this global campaign.

In his own words, Glaser said, “"The AIDS crisis is truly a global issue: its effects extend well beyond the borders of the most stricken nations. Our announcement is a first step—to catalyze more public service commitments from the broadcasting industry, and to highlight the Internet's unique ability to empower individual action on global issues," said Glaser. "With this initiative we hope to harness the Internet's worldwide reach and mobilize people to take action and address the AIDS epidemic, which is ravaging the lives of millions." I wish this campaign every success. It is badly needed by our industry and our world — and in more ways than one.

Bottom Line
My bottom line is that by walking the talk, by showing us that there are viable Internet video business models as well as ways to address our industry’s growing pains and many challenges, I think that RealNetworks is demonstrating authentic leadership.

Unfortunately, that’s different. I don’t see any of the others making these kinds of commitments or accomplishments. On the other hand, fortunately, these actions give me hope and a good reason to stay tuned.

Jon welcomes feedback and suggestions via e-mail at [email protected]


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