[opendtv] News: RealNetworks Seeks Musical Alliance With Apple

From: Craig Birkmaier <craig@xxxxxxxxx>
To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
Date: Fri, 16 Apr 2004 08:14:01 -0400
Note that Apple just reported stronger than=20
expected earnings, based in part on very strong=20
sales of the iPod music player (more than 800,000=20
units in the last quarter). Apple is delaying the=20
introduction of the iPod Mini until July due to=20
the inability to meet strong demand for the=20
device.

The alliance between Real and Apple, discussed in=20
the following article, could have a significant=20
impact in the digital media player market...

And it is worth noting that Real supports the=20
ISMA streaming video initiative, which could help=20
promote a standards based approach to streaming=20
using MPEG-4 and AVC.

Regards
Craig


RealNetworks Seeks Musical Alliance With Apple

April 16, 2004 12:00am
Source: The New York Times Co.

New York Times: RealNetworks made a direct appeal=20
last week to Apple Computer, its Internet music=20
rival, suggesting that the two companies form a=20
common front against Microsoft in the digital=20
music business.

The offer to create a ''tactical alliance'' was=20
made on April 9 by Rob Glaser, chief executive of=20
RealNetworks, the Seattle-based Internet music=20
and video service, in an e-mail message to Steven=20
P. Jobs, Apple's chairman.

But if an alliance with Apple could not be=20
struck, Mr. Glaser strongly hinted in the e-mail=20
message that he might be forced to form a=20
partnership with Microsoft to pursue ''very=20
interesting opportunities'' because support for=20
Microsoft's media-playing software seems to be=20
growing.

A pact with Microsoft would be a startling=20
reversal for RealNetworks, whose complaints about=20
Microsoft's business tactics form a major part of=20
the European Commission's antitrust case against=20
the company.

Mr. Glaser, the founder of RealNetworks, is a=20
former executive of Microsoft who left on=20
friendly terms but later became a bitter rival=20
after Microsoft decided that media-playing=20
software would be crucial to its long-term=20
growth. The overture from Mr. Glaser to Mr. Jobs=20
also reflects the scramble among major technology=20
and media companies to jockey for advantage as=20
the market for music -- and eventually movies --=20
distributed legally over the Internet is starting=20
to take off.

Apple is clearly the early leader with its iTunes=20
online music store, which downloads and plays=20
songs only on Apple's popular iPod handheld=20
devices. Besides RealNetworks, a pioneer in=20
software for distributing and playing music and=20
video, major companies are entering the market.

Microsoft is gaining ground and making deals.=20
This week, it agreed to pay $440 million to=20
settle a private suit over patent claims and to=20
strike a licensing deal with InterTrust=20
Technologies, an early developer of copyright=20
protection software.

Microsoft is expected to offer its own digital=20
music store before long. And Sony has said it=20
will start a music store later this year. It is=20
developing its own media-player devices, which,=20
given Sony's reputation for stylish design and=20
clever marketing, could prove to be strong=20
competition for the iPod. Sony has not announced=20
when its devices will be introduced.

It is against this backdrop that the timing and=20
details of Mr. Glaser's offer to Mr. Jobs are=20
particularly intriguing. In his message, which=20
was obtained by The New York Times from a person=20
close to Apple, Mr. Glaser asked Mr. Jobs to=20
consider licensing Apple's Fairplay digital=20
rights management system to RealNetworks to=20
permit customers of the RealNetworks music=20
service to play their digital music collections=20
on iPod players.

In exchange, RealNetworks would make the iPod its=20
primary device for the RealNetworks store and for=20
the RealPlayer software.

The message notes that both RealNetworks and=20
Apple support the same digital music technology=20
standard, known as AAC. But because it is not=20
possible for RealNetworks' encrypted music=20
services, Rhapsody and the Real music store, to=20
be played on iPod, RealNetworks is considering=20
switching to Microsoft's competing WMA format,=20
which would make the RealNetworks services work=20
seamlessly with Microsoft's technology.

''We are seeing very interesting opportunities to=20
switch to WMA,'' Mr. Glaser wrote.=20
''Instinctively I don't want to do it because I=20
think it leads to all kinds of complexities in=20
terms of giving Microsoft too much long-term=20
market momentum.''

Apple executives would not comment on the=20
message. But it seems likely Mr. Jobs will rebuff=20
the offer. Mr. Glaser said he had not received a=20
response from Mr. Jobs, and in his e-mail message=20
Mr. Glaser said he was going to be in Silicon=20
Valley this week and suggested that he meet with=20
Apple executives today.

Mr. Glaser has been vocal in his condemnation of=20
what he considers Apple's proprietary strategy=20
and he has said he believes the strategy is a=20
mistake. Apple is running the risk of following=20
the same path it took in its development of its=20
personal computer, he argued.

It is widely believed in the PC industry that=20
Apple's refusal to license its Macintosh=20
operating system in the late 1980's contributed=20
to the operating system monopoly of Microsoft's=20
Windows.

Mr. Glaser has recently tried to act as a neutral=20
broker in the competition between different=20
hardware standards, while Mr. Jobs has been=20
pursuing a more proprietary approach, making=20
digital music from Apple's iTunes store playable=20
only on iPod.

Apple, however, notes that it is open to deals=20
with other companies. It recently formed a=20
partnership with Hewlett-Packard, allowing=20
Hewlett to distribute iPod devices and load=20
Apple's iTunes software on its consumer PC's.

Subscribers to AOL, Apple adds, can also download=20
music from the iTunes music store. Still, these=20
deals are mainly distribution agreements with=20
other companies, and do not require Apple to open=20
its technology so that other music services and=20
devices can work with the Apple offerings.

''Apple is not into interoperability,'' said an=20
industry executive with connections to both the=20
computer and music industries. ''Steve's bet is=20
that he can beat the big guys, Sony and Microsoft=20
-- with better marketing.''

A number of industry executives said, however,=20
that Mr. Jobs was under increasing pressure from=20
both his music industry partners and from=20
Hewlett-Packard to open up his digital music=20
service.

The situation in the digital music industry is=20
complex and changing very rapidly. Events like=20
the European ruling against Microsoft's bundling=20
of its media player into the Windows operating=20
system could force the company to rethink its=20
digital media strategy.

At the same time Microsoft has clearly been=20
moving to settle as many of its legal=20
entanglements as quickly as possible. In recent=20
weeks it has settled lawsuits with Sun=20
Microsystems and with InterTrust.

By putting many legal problems behind it,=20
Microsoft would be freer to compete aggressively=20
with Apple in the music market, analysts said.

''Real understands how incredibly powerful the=20
Microsoft music initiative will be,'' said=20
Richard Doherty, a computer industry consultant=20
and president of Envisioneering. ''I don't think=20
that Jobs understands this. He doesn't realize=20
how big the juggernaut is about to get.''

In his e-mail message to Mr. Jobs, Mr. Glazer=20
said that he was reaching out to Mr. Jobs before=20
making a move to switch camps. Mr. Glaser said he=20
was surprised that the proposal had been leaked.

''Why is Steve afraid of opening up the iPod?''=20
he asked in a telephone interview. ''Steve is=20
showing a high level of fear that I don't=20
understand.''

Photo: Rob Glaser, chief executive of=20
RealNetworks. He has been vocal in his=20
condemnation of what he considers Apple's=20
proprietary strategy, which he sees as a mistake.=20
(Photo by Justin Sullivan/Getty Images)

April 15, 2004, Thursday Late Edition - Final=20
Section: SECTC Page: 1 Column: 02 Desk:=20
Business/Financial Desk Length: 1172 words

<< Copyright =A92004 The New York Times Co. >>

 
 
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[opendtv] News: RealNetworks Seeks Musical Alliance With Apple

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