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Swimming with sharks

Industry veterans say RealNetworks may be running dangerously close to suffering the same fate as Netscape at the hands of Microsoft. The future of streaming media could be at risk.

 

News.com Special Report
By News.com staff
April 14, 2000, 4:00 a.m. PT

Within the high-tech industry, it is known as "getting Netscaped."

The damning label is applied to companies that have dared to cross swords with Microsoft since its well-documented campaign to take the browser business away from Netscape Communications. And many industry veterans say RealNetworks risks suffering a similar fate in multimedia, a situation exacerbated by a particularly acrimonious history with its arch enemy.

This week, RealNetworks marks the five-year anniversary of its breakthrough RealAudio software for Web streaming, a technology that was key to the Internet's multimedia expansion. Coincidentally, the company is facing perhaps the most difficult challenges in its short history as it confronts unprecedented competition from a software empire just a few miles away from RealNetworks' Seattle headquarters.

Those familiar with both companies say a licensing deal signed last month with Microsoft is an ominous sign for RealNetworks' dominance in streaming. At present, RealNetworks says it has no plans for wide adoption of Windows formats, but the broad agreement leaves the door open to possible use of Microsoft's technology in all of the streaming company's products.

The move may reflect a grudging admission that Microsoft's inroads are deeper than RealNetworks has publicly acknowledged. The war for control of multimedia technologies is far from over, but the outlines of a familiar pattern are beginning to emerge: one that recalls the divide-and-conquer strategy employed by Microsoft for the past two decades.

"It's very much like the early days of Netscape and Internet Explorer," said David Goldberg, chief executive of music site Launch, alluding to the infamous battle of Web browsers that Microsoft eventually won. "I think there are a lot of parallels."

It is a particularly poignant struggle for Rob Glaser, the man who founded RealNetworks after spending years as a Microsoft executive. Knowing well the ways of the Windows empire, he appears to be hedging his bets with an exit strategy that would shift his company from software to services. The question is whether this is a natural evolution of his business or whether Glaser's hand is being forced by his former mentor, Bill Gates.

In an interview with CNET News.com, Glaser unequivocally denied that competition with Microsoft alone is driving his company, insisting that RealNetworks' products are far superior. He also rejected comparisons to Netscape, saying his company is more akin to America Online, eBay, Yahoo or other "networks" that have grown beyond their original mission.

Either way, the conflict is a study in Microsoft's efforts to expand as the Justice Department attempts to erect boundaries around it. The company has been investigated once before for its actions in the streaming market, and last week's ruling in its federal antitrust case may pose new challenges in its drive to unseat RealNetworks.

Day One: Microsoft's 'Netscape' strategy
Devil is in the details
On its face, many viewed it as any other announcement touting some routine product, service or partnership. But on closer examination, some say RealNetworks' latest move with Microsoft could be the equivalent of a deal with the devil.

The price is right: free
It is a classic Microsoft squeeze. On the consumer side, the company is giving away Windows Media Player software with its browser; on the corporate side, it's bundling the companion server with Windows 2000. That could leave little room for competition.

Caught in handheld squeeze
Even if RealNetworks continues to thrive in the streaming market, it will clash with major competitors on another key front: download music technology used in handheld devices. And here again, Microsoft has a considerable head start.
 

Day Two: RealNetworks: A case study
Was resistance futile?
RealNetworks has shifted gears on many occasions to maintain a distant lead over Microsoft in the streaming market, at various times antagonizing and partnering with its nemesis. Could it have done anything differently to have avoided the threats it faces today?

The man who would be Gates
If there is one word that people use to describe RealNetworks' founder, it would be "passionate"--but that's where the agreement often ends. Some say Rob Glaser's tenacity is a necessary quality of any successful dot-com CEO; others say it can do more harm than good.

Plan B: Embrace and extend
As it faces unprecedented competition in its software business, RealNetworks is rapidly repositioning itself as a Web services company. It is less clear, however, whether this is a natural evolution or an exit strategy forced by market pressures.
 

Day Three: Lessons half-learned
Where are all the regulators?
Three years ago, the Justice Department apparently dropped a brief inquiry into the streaming media business, focusing instead on the browser wars. Was that a mistake?

Once again, a lesson in Apple
Apple's QuickTime multimedia technology was a breakthrough product years ago. It also provides an object lesson in how Microsoft can essentially neutralize rivals in this software competition.

Playing the standards game
The state of streaming is a classic scenario of what technology purists fear most: that standards will follow the market--not the other way around, as the development of the Web was initially envisioned.

 
 

Go to: Devil is in the details 

 

 

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Reverse engineering could threaten RealNetworks

Microsoft, Real set stage for streaming media fight

Microsoft challenges RealNetworks for music limelight

 

 News around the Web
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RealNetworks caught spying on users
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Browser war all over again
Forbes 

 

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