Services & Software

RealNetworks snags Intel distribution deal

The streaming-media company signs an agreement with the chipmaker to ship its technology with the main circuit boards that power PCs.

Looking to strengthen its position in the streaming media market, RealNetworks on Wednesday said it has signed an agreement with Intel to ship its technology with the main circuit boards that power PCs.

Under the terms of the deal, the Seattle-based company's RealPlayer and RealJukebox software will be distributed on CD-ROMs included with two new Intel desktop PC motherboards that support the chipmaker's Pentium III and Celeron processors, RealNetworks said in a statement.

Intel is the largest maker of PC processors and is a major manufacturer of motherboards, which are sold to computer makers.

"This is a smart move (for RealNetworks). They already have a relationship with Intel, and they're in the process of trying to get as much distribution as possible," said John Corcoran, an analyst with CIBC World Markets.

RealNetworks already has deals with branded PC makers such as Dell Computer. Wednesday's agreement attempts to extend that bundling to so-called white-box, or unbranded, computer makers, which command a large share of the PC market through resellers.

By packaging its software with motherboards--the heart, brains and much of the muscle of a PC--RealNetworks hopes to entice these manufacturers to pre-install its RealPlayer and RealJukebox products.

RealPlayer allows the playing--or "streaming"--of audio and video programming online. RealJukebox lets people record CD collections to PC hard disks, search and download Internet music, and manage music collections on their PCs.

Some analysts, however, questioned whether RealNetworks' distribution on CD-ROMs accompanying Intel motherboards would translate into wider adoption of the software.

"Just because something is distributed with something else doesn't mean it gets used," warned Dan Kusnetzky, vice president of systems software research at IDC. "When I get a PC, it comes with a whole stack of CDs, and I don't install a single one of them. It goes straight into my closet. What do you call that, closetware?"

RealNetworks announced the deal just as it is fighting off rumors that its distribution deal with AOL Time Warner may be in jeopardy and amid concerns that it is losing ground in its battle for streaming player market share with Microsoft.

Deal rumors batter RealNetworks The software giant's Media Player software ships with its Windows operating system, which is installed on the vast majority of new PCs.

RealNetworks, however, says that more than 85 percent of the streaming media content available on the Web is in its branded format.

Wednesday's agreement marks the latest development in RealNetworks' relationship with Intel. Last year, the companies jointly developed a new product dubbed Intel Streaming Web Video, which is able to receive images comparable to VHS videotape or DVD images. It is part of RealNetworks' RealVideo and RealSystem software, which transmits audio and video over the Web and runs on PCs using Intel chips.

Still, the latest Intel deal could fall flat with the white-box computer manufacturers RealNetworks is targeting. If an information systems department, for example, is assembling a computer with hardware from various sources, it is likely to have pre-configured a software package that will go on each of the new computers. Software accompanying the motherboard, monitor, memory add-ons and other hardware is likely to go unused, according to IDC's Kusnetzky.

"If the end user is (RealNetworks') target, shipping software with the motherboard is not the best way to get to them," he said. "When you go back to basic computer components, that's much less likely to get used than software pre-installed (with the operating system). And that's much less likely to be used than something that the computer user selected and paid for with intent."

Some computer companies have had great success distributing their software via CD-ROM. America Online, for example, "carpet bombed" consumers with discs of its software in its successful march to becoming the world's largest Internet service provider, with 29 million subscribers.

But even that approach of directly targeting consumers is not uniformly successful.

To test the effectiveness of CD distribution, Kusnetzky and his colleagues followed the progress of SuSE, a European Linux provider, after it included more than a million CDs of its software in a print magazine. Only about 1 percent of recipients installed the software, IDC found. And only about 1 percent of those who installed it wound up using it past the initial installation.

But RealNetworks said it expects most manufacturers that receive the bundled software will opt to install it.

"They actually have to open the CD because all the drivers to the boards are also included there," a representative said. "Of course, the other point is the manufacturer will want to install RealPlayer since it is the most popular media player, giving consumers access to the largest amount of streaming media on the Web."

But Intel acknowledged that that kind of distribution could only do so much.

"We see bundling additional software with our motherboards as an added incentive for people to buy our products," said George Alfs, an Intel representative. "But it's ultimately the end user's choice, the software they use in their system."