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RealNetworks' "Big Brother 2" cashes in

The company says the number of subscribers to its Webcast of the popular show has surpassed the 25,000 mark, the latest sign that people are willing to pay for Web content.

RealNetworks said Thursday that more than 25,000 people have paid to watch the Webcast of CBS' reality TV show "Big Brother 2" via a subscription made available through RealNetworks and CBS.

"Big Brother 2" features 12 strangers who live together as they compete for $500,000 by avoiding getting booted from a heavily bugged house. Fans can watch an entire broadcast run of the show at the official CBS Big Brother Web site for a one-time fee of $19.95, or they can subscribe to RealNetworks' RealPlayer GoldPass for $9.95 per month, which includes exclusive programming, games, software downloads and other content. The company claims 300,000 subscribers for its GoldPass service to date.

While the number of subscribers is the latest sign that people are willing to pay for streamed content, it also underscores how RealNetworks' business is beginning to rely on content for revenue.

"They are trying to diversify their revenue stream," said Jarvis Mak, senior Internet analyst at Nielsen/NetRatings. "They are pushing whatever compelling content that they can grab."

The Seattle-based company has been facing hard times, slashing its staff by 15 percent last week and falling short of analysts' estimates in its latest earnings report. RealNetworks earned $2.4 million, or 1 cent a share, on sales of $47.9 million, marking a 24 percent decline from the year-ago quarter. In addition, consumer sales dropped to $15 million from $18.6 million last quarter, while advertising sales fell from $5.5 million to $4.6 million.

RealNetworks also has been facing heated competition from Microsoft as both companies race to dominate the market for streaming video and audio. According to Nielsen/NetRatings, however, RealNetworks has the widest audience for the RealPlayer format. Microsoft's Windows Media comes in second, and QuickTime falls in third.

While RealNetworks' focus is to develop software products that enable people to send and receive digital media using the Web, the company said it has no plans to change its business from a software company to a content provider to gain more revenue.

Cara Jacobson, spokeswoman for RealNetworks, said the company plans to keep working with content providers such as CBS, Major League Baseball and the NBA to offer streamed sports, games and other entertainment content.

"Our technology will always probably be the core of our business because the technology enables us to create these different kinds of business models and bring that content to the Internet," Jacobson said. "There are tons of companies that are in the business of creating content; we are in the business of bringing that content to an Internet audience."

While RealNetworks said subscription figures for the show's Webcast validates its subscription business online, Neilsen's Mak said that subscription fees are still something people need to get accustomed to because people are used to the Internet being free.

"It's a whole paradigm shift," Mak said. "People are used to getting stuff for free...but these companies do need to make money, and they're tying to instill this shift with the economic downturn. As a lot of companies are starting to make the shift from free to pay, content providers are trying to bank on that."