RealNetworks Is Preparing to Battle the Giant
RealNetworks today will introduce a new generation of software designed to improve the quality of audio and video available over the Internet, and the technology world will be watching closely to see how well the Seattle firm is staying ahead of the curve.
The company, which recently changed its name from Progressive Networks to more closely identify with its RealAudio and RealVideo software, is about to go public. But Wall Street is wondering how RealNetworks plans to stay out of the deathly embrace of its new partner and emerging rival, Microsoft Corp.
While RealNetworks’ software is used by more than 85% of Web sites that offer audio and video, in the rapidly changing landscape of the Internet, its dominance is hardly assured.
Microsoft paid $30 million for a 10% stake in RealNetworks earlier this summer, and as part of that deal got the rights to much of the technology used in RealNetworks’ current RealAudio and RealVideo 4.0 products.
Microsoft has also acquired VXtreme and a 5% share in VDOnet, which offer competing software for delivering sound and video over the Internet. Microsoft is expected to combine technology from the various acquisitions to turn its own NetShow product into the market leader.
RealNetworks’ recently filed prospectus notes that by drawing technology from its recent acquisitions and licensing arrangements, Microsoft is likely to emerge as a key competitor that “could have a material adverse effect on the company.”
Even the Justice Department is conducting an investigation to see whether Microsoft’s investments give it powerful sway over the market.
RealSystem 5.0 uses new technology, to which Microsoft doesn’t have access, to improve the quality of video and audio transmitted on 28.8 modems. The software includes technology that will make it easier for Web sites to offer cartoons and other animation in combination with technology from Macromedia.
RealSystem 5.0 will enable users on high-speed networks to play high-quality video using the entire computer screen instead of tiny boxes.
Although the system will initially be used mostly for internal high-speed corporate networks, the company expects the technology to gain wider usage as cable modems and other technologies become more widely available to the general public.
The new software will also enable Web site operators to easily insert commercials into their video clips, a technology that could help Web businesses to support themselves through advertising.
RealNetwork may need to find ways to make more money if it plans to go head-to-head with Microsoft. Although the company booked revenue of $13 million in the first half of this year, compared with $14 million for all of 1996 and $1.8 million in 1995, its losses are also mounting. It lost $6.3 million in the first half of 1997, bringing its accumulated deficit to $12.4 million.
