RealNetworks Conference: CEO Paddles Through Streaming Media Worries

A panel set up to discuss streaming media turns into talk about the controversial MP3 format.
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SAN FRANCISCO -- Despite the skillful diplomacy of RealNetworks (RNWK) - Get Report CEO Rob Glaser, a keynote panel at the RealNetworks Conference '99 about streaming media quickly erupted into a controversy over MP3 files. Nor could Glaser avoid addressing the dreaded M-word: Microsoft (MSFT) - Get Report.

The panel, part of the third annual conference held at the

San Francisco Marriott

hotel, doubled as a special Webcast of

ZDTV's

Silicon Spin

, a sort of

McLaughlin Group

for the high-tech set. Hosted by industry analyst and cyber-cutup John Dvorak, the panel featured Glaser,

Kagan Associates

Senior Vice President Larry Gerbrandt and

New York Times

correspondent John Markoff.

Instead of painting this digital audio compression format as a record label's nightmare, Glaser sought to portray MP3 as a boon to the music business by comparing it to the VCR. "The movie market is now four times the size it was before VCRs were introduced," said Glaser. "I think the same thing will happen to the music download market."

Music labels are freaking out over MP3 files because they don't prevent the illegal copying of music. But most of the analysts argued that MP3 would be hard to stop. "Copyright holders have always had fears about technology," said Gerbrandt. "To the extent that technology opens up new markets, the copyright issues will get resolved."

Glaser sought to downplay the fears about bootlegging by stressing his company's support of several security measures. RealNetworks, he said, backs the Serial Copy Management System, which allows consumers to make one copy but not a copy of a copy. RealNetworks products will also support multiple security options, including the music industry's Secure Digital Music Initiative, which was created last December by the

Recording Industry Association of America

. That initiative, according a press release on the SDMI Web site, aims to "develop an open, interoperable architecture and specification for digital music security ... answer consumer demand for convenient accessibility to quality digital music, enable copyright protection for artists' work and enable technology and music companies to build successful businesses."

Asked if RealNetworks' business would be undercut by free servers from Microsoft and MP3, Glaser said it wouldn't because the company would continue to lead the market by creating new generations of innovative products and services.

But at least one panelist wasn't convinced. "Pretty soon it'll be MPEG 98," said Dvorak, taking the obligatory jab at the 800-pound gorilla up in Redmond, Wash.

The Once and Future RealNetworks

Glaser kicked off the conference with an hourlong pep talk titled "The Future of Media Delivery." Addressing 1,300 people in a packed ballroom of the San Francisco Marriott, Glaser reviewed the successes of the company and looked ahead to more conquests.

Right now, Glaser said 400,000 sites employ streaming audio or video and 1,700 live radio stations broadcast over the Internet. Of those streaming sites, said Glaser, 45,000 use RealNetworks G2 servers. Citing figures from media research firm Kagan Associates, Glaser pegged the value of the streaming media market at $270 million, up from $120 million in 1997.

"We're just scratching the surface," said Glaser, adding that the broadcast industry is valued at $120 billion. "We're setting the stage for the next phase of incredible growth.

The company's most recent step ahead is

RealJukebox

, the company's new streaming software

released Monday. Dave Richards, RealNetworks' vice president for consumer products, said RealJukebox was downloaded 250,000 times in its first two days. With the release of the Jukebox, which records CDs onto a PC and plays MP3 files, RealNetworks has set for itself a new strategic direction, aiming to establish a leadership position in the new market for the digital distribution of music.

To show the company's support of the MP3 movement, Richards demonstrated a prototype version of the

RCA Lyra

, a new MP3 player announced Monday, by using a memory card to transfer a music file from the desktop to the portable device. Glaser also said that 30 Web sites now support direct music downloads. "We really think we've pushed the ball forward to create a digital distribution marketplace," said Glaser.

In a separate session, Brett Goodwin, RealNetworks' manager of intranet products, said the company was showing strong growth inside corporate America. RealNetworks' user base in companies, said Goodwin, more than doubled over the past year. He also said that 25% of

Fortune 500

companies have either purchased or are evaluating the purchase of RealNetworks products.

Glaser also announced the release of several new products:

  • A new advertising application that allows advertisers to measure the placement as well as the duration of the advertising.
  • The RealPlayer G2 Update 2 for Windows and RealPlayer G2 final release for Macintosh. (The latter announcement garnered a huge round of applause from Apple (AAPL) - Get Report devotees.)
  • The support of a beta version of RealNetworks G2 platform that IBM's (IBM) - Get ReportLotus Notes and Lotus Domino can now support, allowing corporate users to attach video and audio clips within their emails.