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The State of Streaming Media
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An uncertain future for RealNetworks

RealNetworks certainly had a busy year. They shook up the streaming industry when a licensing agreement was made with Microsoft allowing Real to include Windows Media technology in its products. They also made an agreement with Apple to allow RealServer 8 to support the delivery of QuickTime content.



In addition, RealNetworks announced that they've been working with Intel to develop streaming media software that rivals the quality of DVD, and revealed this technology with the unveiling of RealSystem 8. And its agreement with AOL makes RealNetworks the sole provider of streaming media for the largest ISP in the world; its software now comes bundled with AOL 6.0. As the AOL and Time Warner merger has gone through, you can bet you'll be seeing plenty of movies, music, and TV shows ready for distribution from Real.

RealNetworks also decided to step outside its role as a software company when it launched a subscription service to provide music and video content. While the subscription model has failed to gain steam, Real's free Take5 service became one of the top sources of on-demand media.

While RealNetworks is still the No. 1 choice for streaming media, its market share has been whittled down dramatically over the last two years by the Windows Media Player. Rob Glaser, RealNetwork's chairman and CEO, recently announced that the company's profits would only be up $.02 a share as opposed to the $.04 analysts were predicting. Its stock has now plummeted, with a huge drop following from the news that they would be licensing Windows Media technology. They held a 52-week high of $96 a share, and then dropped like a stone to a low of just over $5 a share.

Sweeping away the competition the Microsoft way

Where RealNetworks is dependent on the streaming industry, Microsoft has other sources of income. Seeing that Real made a chunk of money by licensing its software, Microsoft began giving its streaming bundle away. In doing so, Microsoft is forcing RealNetworks' industry into a commodity market.

Microsoft also has a leg up on both Real and QuickTime as their Media Player software comes with every Windows PC purchased, and the ME edition of Windows comes with both Windows Media Player 7 (WMP7) and Windows Movie Maker, which directly competes with the Macintosh's popular digital movie feature.

While this year saw Microsoft chip even further into RealNetworks' lead, a big part of the momentum came from its release of WMP7, which has been called the first all-in-one media browser. You can rip CDs to your hard drive (but only in the WMF format), burn CDs, surf the Microsoft media guide, and change the look of the player through different skins -- all within the same application, effectively making dinosaurs out of QuickTime and RealPlayer.

Microsoft's agreement with EMI earlier this year brought the largest single release of digital music on the Web by a major record label, and the catalog is easily accessible through WMP7. Microsoft scored big again this November, when Warner Music Group decided to use Microsoft Windows Media to deliver secure music downloads over the Internet (thus creating a conflict of interest in the agreement between AOL and RealNetworks).

To combat the Intel/RealNetworks partnership, Microsoft unveiled Windows Media Audio and Video 8 beta at this year's Streaming Media West conference. This technology claims to have a 30 percent compression improvement and near-DVD quality video across Internet connections as low as 500 Kbps, and near-CD quality audio streams on a 48 Kbps connection.

What's in store for the next year?

According to president of the non-profit Streaming Media Alliance, Gayle Essary, multinational corporations will take a "grand leap" into streaming in 2001. Can the promise of streaming technology be realized without a single standard for service providers, network operators, equipment suppliers, content providers, and end-users? While the technology looks to be a multi-billion industry, how can we embrace this technology when it can't agree with itself? Will the battle over a dominant format stagnate the development of the technology, or spawn a better product?

The promise of a booming streaming media industry can be realized with cooperation, but many obstacles remain. While a common standard may be beneficial for the general community, RealNetworks and Windows Media have shown they are determined to push their proprietary formats on the rest of the world. As traditional media and online media converge, there will be an ongoing demand for a common format for everyone, both supplier and end-user. Then my father won't have an opportunity to choose a soon-to-be-obsolete product, and he can tell his golf buddies that I knew what I was doing all along.

Steve McCannell is a writer/producer for the O'Reilly Network and the founder of Lost Dog Found Music.


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