05/11/19 REALNETWORKS: A TRAILBLAZER SCRAMBLES TO STAY OUT FRONT

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REALNETWORKS: A TRAILBLAZER SCRAMBLES TO STAY OUT FRONT

Don't ask RealNetworks Chief Executive Rob Glaser how the latest version of his Internet video software stacks up against Microsoft's similar product. Says the pugnacious Glaser, who was the first to bring audio to the Internet: ''I can't imagine that anyone who has seen Real's software would think Microsoft is even on the same planet, much less in the same neighborhood.''
Such chutzpah--and some cutting-edge technology--has made Seattle-based RealNetworks Inc. the No.1 provider of software that dresses up the Net with lively video. Today, Real claims its software is used on 85% of all Web pages that use streaming media, with some 21 million people having registered to use it. That helped double the company's revenues in 1997, to $32.7 million, and a 48% jump is expected this year, says analyst John F. Powers of BancAmerica Robertson Stephens.
REDMOND RIVAL. Or at least it was expected. Suddenly, it looks as though software giant Microsoft Corp. may be getting its video act together. On May 4, Microsoft plans to release a test version of its much improved rival product, called NetShow 3. If it's a hit, as some analysts predict, Microsoft will come out swinging, and the four-year-old startup could find itself trying to avoid the ropes.
Not that Glaser isn't used to fancy footwork. The 36-year-old CEO spent most of his software tutelage working for the master--Microsoft's William H. Gates III. Glaser joined Microsoft's marketing ranks at age 21 and, over the years, became known for a pit-bull style not unlike that of his mentor. Glaser built Microsoft's multimedia CD-ROM business into a powerhouse before resigning in 1993 with $15 million worth of Microsoft stock. In 1994, Glaser plunged $1 million of that into his startup, then called Progressive Networks, but renamed to align with its product names when the company went public last fall.
But Glaser has never strayed far from Microsoft. Last year, Microsoft paid $60 million for a 10% stake in RealNetworks and licensing rights to some of its technology. Since then, Glaser has zigzagged between being a Microsoft ally and an adversary. On one hand, Microsoft includes Real's 4.0 software in its browser and Windows NT server. That gives Real's technology broad distribution. But because Microsoft gives the video software away free, RealNetworks was forced to stop charging for its basic server, priced at up to $995.
The benefits have outweighed the disadvantages, says Glaser. Microsoft helped seed the market for Real to sell its $5,000-plus, high-end video server. And Microsoft doesn't have the licensing rights to Real's new technology without ponying up more money.
What's ahead, though, may not go as smoothly. By all accounts, Microsoft's latest version of NetShow is on par with Real's last update, RealSystem 5.0. Glaser's answer: a second-generation technology, dubbed G2, that will be out in test form in May and has better resolution and automatic update features.
The snag: G2 won't be included in Microsoft's products, while NetShow will be. Analysts say that could boost Microsoft's market share to 25% in the next couple of years. ''What they have isn't adequate or sufficient,'' counters Glaser, who was strutting around RealNetworks' headquarters recently with a G2 T-shirt stretched over his button-down shirt. Maybe so, but many are betting that it's going to take more than G2 T-shirts to outmaneuver Microsoft.
By Seanna Browder in Seattle

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