The 10 questions we sent Real Networks CEO Rob Glaser were selected from 37 that were moderated +5 about 24 hours after we posted the "call for questions" last week. As promised, Glaser answered them himself rather than through PR people, but since part of a CEO's job is to be his company's number one booster it's not surprising that his answers have a high PR component to them; yours would too if you were in his position.1) Apple Support - by ack154
Since RealNetworks is all for "compatibility" and getting their stuff to play on the iPod, when do they plan to offer support for Macintosh users in the Rhapsody music store?
No plans as of now.
We're one of the most active Mac ISVs around, with our RealPlayer running on millions of Macs. We also offer our Superpass and RadioPass premium content products, and we offer more than 45 premium downloadable Mac games such as Shape Shifter, Bounce Out Blitz, and Text Twist.
Having said that, since the Mac is such a small part of the overall market, we make practical decisions about what functionality and services we offer on the Mac. So far, offering a music store or the Rhapsody subscription service on the Mac hasn't made the cut.
2) It still comes down to price, for a lot of us - by erick99
How much wiggle room is there in the pricing of the songs? Forty-nine cents a song has made me a customer of Real's for now ( I haven't tried any .99 cent services - don't want to pay that much). I know it's unlikely that music can be sold that inexpensively but we know it doesn't have to be .99 since WalMart is doing .88. So, I am wondering what RealNetworks' pricing strategy will be. While I understand you cannot differentiate on price alone, the rest isn't going to matter if the price is .99. I just won't buy at that price (yes, obviously others will, but I maintain that multiples more will at a sustained, lower price).
Here's a long answer to a short question.
The music industry supports 2 models of legitimately selling music services that allow consumers to listen to a jukebox in the sky (but not keep the music), and services that sell a permanent copy of the song to the consumer. We have 2 different services depending on which model consumers want.
The best deal out there today for price-sensitive customers who love music is our Rhapsody music service (www.Rhapsody.com). It is a jukebox in the sky type of service that allows consumers to listen to as much music as they want for a fixed price of $10/month. Then, when consumers find a song they want to own permanently, the song costs 79 cents, basically a membership discount for Rhapsody subscribers.
After just a year of us running the Rhapsody service (We acquired listen.com last August), we have hundreds of thousands of Rhapsody subscribers who get great value out of the service. In fact, our average Rhapsody subscriber listens to over 200 songs/month, including over 100 different songs. If the consumer had to purchase all those different songs they'd be paying over 10 times as much as what Rhapsody costs.
Our RealPlayer Music Store is a pure example of the second model. As part of our introduction of our Harmony technology (which allows digital songs to play on a virtually any popular MP3 player), we put every song in the store on sale at 49 cents. The promotion was a smashing success, resulting in us selling over 3 million songs in about 3 weeks.
The 49 cent for everything promotion is now over, but it was such a big success that we decided to continue to feature a Top 10 list of songs for 49 cents each, with the rest of the songs back at the usual price. This is also going well and our store sales are well ahead of where they were before we launched Harmony, which says to us that a lot of people like what Harmony offers and are going to continue to buy from us for reasons of more than just price.
Now let me answer your question about why songs cost 99 cents (or 88 cents or 79 cents, but not usually 49 cents). Selling songs legitimately consists of 3 components: the cost of the recording, which we usually pay to the record company (who then pays the artist); "publishing" cost which goes to the company that owns the rights to the musical composition (who pays the song writer); and other costs such as credit card fees, bandwidth, and technical support.
While wholesale prices vary depending on the label, today most labels charge approximately 65-70 cents per song. Publishing costs a fixed rate of about 9 cents per song. And the other costs average a few pennies per song. Thus, as we have made clear, selling every song in our store for 49 cents a song is not sustainable unless/until the labels change their pricing philosophy.
Based on the data we've seen, we think, long-term, the pricing that will result in the biggest overall market for music will involve some kind of tiered pricing new mainstream songs for 99 cents retail, and up-and-coming artists and back catalog artists at a lower price.
We are working with the labels to prove this to them. We think over time we will succeed, but it will take time. The more that customers support our efforts both directly (by voting with your wallets) and by communicating directly to the music industry, the better.
3) Media formats and proprietary control - by Performer Guy
Given the ongoing struggle for control of content distribution via proprietary formats, do you see any hope for more vendor neutral formats that don't tie customers to one particular 'technology'? It seems that constantly changing formats often have more to do with vendor lock-in than genuine technological differentiation. What is Real doing to improve this situation and are other vendors likely to cooperate?
We have done a number of things in the past few years to address interoperability and to move digital media toward much better and stronger interoperability while also supporting open source development on our platform through the Helix open source licensing program.
The single biggest thing we've done in the past year -- and maybe ever -- was to create Harmony, which (as you probably know) is a technology that translates between the main secure audio content formats Helix DRM, Windows Media DRM, and Apple's DRM.
Going back a few years, we took the core of our media delivery system, Helix, and made it open source. We then built a universal media delivery system -- Helix Universal Server -- on top of that platform. What's more, we fundamentally changed our software development methodology for Helix to a community-based approach. Indeed, we strongly encourage slashdot readers to join the Helix community at helixcommunity.org, as thousands of developers have already done.
We also have been active supporters and drivers of a number of open industry standards including RTSP for streaming and UPnP for media delivery across devices.
We think these initiatives are consistent with where the net is going much more focus on open systems and open formats, and much more focus on interoperability.
Unfortunately, competitors of ours such as Apple and Microsoft haven't followed suit. They have their own reasons for this. Apple apparently is focused on controlling an end-to-end secure music system, and Microsoft is focused on extending their proprietary Windows platform everywhere.
In light of this, we remain committed to enhancing interoperability and openness wherever it makes sense. However, what we haven't done is "unilaterally disarm" in the way that, for instance, Netscape did. All that would do is allow competitors with proprietary agendas to "embrace and extend" on top of our formats, while keeping their own proprietary, which ultimately wouldn't achieve anything.
4) Turnabout? - by Elwood P Dowd
What would you do if the next version of Quicktime could play .rm files, even ones with DRM? Suppose that they respect the DRM, and only play on authorized computers. Suppose Quicktime Pro were capable of creating .rm files with DRM.
Why shouldn't Apple do this?
We would be happy to cross-license our DRM and formats to Apple to enable exactly the kind of interoperability you propose.
As has been widely reported, we approached Apple about licensing their DRM several months ago. It was only after they rebuffed those initiatives that we came out with Harmony, which implemented software compatibility with their DRM as well as with Microsoft's.
5) Why is Real's software so intrusive? - by jerkychew
I've been in the computer industry since 1995 or so. In that time, I've seen lots of software come and go, and lots of less-than-ethical tricks to keep users hooked on one piece of software instead of another. In my 9 years or so, I've never seen any product as consistently sneaky as Real's media player. I remember back when RealAudio would make itself the default player for every media type it could without asking, which would annoy the tech-savvy user and scare those of us that are less technical.
While it seems that Real has backed its intrusiveness down a notch during the install, I still feel like Real is telling me what to do on my computer instead of the other way around. For example - Telling Real not to start when windows starts is no easy task. I have to go through 3 or four submenus in the preferences until I find the vaguely-named SmartCenter (or StartCenter? I don't have a machine handy to doublecheck the name). Even then, when I tell it not to start with Windows, I am greeted by a scary warning message. Even with SmartCenter disabled, Real's update service still lives in my registry, starting every time I boot windows.
So my question is, why try so hard to force your software on the user? Is it worth the market share to anger and confuse your core audience? Mention Real to the average user, and their first response is "I hate that software. I wish I knew how to delete it."
I've always been taught that it's best to make your customers happy, instead of holding them hostage. Does your business model say otherwise?
We have put a lot of effort into making our users happy and in giving users lots of choice in how they install and use our software. We have learned a lot over the years and I think if you look at RealPlayer 10 for Windows, Mac, or Linux carefully, you would find that it gives users much more choice and control over how our player works than any other major media player, including Microsoft's Windows Media Player or Apple's iTunes.
While I'm not 100% sure, from your description it sounds like you have a previous version of RealPlayer. In RealPlayer 10, the user can select Tools/Preferences/Automatic Services and configure all of the background activity, including features that remain active when RP is not running. With just a couple of mouseclicks, the user can disable all background services.
Compare how our software works to Microsoft's. Have you ever tried to "uninstall" Windows Media Player? All Windows does, in its own words, is "removes access to Windows Media Player from the Start Menu and Desktop," yet it doesn't actually get rid of the software. If you uninstall RealPlayer, we uninstall the whole enchilada. Same with mime types: we ask you what mime types you want our player to play, and then we only play those. On the other hand, when you upgrade your version of Windows, it takes the mime types it wants to without even asking. What's more, we've been told by reliable sources that Microsoft writes into its contracts with computer OEMs that the OEM MUST make Windows Media Player the default player for major mime types, otherwise the OEM doesn't get access to critical marketing funds that every PC manufacturer needs to stay in business.
Regarding your question of why we have put the features you want on specific menus, I will ask the guy who runs our player product group to take a close look at how we can make control of the specific features you have described even more obvious. My guess would be that the tradeoff is making the features available to technical users without confusing average users. Even so, we'll try to do even better next time. I promise that we will do our best to keep improving our software for both regular consumers and technical users.
6) Helix - by MikeMacK
What prompted the creation of the Helix community? Does Real see open source as a way to differentiate themselves from Apple and Microsoft, or where there other considerations?
Our reasons for creating the Helix community and to making the core of our system open source are the reasons best described in Eric Raymond's classic manifesto The Cathedral & the Bazaar (I imagine you all have memorized your favorite link to it, but in case not: http://www.redhat.com/support/wpapers/community/cathedral/whitepaper_cathedral.html).
Basically we realized about 3 years ago that digital media was becoming huge and ultimately it made much more sense for us to open up our system so it could be the foundation of great work by everyone rather than the work done just by our company and close allies.
What's more, we fundamentally changed our software development methodology to a community-based approach for Helix. Three years and tens of thousands of Helix community members later, we've made lots of progress. We know that this is a long-term process and that proprietary-based media delivery systems won't go away anytime soon. But this is no different than the Linux versus Windows battle.
7) Legality of Harmony - by halo1982
Are you concerned at all that Apple might sue Real under the DMCA for basically hacking the iPod to allow compatibility between Real and the iPod? If Apple does do this, what measures are you taking to make sure that the files people buy from Rhapsody will continue to play on their iPod after Apple locks Harmony out using a firmware update or something similar, and would you offer refunds to people with iPods who purchased music on Rhapsody?
The legality of Harmony under the DMCA is well established in law. It's important to understand that Harmony simply added a new way to secure the content we've licensed from music companies. We didn't mess with the locks on any of Apple's music. The DMCA contains a specific provision enabling companies to create just this kind of interoperability. Take a look at a recent case, Chamberlain v. Skylink, which describes how courts look at this in the real world.
We think it would be extremely anti-consumer for Apple to stop the music by intentionally breaking compatibility with Harmony. In the event that they do, we have a comprehensive plan in place, but it's not appropriate for me to go into details now. I will point out that Harmony will continue to work for any current iPod user who chooses to have RealPlayer manage that iPod (and who doesn't use iTunes, a future version of which might be the vehicle that Apple would use to break compatibility).
8) Nice, but.... - by dacarr
While I find it wonderful that Real has embraced Linux, your subsidiary, listen.com, seems antagonistic toward Linux, making it quite clear that they have no plans at this time to move their Rhapsody player to Linux. This tells me of a bit of a dichotomy in your company. Are there plans to resolve this?
I don't think it's about one division at Real versus another. It's about software versus services. We have made a significant commitment to delivering Linux versions of our software products on both the client and server side, and we're grateful for the support we've received from the linux community.
Delivering consumer services on Linux would be a new step for us; indeed, there are very few content services available today for Linux, reflecting the fact that the Linux desktop market is still quite nascent.
So, what we're doing now is looking at ways in which our Linux efforts can gather enough momentum that makes this a simpler decision. We're working closely with the Linux distributors to grow the market for Linux desktops by having a solid media player solution. And we're investigating which of our service offerings we can offer to Linux users in a cost-effective manner. Our goal is to start building a direct revenue base that we can then use to fund more ambitious efforts.
9) Lessons learned from astroturfing - by michaeldouma
There's a lot of spin going on at Real's new Freedom of Music Choice [freedomofmusicchoice.org] site. Clearly, Real was not expecting such a profound and immediate [slashdot.org] backlash. It must be frustrating [slashdot.org] that Apple gets to be both an underdog and a monopoly at the same time. But despite the feel good claims [freedomofmusicchoice.org] on your Freedom site (did you really write those?), your price drop, reverse engineering, and activism are hardly riling up the public.
What have you learned from this?
We're very happy with how our freedom of choice campaign for Harmony has worked. As you know, we sold over 3 million songs in 3 weeks, well beyond our expectations. Moreover, the tens of thousands of users who have bought songs from us and are continuing to enjoy the benefits of Harmony speak for themselves.
It's certainly true that a small group of Mac lovers gave us a hard time for criticizing Apple. This isn't that surprising because Mac users are very sensitive anytime anyone criticizes Apple, I guess because they emotionally identify with Apple as the "underdog" versus Microsoft. But for every Mac user who didn't like our criticizing Apple, there were literally hundreds of Windows users who enjoyed Harmony, including iPod users who sent us their comments (see http://www.realnetworks.com/company/press/releases/2004/real_3million.html).
The campaign was successful because consumers really do want choice. We hired an independent research firm to ask internet consumers about this. 96% of portable device owner said they thought they should be able to move music they bought to any device, which gives us great confidence that we're on the right side of history.
10) Strategy Question - by Anonymous Coward
Strategically speaking, Real doesn't look to be in a very promising position. Its technology, once unique (RealAudio), is now ubiquitous. Its marketing has been, by any account of which I am aware, a disaster. Now it seems like there is no area in which Real has any real strength or over its competitors - RealMedia is eclipsed by Windows Media, iTunes rules the day in downloading and Microsoft is entering that market as well.
Rob, what advantages does Real bring to the table? What can Real do that no other company can do? Why does Real exist? What the hell are you doing?
Well, your question has more than a bit of a "when did you stop beating your wife" feel to it, but I'll address the core question, which is what are we trying to do and how are we doing.
Since many SlashDot readers don't necessarily read all the details of our financial statements, let me talk a bit about our business. 2004 is on track to be the biggest revenue year in our history. In the first half of the year we had sales of $125.9 million. Our second quarter sales were 65.5 million, which is 32% over our revenue for the same quarter last year. We ended the quarter with over 1.4 million subscribers to our premium services, including over 550,000 subscribers to our music services, both of which were records and make us #1 in the business.
In terms of our products, Rhapsody is not only #1 in subscribers, it also wins pretty much every review as the music service that is best and easiest to use. RealPlayer 10 was also PC Magazine's editors' choice and also many other awards.
Of course we have competitors if we were a monopoly you would have other reasons to criticize us. :)
Having said that, we're as different from our competitors as Yahoo is from its competitors. We're focused on creating services that deliver great experiences to consumers regardless of what platform they use. This is very different from either Apple or Microsoft, both of whom center their services on their proprietary platforms (Mac/iPod in Apple's case, Windows in Microsoft's case).
I started RealNetworks more than ten years ago because I believe strongly that the Internet can and will transform how people experience media, giving them unprecedented control over what audio and video they experience, and when, where, and how they experience it. While there have been many twists and turns along the way, we're very pleased with the progress we're making both as a company and as an industry. And we feel great about the opportunities in front of us.
With that, I'd like to that you all for your questions and for taking the time to read and think.