Online Extra: Q&A with CEO Rob Glaser

Says the confident exec: We're either at or fast getting to the point of permanent critical mass that a service like AOL got to

Rob Glaser, the CEO of RealNetworks, pioneered the delivery of audio and video files via the Internet, turning the Web into a multimedia affair. His RealPlayer software for viewing and listening has been installed on 215 million PCs worldwide, making it nearly ubiquitous among Web surfers. But Glaser faces his biggest challenge yet from Microsoft's new Windows XP operating system, due out in October. The software giant has integrated its rival Windows Media player into Windows XP, and that could tip the competition between the two companies in its favor. In an interview with BusinessWeek Correspondent Jay Greene, the feisty Glaser vows that will never happen. Here are edited excerpts of their conversation:

Q: Do you see Windows XP as a competitive threat?


Microsoft has been deemed a monopolist that illegally leveraged its monopoly by two levels of courts. Most people believe that's going to stand. You can certainly argue that Microsoft's illegal monopoly practices, unless checked, would have the ability of inhibiting us from pursuing that future opportunity of being in the horizontal platform beyond the audio/video type business.

The reality is when you're trying to stimulate action by the government that's elected now, and you're one of these trade associations in Washington, D.C., the argument I've just described gets telescoped down very dramatically to: "Oh my God, there's going to be impact next Thursday." We dispute the notion that there's that kind of risk for us.

Q: Is anything they're doing with Windows XP unfair?


Once the Appeals Court came down and said you can't force people not to put things on desktops, and you can't create that sort of hammerlock, I think it changed the dynamics and played an important role in rebalancing the industry. The fact that Microsoft is appealing that ruling speaks volumes. The legal process is basically working.

Q: Are computer makers more open to putting Real on the desktop now?


We already have a good set of distribution agreements. What I think we found is that PC makers are clearer on their ability to make long-term deals that don't have contingencies in them. They always said we'll make a deal with you, but we've got to have flexibility in case some exigency happens. Now they realize they're on surer footing because they know what exigencies they do and don't have to worry about. So it has made that part of it simpler.

Q: Friends of yours have said that the dispute with Microsoft, and Bill Gates in particular, has been personally difficult for you. Is it still a problem?


When I joined Microsoft, I was 21 years old. Bill was maybe only 27 or 28 when I got there. The way you look at something when you're 21 and someone else is 27 is that they feel like Methuselah to you. I think I look at the world pretty differently now. I worked for Bill for 10 years, and I learned an incredible amount from him.

He's an incredibly smart guy. He knows this business. He understands the intersection of technology and strategy incredibly well. It was always a very close professional relationship. But you close chapters, and you move on. I got married. He got married. I didn't expect it to be a deeply personally connected relationship.

Q: Did Microsoft teach you business lessons that you brought to Real?


Microsoft's culture was much less about invention and much more about grinding it out. One of [the] surest ways you could drive Bill nuts was to say that Apple is the company that innovates, and Microsoft is the company that iterates. But I think it's basically true. My goal was to create a company culture that has the same pioneering, innovative spirit that one associates with Apple and that has the persistence, a willingness to go nose to the grindstone, that one associates classically [with] Japanese manufacturing companies, like Matsushita, and with Microsoft.

Q: What are you like to work for?


I hope people would say stimulating. I hope they would say collaborative, sets high standards, communicates strategic objectives clearly. I would say if it ends up being like your favorite professor in school, where you learn more than you did in other classes but maybe you have to work a little harder to do it, I'd be happy to have that be the sense.

Q: There are those who have said that you are challenging but in a more pejorative way.


You're always hoping to grow and learn as a person. I've probably learned to try to strike a better balance to making sure that the notion of there being a high bar is clear, as opposed to the intensity of reaction every time somebody doesn't clear that bar. Trying to use humor a little more. Trying to make sure that people know we're all in this together.

Q: What are the biggest challenges for Real now?


I think the biggest challenge is to continue to drive the growth of the underlying industry and medium. When we started out seven years ago, nobody believed that what we were going to do was going to be central, much less fundamental. Around '97, '98...everybody thought it was going to be fundamental next Thursday. So you had all these people rushing in to make investments. And we benefited from that as did many other companies, where they hadn't done really full analysis on the return on investment of what they would need to be successful. In that headlong rush, a lot of people lost sight of the fundamentals.

Well now, if anything, we've careened back the other way. The notion that businesses have a gestation period before they become profitable is a wholly comfortable element of our economic system.

Q: Analysts say Microsoft's Windows Media Player is beginning to catch up in terms of the technology. Are they right?


You've got to go back to fundamentals. We're in the Internet media and delivery business in a pure way. We're not trying to sell you an operating system. We're not trying to tell you what device it can run on. We're as pure as you can get.

Whereas Microsoft and Apple or anybody who's in this business pursuing an operating system or hardware platform agenda, they have a much more restrictive approach they're taking toward this. From the standpoint of the media-delivery industry, there's nobody else even trying to do what we're doing in terms of creating a completely Internet-based, data-type independent, operating-system-independent, originating- and receiving-device-independent infrastructure.

You either think that's the right strategy or you don't. And if you don't think that's the right strategy, we're kind of a loser company. But if you think that's the right strategy, the fact that no one else is trying that strategy means we're going to win.

Q: Will there be a time when there will be just one media format?


In a scenario where the guys who have the leading operating system publish all their APIs so you could create an interoperable Windows product without having to license the bits from Microsoft, in a scenario where that chokehold is gone, anything would be possible.

Q: The data shows that Microsoft is gaining ground.


That actually is not true. The data that you see shows you that as media gets more popular, multiple people will have more people trialing their products. But if you look at the data in terms of active usage, our active usage levels have never been higher. Our user levels are at all-time highs, and I'd continue to expect that as more and more great content gets online.

We're either at or fast getting to the point of permanent critical mass that a service like AOL got to. The conventional wisdom was that AOL was going to get wiped out by a combination of Microsoft bundling their client on the operating system and the rush to the Internet commoditizing what AOL did. And then all of a sudden, AOL went from that to being the 10-ton gorilla in perceptually about 20 minutes.

I can't predict when the 20 minutes will be and conventional wisdom will shift and focus on the incredible depth of our leadership position and away from this "Are you guys going to get whacked?" type thing. But I'm really going to relish those 20 minutes in between those two.

Q: What kind of music do you like?


Alternative rock is probably the genre I'm most interested in. The band that emotionally affected [me] the most in the last few years was Nirvana. Their music has the power and energy of punk, a pop sensibility, and an attitude that reflects the audience and the times. Their lyrics have an undercurrent of raw emotion wrapped with the cynical indifference.

Q: Did you use Napster?


Purely for research purposes. Not at all since there was a ruling that specifies pretty clearly what's legal. I've downloaded, but I haven't inhaled. Let's leave it at that.

Q: What are the lessons from Napster?


It shows there's a market for lots of music that's not readily available. That's the part of this that I hope doesn't get lost in the shuffle. Even though physical distribution can't stock it, the Net provides access to it.

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