Rob Glaser: Real Close

Position: CEO, RealNetworks

Contribution: Built the premium online audio- and video-content business with the most subscribers

Challenge: Not to get steamrollered by Microsoft

Rob Glaser is out to deliver your digital content. The CEO of RealNetworks (RNWK ) wants to do it on your computer, on your cell phone, and on your personal videorecorder (PCR). Grand aspirations, to be sure.

Too bad the Colossus of Redmond has the same ones. And Microsoft has given away server software that Real charges for and has eaten away at Glaser's lead in desktop players for consumers. Real has been profitable on a net basis for only one of the past four quarters, and quarterly revenues have stagnated in the $45 million range. Its shares have traded below $10 for the past year, from dot-com highs in the $80s during 2000, and were trading in the $5 range in September, 2002.


  But now, signs are appearing that the strategy Glaser has crafted is turning Real into a digital-media powerhouse. His moves to lock up exclusive Web content from sources such as Major League Baseball and the National Basketball Assn. appear to be paying off as more broadband Web surfers and sports junkies pony up $10 per month for RealOne Super Player premium subscriptions.

In the quarter ending June 31, 2002, the number of subscribers grew from 600,000 to 750,000. Subscription revenues grew by 31%, to $17.8 million. "That's a lot more subscribers than anyone else out there on the Web. As they continue to build the business -- particularly as we get more broadband connectivity -- their value proposition improves," says Phil Leigh, an analyst with investment firm Raymond James Associates. Glaser has also inked a deal to install on Nokia phones Real software that can deliver audio- and video-data streams.

In late July, Real also launched a new server product designed to take on Microsoft. Dubbed Helix, the server allows programmers to use a single piece of software to deliver a wide variety of data streams and formats over the Internet. That could save media companies big bucks by eliminating the need to encode in multiple formats.


  Naturally, Microsoft begs to differ. Bill Gates includes Windows Media Server software for free as part of a broad package of Windows server software. But Helix, for which Real charges companies, runs atop the free Linux operating system (the underlying software that runs computers), potentially negating any cost benefits for Windows Media Server since Windows users have to pay for Microsoft's basic operating system.

Notes Steve Kleynhans, an analyst with Meta Group: "[Real's] real strength is they have a richer, more powerful server at this point. And large companies are not as fickle as consumers, which can switch off their subscriptions overnight."

Glaser also has high hopes for the latest consumer version of the Real desktop media player. It not only accepts Real's proprietary formats but can also play Microsoft's Windows Media and Apple's QuickTime, not to mention the popular MP3 for audio files and the fast rising MPEG-4 for video.


  True, customers would still have to download QuickTime and Windows Media players. But Real's new player can effectively piggyback on them and eliminate the need to pick the proper player to match the format of the media file being opened. "[This] accelerates the growth of the industry by tackling some of the issues people have with ease of use," says Glaser.

The improved product could goose Real's market share in desktop players, where Nielsen NetRatings gives it a slight lead over Microsoft's Windows Media Player, with 17 million consumer users compared to 15 million. If it does, then Real would truly be the real deal.

By Alex Salkever, Technology editor for BusinessWeek Online

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