March 25, 2003 4:00 AM PST

AOL to swap Real audio technology

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America Online is expected to announce that it will replace RealNetworks with Dolby as the default audio streaming technology for its narrowband Net radio service, according to Dolby.

Learn more about AOL and streaming
AOL will swap RealNetworks' audio streaming technology with Dolby AAC in its narrowband Radio@AOL product. AOL also will incorporate Dolby's audio encoding files in its Broadband Radio@AOL service, which streams MP3 files to its high-speed Internet users. The companies will collaborate on future products such as a live encoder or audio-ripping software.

The announcement is expected to occur within the next two weeks, according to a source familiar with the launch. Despite the change, AOL will still support RealNetworks in other areas on the AOL site. An AOL representative declined to comment.

AOL's decision to discontinue using its technology is a setback for RealNetworks, which has long counted the online giant as its staunchest ally against Microsoft. RealNetworks has been engaged in a market share war against Microsoft's Window Media for many years and has witnessed its dominance in the industry slip.

AOL and RealNetworks have partnered to launch MusicNet, an online subscription service that uses RealNetworks' streaming and download technology. AOL is MusicNet's primary distribution partner.

RealNetworks said the switch will not affect its ongoing relationship with AOL. Dan Sheeran, RealNetworks' vice president of marketing, said AOL will continue to deliver other types of multimedia content using RealNetworks' servers and will support its digital rights management software and its media formats as well.

"They are still a very deep partner of ours, and they're still using a lot of our technology," Sheeran said.

But the two companies have loosened their dependence on one another and may become competitors in other areas.

Over the past few years, RealNetworks has tried to move away from media server sales and has focused its efforts on a multimedia subscription service called RealOne SuperPass. The service has 900,000 subscribers, according to RealNetworks, and AOL's corporate cousin CNN, ABCNews.com, the Weather Channel, Major League Baseball and the National Basketball Association are some of its content partners.

AOL also has signaled its intention to offer premium content to maintain its 35 million subscriber population and to lure new subscribers. Last November, AOL launched a broadband version of its online radio service that used its own streaming backbone called Ultravox, a move that raised questions about its future use of RealNetworks' technology.

At the time, AOL said it would continue using RealNetworks' streaming technology for its narrowband services such as Radio@AOL and its Spinner Web service. But sources close to AOL said the move opened the possibility of replacing RealNetworks with other partners where need be. Sources also touted how Ultravox, which was developed by some founding members of AOL's Nullsoft team, could power other high-bandwidth, rich-media products down the road. Thus far, only Broadband Radio@AOL uses Ultravox technology.

Creating a more compelling broadband product has been an initiative that AOL executives consider crucial to the online unit's turnaround. For the past year, AOL has watched its Web advertising revenue dissolve, its subscriber base decline, and its accounting practices come under government scrutiny. The company is expected to post a 40 percent to 50 percent decline in its online advertising revenue in 2003.

AOL's new executive team, led by CEO Jonathan Miller, has earmarked product refinement as a primary way to retain its customers. The company is trying to offer broadband services to prevent its 35 million subscriber base from defecting to cable or telephone companies offering high-speed Internet access.

Next week, AOL will unveil AOL 8.0 Plus, an enhanced version of its online service that will cater to broadband users.

 

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