October 23, 2002 4:37 PM PDT

Real to release code amid strategy shift

Thirteen weeks after its surprise announcement that it was releasing parts of its source code into open-source development, RealNetworks will make the first installment of that code available on Tuesday.

The release will be accompanied by a Webcast at 11 a.m. PST during which RealNetworks Chief Executive Rob Glaser will speak about the company's attempt to reposition its server business, which Glaser termed "challenging" in this week's third-quarter earnings announcement.

Tuesday's release will reveal the source code to the Helix DNA client, which will let consumer electronics makers and other third-party application providers license the source code under one of two licenses: a "community" license for commercial use, and a "public" license for noncommercial use.

The company will also release the final versions of those licenses, having revised and clarified issues related to patents and to intellectual property, and will set pricing for the community license.

Analysts say RealNetworks' server business has suffered not only from the general economic downturn, but from the formidable threat of Microsoft's Windows Media Player alternative, which comes free with the purchase of the Windows 2000 operating system. RealNetworks, by contrast, charges for its server and on a usage basis.

RealNetworks' strategy to maneuver out of Microsoft's way has two components. One has been to support as many different streaming formats as possible, an effort that involved reverse-engineering in a clean-room environment Microsoft's technology, giving it the ability to serve and play back Windows Media files.

The second part of the new strategy is to introduce products and services to make the technology attractive to large corporate networks and ISPs (Internet service providers). In that respect, the company is hawking its Universal Server as more of a telecommunications infrastructure product than a garden-variety streaming solution.

Turning to telecom
"We're repositioning our server product as a multi-format gateway product rather than a single format server," said Dan Sheeran, vice president of media systems for RealNetworks. "The difference is that there is a category of products that telecommunications service providers and enterprises use to manage digital media, and they include caching and proxy products."

Those products have to serve the widest possible variety of formats as well as route streams from one network to another, Sheeran said. RealNetworks in the past has ceded that market to the likes of Cisco Systems, Network Associates and BlueCoat Systems (formerly CacheFlow).

"Our new Helix Universal Server is an entry into that category," Sheeran said. "And the pricing and requirements are totally different."

RealNetworks' attempt to dodge Microsoft in this way could give the company room to grow, analysts said.

"In the absence of a single standard for streaming media, with a three-way battle between the QuickTime-MPEG folks, Microsoft and Real, the ability of a content provider to distribute diverse content on a single server does offer some significant cost savings," said Michael Gartenberg, an analyst with Jupiter Research. "It's a question of trying to use your enemy's weapons against it. If Real can stream Windows Media, it obviates the need to install a separate server. You serve everything, and your customer can choose what to play."

Tuesday's release will be the first of three that RealNetworks has scheduled. The next two, in December, will reveal source code to the Universal DNA producer, which turns analog content into a Real stream, and the server, which distributes it over the Internet.

Gartenberg predicted that no matter what details RealNetworks announces Tuesday, reaction from the open-source community is bound to be mixed.

"We've been seeing an awful lot of interest from that community, and Real's success is going to depend on the efforts it makes to become a real open-source player," Gartenberg said. "But you have different degrees in open-source movement in terms of what's considered acceptable and what's fluff."

 

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