February 8, 2005 10:00 PM PST

RealNetworks shifts mobile strategy

Facing strengthening rivalry from Microsoft and other competitors, RealNetworks is shifting tactics in its approach to the mobile phone multimedia market.

On Tuesday evening, the company announced an expansion of a longstanding deal with handset maker Nokia, under which the cell phone giant will build support for RealNetworks' media formats into many of its advanced new phones.

That deal marked the tip of a new licensing strategy, however. For several years, RealNetworks has pursued an all-or-nothing approach, asking manufacturers to install its whole audio and video software package on their phones, as Nokia has previously done with some models.

Now the software company is breaking that bundle into components and letting manufacturers license individual pieces, such as support for RealNetworks' streaming video technology. The company hopes that will help a wider variety of products play back content from RealNetworks and its customers, even if phone makers ultimately use rival media players on their phones.

"We want to create more flexibility," said Sharon Goldstein, director of mobile products and services at RealNetworks. "You have to get a critical mass of devices out so it is interesting to launch services to those devices."

RealNetworks is following much the same path that it pursued in the world of PC multimedia, where it blazed a trail as the first commercial audio and video player, but later lost ground to Microsoft and standards-based rivals such as MP3. While still a software company, its content businesses are now driving its growth.

RealNetworks struck early deals with companies such as Nokia to support its audio and video software on cell phones. Close to 70 mobile phone operators also have installed the infrastructure in their networks needed to stream content in RealNetworks' format.

But as the mobile multimedia market heats up--particularly in Asia and Europe, where fast data networks are becoming the norm--rivals such as Microsoft and media software company PacketVideo are gaining ground inside phones. Late last month, Verizon Wireless announced it would stream videos on its new high-quality V Cast service using Microsoft's video format.

Throw in open standards such as aacPlus--an increasingly popular format for music on cell phones--and the little amount of storage space on phones that can be dedicated to software is getting quickly filled up.

Under the new plan, RealNetworks is providing companies with access to its media player engine, its proprietary audio and video format support, or the whole user interface, in whatever combination a customer wants. That means a handset maker that wants to use PacketVideo's media player, but still wants support for RealNetworks' video streams, could pursue this piecemeal plan, for example.

The company is charging 25 cents per device, no matter which component or bundle of components a handset maker like Nokia uses.

"It is a revenue business," Goldstein said. "But it's more of a ubiquity business."

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RealNetworks Inc., Packetvideo, handset maker, cell phone company, software company

 

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