MS or RealNetworks? What's the real deal?

What's the real deal with RealNetworks and Microsoft? Well, it depends on which company you ask. Microsoft proclaimed on Tuesday that long-time rival RealNetworks -- plus a handful of other vendors, including Yahoo!, Sonic Foundry, AOL Winamp and Lycos Sonique -- had agreed to license Microsoft's Windows Media format technology. As a result of the latest round of deals, according to Microsoft, Windows Media is now poised to become the "universal" digital audio format.

But RealNetworks, not surprisingly, had a slightly different take on the matter -- Real sees Microsoft's claim as meaning it is throwing in the towel. RealNetwork's alternative to Windows Media format -- aka RealPlayer -- is not going to disappear any time soon, said company officials. "What we did was license the (Windows Media) codec and digital rights management solution. It had nothing to do with Windows Media Player. That Microsoft represented it this way indicates how desperate they are," claimed Steve Banfield, general manager of RealNetworks' consumer division. "For Microsoft to imply this is somehow going to make Windows Media Player the standard is disingenuous."

A codec is the compression/decompression software that is used to make audio and/or video distributable over the Web. RealNetworks agreed to include support for Microsoft Windows Media formats in its RealPlayer and RealJukebox products. Real was quick to note that its agreement with Microsoft made Windows Media the most recent of nine codecs and eight digital-rights management solutions that the company is offering.

Banfield, a former Microsoft executive himself, claimed RealNetworks was caught "unaware" by Microsoft's decision on Tuesday to issue a press release and hold a press conference on the latest round of Windows Media deals. "We were hopeful we were moving toward a good working relationship with them in this space," said Banfield.

He added that Real felt Microsoft took the liberty of pre-announcing Real's future product direction. Real plans to make support for Windows Media formats available via its auto-update capability some time later this year, Banfield said. "To say this announcement was quite a surprise to us would be an understatement," he added.

But at least one analyst said Real shouldn't have been surprised with the rapidity and volume that Microsoft chose to publicise the agreement.

The lack of Windows Media support in Real products "is one of the few things that kept Real fans" from being able to make it their universal player, noted Rick Doherty, research director with technology assessment and market research firm Envisioneering. "Real's been like Switzerland in its posturing, in terms of support of all the media types. Windows Media was one of the last."

But Doherty also added that Microsoft "maybe overstated the case a bit," with its claims of near world domination. "Microsoft is just one of the colours on the globe (in this space)," Doherty said. "Real is still the map maker." Doherty also pointed out that nothing in Tuesday's deal allowed Microsoft to add support of Real's format to Windows Media Player. And WebTV is still not supporting Real's format, Doherty noted.

Tuesday's volley between Microsoft and RealNetworks is just the latest in an ongoing battle between the companies that has dragged on for nearly two years in the streaming media space.

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