US Report: How trashing Microsoft is paying off for RealNetworks

Ever been tempted to tell someone what you really think of them -- but stopped short to avoid burning that bridge? RealNetworks CEO Rob Glaser has undoubtedly stopped short on occasion, too.

Ever been tempted to tell someone what you really think of them -- but stopped short to avoid burning that bridge? RealNetworks CEO Rob Glaser has undoubtedly stopped short on occasion, too. However, it is the one time he did not that made him (in)famous.

Ironically, ever since he went to Capitol Hill last summer and publicly dissed Microsoft, his former employer and business partner, his star has risen amongst Microsoft rivals. It's not what Glaser said that's so interesting. Others have made similar charges and that's why Microsoft is in Judge Jackson's courtroom right now. More remarkable is the crescendo of industry support that followed Glaser's tell-all in front of Orrin Hatch's judiciary panel.

Founded by Glaser just four years ago, RealNetworks is a pioneer in streaming media. It has 85% of the market -- and it's a market Microsoft is making an aggressive attempt to own. But RealNetworks has inked mega-deals since Glaser came out publicly as a Microsoft 'enemy' and endeared himself to the Anyone But Microsoft (ABM) Coalition:

  • Netscape to bundle RealPlayer audio and video software with its free Web browser.

  • Lotus to distribute RealNetworks' technology to its 25 million Domino and Notes users.

  • America Online to embed RealNetworks' technology in its new online access software. In exchange, RealPlayer becomes the default media player in AOL software.

  • RealNetworks to license Intel's data streaming technology.

All of which is good for RealNetworks -- and in the long-term for you too. But before you elevate Glaser & Co. to RealHero status, consider short-term consequences: RealNetworks' new partners, who should make deals based on what's best for their company and customers, are basing them partly on emotion and the chance to rub Bill's face in it.

RealNetworks is using a classic lock-in strategy in a tippy market. Its business model is to give away the media players, but make up the money on servers. If it sounds familiar, it's what Microsoft has been doing to the industry for 20 years. (Remember, Glaser learned industrial warfare from the Redmond master.) RealNetworks' strategy could be easily foiled long-term, however, if Microsoft gives away its player and server, bundling it into the price of Windows NT.

How does it play out for users? A lot of these deals make media streaming over the Internet more ubiquitous (AOL, Lotus, Netscape). Several of them make it cheaper, even free (as long as the courts don't nix that strategy). And the pact with Intel promises to make it faster.

Nobody wants to feel locked in as a prisoner of Microsoft or RealNetworks. Yet the healthier outcome for users may be for RealNetworks to dominate, forcing it to constantly innovate to stay ahead. Microsoft would dump money into building better products faster to catch up. And if at the end of the road we get open standards -- we win again.