Streaming Wars

In its third year, the battle rages on between Microsoft and RealNetworks to see which can get its media technologies adopted by more music and media companies, content creators, enterprises and consumers.

A few days before RealNetworks was to host its annual developers conference and announce the next-generation version of its flagship streaming media player, Microsoft sent out an e-mail update noting the "dramatic rise" in the adoption of its rival Windows Media Player and claiming for itself the honor of being "the fastest growing and most popular digital media player among U.S. Internet users."

It took RealNetworks less than 24 hours to respond, saying in a press release that Microsofts "claim was flat-out wrong."

"RealPlayer usage is at record levels and its lead over the competition is at its widest margin," RealNetworks wrote. "Microsoft ignored a huge chunk of our usage, and then overstated their own numbers ... When you have all the facts, it should be clear RealPlayer is the leading media player by far."

Welcome to the streaming media wars.

Now in its third year, the battle rages on between Microsoft and RealNetworks - former partners turned rivals - to see which can get its media technologies adopted by more music and media companies, content creators, enterprises and consumers. The tension will only escalate as more businesses look to media solutions to help cure their business ills.

"As travel budgets are slashed, head counts decrease and competition for customer dollars is heightened, corporations will begin to use their existing networks to keep employees as productive as possible, using interactive streaming media applications to communicate, train, motivate and retain both workers and key customers," reports Cahners In-Stat Group. The research firm estimates that worldwide revenue for streaming media services will surpass $5 billion per year by 2005.

The winner is the company that can keep businesses and users tied to its proprietary format - at least until an open standard for streaming media takes hold. Thats what keeps Microsoft and RealNetworks plotting battle strategies.

On Oct. 25, Microsoft will release the latest version of its market-dominating operating system. As it did with its once stand-alone Web browser, Microsoft promises tighter integration between the audio, music and video capabilities of its Windows Media Player and its new Windows XP OS.

Meanwhile, RealNetworks, led by former Microsoft executive Rob Glaser, last week introduced RealOne, which combines the functionality of two formerly separate players: its RealPlayer for audio and video, and its digital music player RealJukebox. It also adds a media browser, and will synch with an expanded subscription service based on the companys year-old GoldPass news, music and content delivery service.

"Were trying to make things simpler," says Steve Banfield, RealNetworks general manager. "What do people want to do? Watch the ball game, listen to songs, find new content on the Web. . . . We wanted to provide a continuity of experience for consumers that wasnt there before."

But Microsoft says continuity is already available to consumers in its Windows Media Player. Michael Aldridge, a lead product manager of Microsofts Windows digital media division, says RealOne is a tacit acknowledgement that consumers want the Swiss Army-knife approach Microsoft took with the Windows Media Player two years ago. And, according to Microsoft, its got the numbers to prove it.

But does it really? During the past two years, Microsoft says the adoption rate for its Windows Media Player has skyrocketed, pointing to numbers compiled by Jupiter Media Metrix. The online audience measurement firm found that in July, more than 24.7 million home users fired up the Windows Media Player - 6.9 million more than were using the Microsoft player in July 2000. In comparison, RealNetworks had 24.4 million home users running its stand-alone player in July, about 1.3 million fewer than the previous year.

"The key thing is not whos leading, but whos growing," Aldridge says. "The fact that they [RealNetworks] finally realized that they have to create an all-in-one experience underscores that weve become the leader."

Well, not exactly. Turns out the operative word in Jupiters measurement is "stand-alone." While the numbers for stand-alone players favor Microsoft, if you add AOLs subscribers to the measurement pool, then RealNetworks comes out ahead. As part of a licensing deal, RealNetworks last fall began bundling RealPlayer with version 6.0 of the client software used by AOLs more than 30 million subscribers.

Taking into account AOL users, Jupiter reports that the number of unique home users who fired up RealPlayer and RealJukebox software in July topped 35.5 million users - 10.6 million more RealNetworks users than in July 2000. And about 11 million more users than Windows Media Player, RealNetworks notes.

These are not the only numbers that Microsoft and RealNetworks pull out to stake their claims as leader of the pack. RealNetworks says there are more than 220 million unique registered users of its RealPlayer, and 68 million Jukebox users. It says its new RealOne development platform has already been endorsed by more than 60 content creators, media companies and service providers. And the company says GoldPass, the content subscription service it launched last year, now boasts more than 400,000 monthly subscribers.

For its part, Microsoft says it has distributed more than 350 million Windows Media Players worldwide - it doesnt keep track of registered users. It claims that one in four large companies - those with 500 or more employees - use Windows Media technologies, and more than 80 consumer electronics devices support its Windows Media format.

The streaming wars are exacting real costs from content creators, which find they must support both of the Webs most popular streaming formats.

For a brief time Microsoft and RealNetworks agreed to have their services play each others proprietary formats, but that ended just a year after Microsoft took an investment stake in RealNetworks and the two realized they had clashing ambitions.

Even Virage, a streaming media service and software provider that counts RealNetworks among its investors, acknowledges that the popularity of both formats leaves many customers with the costly decision to support both. "Customers are encoding in multiple formats, and each of those encodes is another stream. It all adds up," says Paul Lego, chairman and CEO of Virage, noting that its customers loyalties are about evenly divided between the two formats.

But its not all bad news. As Microsoft and RealNetworks compete, they continue to push the technology forward, innovating at a far faster rate than even promising industry standard efforts such as MPEG-4, which is widely touted as the format that will ultimately win the streaming wars.

The Internet Streaming Media Alliance - an open standards industry group comprising more than 70 companies, including AOL Time Warner, Apple Computer, Cisco Systems and IBM - last week released a specification describing how Net appliances and streaming media services can use MPEG-4 to take advantage of an "author once, play anywhere" model for content distribution.

Microsoft and RealNetworks are the notable no-shows on the ISMAs roster, though both say they will support MPEG-4 if and when customers demand they do.

Tom Jacobs, Sun Microsystems director of digital media services and president of the ISMA, predicts Microsoft and RealNetworks will be forced to abandon their proprietary formats and will instead distinguish themselves by how well they can deliver media technology built around industry standards such as MPEG-4. "Theres no use in deflating their core products too quickly," Jacobs says, "because there are still a lot of unresolved issues around MPEG-4" - including the licensing and digital rights management capabilities of the technology.

But eventually, the economics of media delivery across a variety of devices - and those high costs associated with supporting a back end for multiple, comparable streaming technologies - will force a move toward industry standards.

"Today, you go to a Web site and open any page you want with your browser because those Web pages are served using HTML," Jacobs says. "It should - and will be - the same for media."