Real’s Glaser: Apple iPod+iTunes ‘will lose out because of the share of market forces against them’

“To a multi-billionaire like Bill Gates, $761m (£428m) might not be a huge sum. But to Rob Glaser it is a windfall that could make his RealNetworks one of the key players in the future of video- and audio-playing software,” Stephen Pritchard reports for The Independent. “The $761m is what Microsoft paid earlier this month to settle an anti-competition lawsuit brought by its American rival, alleging that Gates’s company had used its Windows operating system to lock out Real’s RealPlayer software in favour of Windows Media Player… With the competition authorities on his side, Glaser, Real’s chief executive, could have fought on. Instead he settled for a deal that amounts to around two and a half years’ turnover for his company. Just over half of the settlement, $460m, is in cash. The remainder will be paid for in services from Microsoft, such as advertising for Real’s Rhapsody music service on Microsoft’s internet portal, MSN.”

Pritchard reports, “Glaser’s decision to opt for access to Microsoft services, and not just cash, might also prove astute. It cements the working relationship and puts the Rhapsody service in front of millions of MSN users, giving it a leg-up in the fight with Apple’s iTunes. Glaser’s battle with Microsoft would have made him a natural ally of Apple’s chief, Steve Jobs. But he criticises Apple for adopting closed technologies instead of open standards. ‘Microsoft takes a very wide approach to licensing its digital rights management software. It is vexing that Apple has taken a closed approach.'”

Pritchard reports that Glaser “believes handset firms and operators will pick Real as its software is open and plays a range of file formats – something the Microsoft agreement only strengthens. That, he adds, is in contrast to Apple’s strategy. ‘The Apple-Motorola phone could be a train wreck. Apple’s deal with HP [to sell iPods] was a train wreck. That end-to-end approach to designing the customer experience can be effective early on, but over time it will lose out because of the share of market forces against them.'”

Full article here.

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On October 27th, RealNetworks announced their earnings results for the quarter ended September 30, 2005. Real reported revenue of $82.2 million and net income of $11.2 million. Real’s music revenue totaled $25.0 million for the quarter.

On October 11th, Apple announced their earnings results for the quarter ended September 24, 2005. Apple reported revenue of $3.68 billion and net income of $430 million. Apple’s music revenue totaled $1.477 billion for the quarter.

How much time does Glaser plan to spend catching Apple exactly? Is Krispy Kreme now fortifying their donuts with some industrial-strength vitamins and life-extending gene therapy? In the last quarter, Apple matched Real’s entire quarterly revenue of $82.2 million in about the first 49 hours of the quarter. In the last quarter, Apple matched Real’s total quarterly net income of $25 million before lunch on the 2nd day of the quarter. In the last quarter, Apple matched Real’s music revenue of $25 million right around the 36th hour of the quarter.

Related articles:
Apple’s ‘pure genius’ will soon make iTunes’ portal the ‘number one destination on the Internet’ – July 26, 2005
Related MacDailyNews articles:
Real CEO Glaser calls Apple ‘deceptive’ with iTunes Music Store – March 07, 2005
Real CEO pitches to half empty room at tech symposium; Apple draws standing-room-only crowd – February 25, 2005
RealNetworks’ CEO Rob Glaser grabs 3 of top 10 spots on ‘Dumbest Moments in Business 2005’ list – January 31, 2005
The de facto standard for legal digital online music files: Apple’s protected MPEG-4 Audio (.m4p) – December 15, 2004
Real’s CEO Glaser: ‘Harmony’ hack legal, Mac lovers are very sensitive to Apple criticism, and more – September 14, 2004
Analyst: Rob Glaser’s ill-advised war against Apple ‘is going to bite RealNetworks on the ass’ – August 30, 2004
RealNetwork’s CEO Glaser crashes Apple’s music party – July 30, 2004
Real CEO Glaser: Steve Jobs’ comments on Real ‘not succeeding’ are ‘ridiculously humorous’ – April 29, 2004
NY Times: Real CEO Glaser was close to having ‘iPod’ before Apple, but let it ‘slip through his fingers – April 24, 2004
Real’s CEO Glaser: Apple’s iPod/iTunes combo ‘threatens to turn off consumers’ – April 20, 2004
Jobs to Glaser: go pound sand – April 16, 2004
Real CEO Glaser begs Apple to make iPod play nice with other music services – March 24, 2004
Real CEO Glaser: ‘iTunes is only going to be used for playing songs you bought using the iTunes store – January 16, 2004

53 Comments

  1. Apple does need to be very aware of how many companies ARE aligning themselves on the “other side” of the digital music biz with MS, and perhaps pursue more deals with others like Motorola and perhaps even start licensing their DRM if market share shoud dip just slightly.

    While I love the fact that the iPod + iTines work together so well, getting more partners on board would also be a good thing to help Apple stave off Bill+everyone else.

    Unfortunately the mount of money that “everyone else” can throw at this to come up with something that works as well (or close enough) is much larger than Apple can muster.

    I’d hate to see Apple go from a leading position to being an also ran becuase of a lack of licensing of the DRM.

  2. I agree with toolazytotell, Apple hast to make deals just to make Fair Play the standard in Music + DRM, everybody says that Apple doesn’t license Far Play because protect the iPod, but people will still buy iPod if the DRM is in other players or music stores because they are cool, people will still use Apple iTunes Music Store because is the bigger and easiest of all the stores. Consumers doesn’t care about the DRM behind

  3. Usually when a ship is sinking most rats jump ship. But not Rob “Second Helping” Glaser.

    “Glaser’s decision to opt for access to Microsoft services, and not just cash, might also prove astute.” – Pritchard

    Uh Uh.

    ” width=”19″ height=”19″ alt=”raspberry” style=”border:0;” />

  4. If Glasner was responsible to his shareholders, he would have taken all that $761 million and gone into another business sector. One where he can give them a “real” return on their investment.

    That is trucklaod of money, and money is power. The power to make more money. Unless your Glasner. He’s gonna piss it up against the wall.

    MDW: “Sell” as in “Shareholder should sell now”. This seems to be as good as it’s going to get folks. It’s all downhill from here.

  5. Uhm, doesn’t this lawsuit settlement also mean that Apple can now sue MS for the same anti-competitive reasons that Real sued MS? Locking out other media software in preference of its own? Isn’t Quicktime the 3rd media software besides WM and Real’s? Wasn’t Quicktime just as disadvantage as Real, by MS’s tight bundling of WM to its OS?

    Didn’t Cringely write about this lawsuit being better for Apple than for Real, over a year ago, as Apple has more to gain than Real, if Real were to win?

  6. “Apple iPod+iTunes ‘will lose out because of the share of market forces against them'”

    That’s like saying that Microsoft Windows will lose out because of the share of Linux market forces against them. A bunch of small competitors taking up a tiny fraction of the total market will only harm those small competitors, not Apple. They will only take market share from each other, and the resulting confusion may actually lead to more people purchasing iPods, as they are the safe bet.

    This is of course barring the off chance that one of these companies has an epiphany and releases a product that is truly better than the iPod. And then they would have to convince the teeming masses of iTunes users to repurchase all their music to make it compatible with their player. That’s a lot of people who would have to make a significant investment to make their songs compatible with their amazing audio player.

    “Microsoft takes a very wide approach to licensing its digital rights management software. It is vexing that Apple has taken a closed approach.”

    Apple’s closed system is their best advantage. Millions of people are pretty much locked in to their hardware AND software. To say the the closed system is a disadvantage is ridiculous.

    “That end-to-end approach to designing the customer experience can be effective early on, but over time it will lose out because of the share of market forces against them.”

    Actually, the closed approach is least effective early on. To have a small portion, say 5% of the market, locked in to your product means nothing. It is only when you have a significant portion of the market locked in to your hardware, software, etc. that the closed approach works.

  7. Current total global sales of the iPod approximately 28 million, potential projected sales for the run up to Christmas 2005 are 9 MILLION units. The iPod commands approximatley 75% of the overall global market of MP3 player sales with over 1000 3rd party ad ons from OEM car manufactures such as BMW, Toyota and Alfa Romeo and others. 3rd party manufactures such as Bose, Gucci, Prada, Burton, Altec Lansing and a whole bunch of others.
    http://www.time.com/time/business/article/0,8599,1123046,00.html
    Featured in Time magazine
    Logitech Wireless Music System for iPod
    A great way to stream music from your player to your audio system

    http://www.smh.com.au/news/livewire/moveable-feast/2005/10/25/1130239525389.html
    “iPod, Therefore I Am” ran the ruminative headline in an issue of Newsweek last year.

    It was an important signpost that Apple’s glossy white digital jukebox for the pocket had culturally arrived.

    The electronic device for iPod aficionados has become like a flame to which manufacturers have been irresistibly drawn, producing all manner of accessories and peripherals to hang off its phenomenal success.

    And in turn, the availability of extras has added value to the iPod.

    Today there’s an avalanche of accessories available, from wireless headphones and radio attachments to external microphones and car kits. Of them all, the compact speaker system, or docking station, is among the most practical.

    A speaker dock transforms the iPod from a device used for listening on the move to a near-essential piece of home-based entertainment.

    The iPod is not going to die anytime soon, Keep stuffing those donuts Rob ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

  8. quoting Rob ‘double-dip’ Glaser, from TFA: “It is vexing that Apple has taken a closed approach.”

    perhaps we should start a list of other things that Rob finds vexing:

    1. That men’s dress pants don’t come with elastic waists
    2. That McDonald’s insists on capping its offering at Extra Large, when his shirts come in XXL, XXXL etc.
    3. That consumers don’t understand that “buffering” time is a perfect time to refill your plate

    did i miss any?

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