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. I don’t understand MDN’s take on this article — so basically Apple’s revenues are greater than Reals? But where’s the commentary?

    I mean, Dell and Microshaft have market capitalizations that far outweigh Apple, yet the smaller company is obviously kicking butt.

    So, what’s the analysis of the financial numbers? Is the Real company revenue falling through the floor, bleeding cash which it will not be able to sustain? Are their company revenue charts pointing straight down and out?

    ???

  2. While I support and believe most of MDN’s and their reader’s comments, I fail to see how any referrals to Glaser’s weight problem have anything to do with the topic. What he says and how he acts are all fair game, but to have to launch an attack on his appearance seems very childish. Surely you have enough ammo to support your opinions without having to resort to that, right?

    Of course, the other side of that coin is that his appearance IS due to the way he acts (at KK). ” width=”19″ height=”19″ alt=”smile” style=”border:0;” />

  3. There are only two threats to Apple that I can see,

    1) is to not progress on building the best portable MP3 experience (both player and client app). From all reports, the iPod + iTunes combo is at least 50%-100% better than the rivals at a similar competitive price.

    2) the record industry cutting there nose off to spite their face. Should they feel that Apple’s influence is becoming too strong, they may choose to take a hit and stop supplying to Apple in order to diversify the competition.

  4. All these anti-trust cases against Microsoft are B.S. Microsoft will eventually fall because a lack of creativity and excess flaws that plague their products, not from strategic moves like bundling pieces of like software. It’s easy to throw stones at the top, however Apple is much more drastic in this approach. They try and succeed in covering many grounds in terms of software, but since they hold a much smaller market share, nobody cares. If Apple were ever to gain a majority of the market, we could expect the same things to happen to them. The government should stay out of the economy as much as possible. The people will ultimately decide where their money is spent and which products to endorse. Any company holding power has that power because of us.

  5. SR, if Apple would start violating anti-trust laws or using its position in the market with the iPod + iTMS to keep competitors out of the digital download market they would be to court in the blink of an eye.
    Apple has 80% of the digital market share and it is not forcing anyone to use its technology nor anyone is forced to kneel down in front of Apple to ask for Fairplay license and a slice of iPod market in order to sell music downloads. The market is open and Apple is the market leader not because they are the gatekeeper but because they sell the best products.

    If you win the market because your technology and products are by far the very best and the market rewards you, you are NOT a monopoly nor a case for anti-trust. It’s called open market competition.

    Monopoly is when by your very presence and by your very command of the ONLY available technology of a market you prevent others from entering it or force them to pay you fee to enter the only available technology in a market. Not the case with digital downloadable music market. No one is the sole owner of the only possible technology.

    Conclusion: Apple could grow to 99.9% of the market and not be case for an anti-trust lawsuit.

  6. What is so open about Media Player ? You have to pay MS if you want to use the DRM. Apple chooses not to sell DRM right now. Big deal. I don’t see auto companys like GM crying about not having access to Porsche Engines. They compete in “their” market with “their own” product. Only in Tech do you see the lazy cry about not being able to “use” someone elses hard work to prop up their pile of stool product – by association. Too many useless dorks have made millions this way. Namely MS by “Riding the Bear” – IBM – for 15 years…only to emerge as the overall winner. Who ever bought a PC for Windows ? All they wanted was a cheap PC.

    As a consumer I want a product to work as advertised. At a reasonable price. iTunes + iPod do that and more !! Nobody wants Glasers “closed” product that does not support the MAC. LOL !!! 2 can play at that game.

    Apple & Google right now…along with Open Source Linux stuff…create much fear for MS. They can smell the scent of many consumers realizing that they do not need MS for anything. MS is lacking a cool factor that it had 12 years ago. Dangerous times for them indeed.

    Every iPod sold is a potential person who finally says “…whoa this works and is cool, I thought the IT guy at work said that Apple sucked”

    Smell the fear at Real and MS.

  7. It’s like Steve says “consumers have plenty of choices, but some people just like the choices they are making”.

    Noone forces anyone to buy an iPod, and noone forces anyone to get their legal downloads from iTunes.

    You can choose Apple or you can choose the hundreds of alternatives. If you choose Apple, their hardwareb and software works on both Mac and PC. If you choose any of the competition, you MUST use a PC, directly discriminating againts a minority group.

    In this environment of massive choice, people choose Apple in overwhelming numbers. Why? Because monopolistic behaviour forced them to buy Apple? No, because they chose to buy Apple.

    It doesn’t matter how big Apple get, they are not guilty of monopolistic behaviour, and they have created no barriers to entry to competitors inton the industry. I’m sooooo sick of hearing this uninformed, uneducated nonesense to the contrary!!!

  8. But he criticises Apple for adopting closed technologies instead of open standards.

    What?!! Apple is using an open standard; AAC (MP4), while Microsoft is trying to infiltrate the market with a closed standard; WMA with its “PlaysForSure” initiative -> on Windows-only!!,

    Apple needs to open up to Linux to make Microsoft’s current offering to look even less relevant than it is now.

    Apple, bring iTunes to Linux!

  9. okay, that’s like the definition of a circle jerk:

    Bill and Glaser having dinner at Bill’s house chuckling about ‘what it’s gonna be like when Apple loses’

    “hyuk hyuk..ooh it’s gonna be amazing.. hyuk hyuk”

    “they’ll never see it coming.. market forces i tell ya.. can you pass the syrup? …. “

    right guys.. if Apple ever approaches the 60% level, they’ll lisence AAC+ and take over.

  10. Apple intends to clamp down on the Fairplay DRM when the new MacTels arrive because only with hardware can a software DRM work.

    Since the PPC chip doesn’t have DRM and the Intel chips do….

    So with that in mind, and since Microsofts DRM is going to do exactly the same thing in Vista with Intel chips, doesn’t make a whole lot of sense to license the Fairplay DRM to hardware that will be broken next year and result in a ton of lawsuits.

    People wonder why so many artists sign up to iTMS,

    1: The iPod sells well

    2: No subscription music, so the artists get a sale instead of nothing

    3: It’s not Microsoft and their monopoly

    4: Fairplay DRM secretly promised to labels and artists to get stronger over time using hardware.

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