RealNetworks Sees Growth Of Snack-Sized Mobile Content; No iPhone Plans For Rhapsody

Tricia Duryee
Wednesday, July 9, 2008; 10:00 PM

RealNetworks ( NSDQ: RNWK), which helps carriers sell ringtones, ringback tones and full-track music, believes the continuing trend in mobile content is to provide a bite-sized or "snackable" content experience, whereas the TV and PC will be the venues for longer, richer, high-definition experiences, according to Analisa Roberts, RealNetwork's senior director of market planning and analysis. That's not a new concept in the industry, however, the thinking has started to get muddled with new entrants, like mobile broadcast TV, which offers full-length shows and movies, and other content providers that see phones with big screens and faster network speeds as away to move everything from TV or online over to mobile without any alterations. To be sure, RealNetworks provides the range when it comes to music, by selling slices of music that are used for ringtones and ringback tones and also full-track music downloads. Here's a snapshot of their thoughts on the matter:

On recent developments: About two years ago, RealNetworks acquired South Korean-based WiderThan for $350 million for its mobile music expertise and then more recently it bought Sony NetServices for $9 million to gain a European mobile music foothold. Last month, it gained recognition for launching an exclusive deal for Rhapsody with Verizon Wireless that includes both full-track and subscription music services.

Lots more, including thoughts on mobile music, after the jump?

Mobile Music by the Numbers:

-- Ringback tones: Ringback tones make up the bulk of RealNetwork's business when counting subscribers. As of Q1, they had 16 carrier deployments in 10 countries with 28 million mobile subscribers, which mostly have subscriptions. "Our ringback tone subscriber base continues to grow at a great rate....It's strong in the U.S. and Asia, but Europe is a focus and we are seeing traction there." To give an idea, 10.5 percent of the global subscriber base has a ringback tone subscription. It's particularly strong in Asia-Pacific, with the U.S. hitting 8.4 percent penetration. "It's at that stage, where it's really starting to get interesting.

-- Music on Demand: The full-track music service is deployed with 11 carriers in 10 different countries with more than 15 million downloads a quarter. "That's not huge for digital music across the board, but we are seeing big traction." The full-track music service was launched with Verizon ( NYSE: VZ) previously, but then more recently it decided to go with Rhapsody, the music subscription service co-owned by RealNetworks and MTV. "We work closely with them. I think you'll see them both [VCast music and Rhapsody] up and running for awhile. There's no talk of VCast music going away, but it may morph into one business. We haven't gotten that far into the planning."

On Mobile Snacking:"It seems like everything is getting super sized. There's extra-large SUVs and Hummers and homes, but for some reason in mobile it is the exact opposite. We are into minimizing. No one wants a big handset, even though their fingers can't touch the buttons.....Mobile is perfect for snacking. People don't have to be tied to PC, and it doesn't have to be long, but they can still get the information, even if it's only one or two lines of text, or 15-30 second media clip. Either our attention spans that are shrinking, or is it because there's so much more information and we don't have time to consume all of it. The amount of content that's being sold isn't being diminished?it's that we don't want long-length content anymore." On MediaFlo's broadcast TV service:"MediaFlo is a good new service that's coming out, but I think it will be interesting to watch the popularity. We've been doing video for two years-plus in the U.S., and we've had full length HBO shows on there, and it's not live?it's streamed?but we continue to see the short pieces of content get more interest, like the recap of the day....It's a great to have and we'll see how it works out when MediaFlo has a good enough number of subscribers to have those kinds of debates."

The iPhone Won't Lead To More Mobile Consumption: The new iPhone won't lead to much more mobile consumption because most of the applications, including music and video, will only run on Wi-Fi networks or be consumed by users who side-load the content from the PC to the phone. By Robert's definition, those are not mobile experiences. "It won't be the device that leads to more mobile consumption because I don't consider Wi-Fi mobile," she said. She also doesn't expect RealNetworks to use the iPhone SDK to create applications for the iPhone other than games. That's because RealNetworks typically partners with the carrier, which has the billing and customer service-relationship with the subscriber. In Apple's ( NSDQ: AAPL) model, that's not true. "We could do a ringtone application for them, but we already do that today for Verizon and other carrier customers. The one thing is, is that in order to play in the mobile purchasing space, Apple will have to start looking at working with the carrier, but they really like their share of the profits." If RealNetworks were to handle the billing relationship with the iPhone user...."There are possibilities, but I don't think Apple would ever want Rhapsody on the device. It's a competing music experience."

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