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Tech Thursday

Leslie Walker's .com Live: The State of Internet Video
Discussion with Rob Glaser, founder and CEO of RealNetworks Inc.

Thursday, May 16, 2002

Rob Glaser
Rob Glaser
(Courtesy RealNetworks)

Seven years after streaming-media technology debuted and let people watch live video over the Internet, online video is still playing to a small audience -- mostly folks with fast computers and high-speed Internet connections. Yet the dream of Internet video-on-demand reaching the masses is being kept alive by entrepreneurs who are trying to smooth out kinks in the technology and business models.

On May 16, .com's Leslie Walker will host RealNetworks founder Rob Glaser online for a live discussion about the future of Internet video. Is it stalled or moving forward? Will it really become a mass medium or remain a niche toy for tech-savvy people?

[Read Leslie's column from today's newspaper, "Web Video's Growing Pains And Gains," which touches on these questions.]

Glaser's company, Seattle-based RealNetworks Inc., pioneered the concept of "streaming" media in 1995 by compressing audio files and sending them in pieces over the Internet. A former Microsoft vice president, Glaser has spent most of the past seven years competing with his former employer over which company's software will be the one most people use to play music and video over the Web.

In one of the Internet's most closely watched business experiments, RealNetworks rolled out an Internet video subscription service in December that gives people access to news, sports and entertainment videos from the likes of CNN, major-league baseball and ABC News. RealNetworks also is a minority owner of MusicNet, an online music subscription service backed by several big music lables. (Read The Washington Post's review of MusicNet.)

An edited transcript of this May 16 discussion is below:

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.


Leslie Walker: Hello everyone and welcome to Rob Glaser, who is chatting with us live from Detroit, where he is on a business trip. To all of you out there reading this, we're ready and eager to hear from you. Fire away with your questions and thoughts.

Leslie Walker: Let's start with a snapshot of "streaming" media today. It doesn't feel like it's gone mainstream on the consumer Internet yet, though I realize corporations are adopting it more and more for business.

Will "streaming" media achieving critical mass in the business market first, well ahead of consumers? And just how big is the streaming media industry today?

Rob Glaser: Based on everything we're seeing, internet media delivery -- both streaming and downloading -- is becoming more and more mainstream every day.

We have over 270 million unique registered users of our RealPlayer and RealOne Player software, and are adding millions more every month.

Moreover, now that Broadband is starting to become more prevalent, people are spending much more time and getting experiences that get much closer to TV-quality than ever before. The best indicator of this is the over 600,000 people who have subscribed to our premium subscription services like RealOne Superpass.

Leslie Walker: Doubters question whether "streaming" media can scale to become a mass medium, especially in the consumer market, because it faces so many technical and economic challenges.

What needs to happen to move streaming media into mainstream culture? For example, do the keys lie in better technology standards, wider broadband adoption, more quality programming - or perhaps all three?

Rob Glaser: As an industry making great progress in making internet media delivery -- streaming and downloading both -- scale up.

Scaling has several dimension -- technical quality, content availability, and cost/economics

On the technical side, with RealVideo 9 which we just released, we've increased quality by 30%, which means that what used to require 400 Kbits/second now only requires 300, or what used to require 40 now only requires 30. This translates to both better quality and lower cost.

In terms of content, we are working with several major media companies to deliver content that's never been available anywhere else -- stuff like every major league baseball game and now, condensed baseball games -- the whole game in less than 20 minutes. On demand access to great news programming like ABC World News Tonight and Nightline. And many others.

In terms of economics, in addition to the cost savings from new innovations like RealVideo 9, the growth of subscription services like realone superpass is showing content companies that they can make money from their valuable programming both from consumers and from advertisers.

Bethesda Md.: How many users can simultaneously access most of the video content on RealOne (like CNN's newscasts or the video sports highlights?) Can you handle more than 2 million? 10 million?

Rob Glaser: Yes we have built up enough capacity to handle very large simultaneous audiences.

The highest demand we have yet seen as an industry was on and right after september 11th. We had I believe over 2 million users watch or listen to news over our servers on the day of september 11th alone. Our team in Seattle pulled out all of the stops during this very dark day.

Alexandria, Va.: It seems to me that the cable industry poses the stiffest threat to companies like yours. Where I live, Comcast has rolled out video-on-demand. I can buy a movie and watch it without dealing with clunky software or imperfect 'Net connections. If the cable industry continues down the line of providing seamless Internet and video entertainment, why do we need a RealNetworks?

Rob Glaser: Our view is that TV video on demand and PC video will live together side by side.

TV is great for stuff that you watch at home, leaning back and relaxing.

The PC is great for letting you watch wherever you are -- work, home, or travelling, and letting you interact with the content -- e.g. looking at a web story on CNN while also watching the video, or finding out about what's going on with other games while you listen to your favorite team play.

Washington, D.C.: How safe from hackers is your streaming media RealOne player? Reading about all the latest holes in Internet Explorer makes me shudder at what might be in RealOne!

Rob Glaser: While there is always a risk that any system can be hacked into, we take strong precautions to prevent this from happening with RealOne.

For instance, Internet Explorer allows executable software to be downloaded from anywhere on the internet to a consumer's PC. On the other hand, the only time general purpose executable code is downloaded by the RealOne player or the RealPlayer is when the code comes directly from update servers managed by RealNetworks.

Of course, there are always risks of malicious hackers coming up with ways to do devious things (e.g. the "buffer overflow" problem that was reported with AOL's WinAMP a few weeks ago), we work hard to make sure this kind of stuff doesn't happen.

Bethesda Md.: Why is the new Real software so aggressive in putting links all over your computer -- desktop, system tray, start menu, not to mention those obnoxious AOL links -- as the default?

Most users aren't technical enough to choose the custom installation which allows them to choose what kind of links. Given that most people will accept your defaults, couldn't you go a little easier on the clutter? Please, please, give more respect and consideration to the average user.

Rob Glaser: Appreciate the feedback.

As you point out, we offer two installation options -- one that gives users control over how RealOne is installed, and one that installs it in a standard way where we try to make the choices that best fit the needs of most users.

We talk to users a lot (e.g. surveys, focus groups) to figure out what the default installation approach should be.

What some people experience as clutter, others experience as helpful options. For instance you mention the AOL links -- it's my understanding that tens of thousand of users a month use the AOL links we provide to sign up for AOL. Clearly for those users, the links have provided a useful service.

There may be a better solution than two choices (express and custom I think we call them); some software gives people three choices (express, full, and custom). But then again, there are people who think that three choices is confusing for the average user. It's hard to come up with a solution that's perfect, but we are looking to continue to learn and improve.

Leslie Walker: I'd like to echo what the Bethesda reader said about the clutter Real's software puts on your computer by default. I just made four installations, and forgot to choose "custom" on one, so I'm familiar with how it works. I doubt the average user needs a RealOne link in three places - start menu, desktop and system tray -- and I'm sure most don't know how to remove them.

Washington, D.C.: Do you feel that content companies have dragged their feet, not providing the best content to services like yours because they fear people will steal and redistribute it for free?

What mechanisms do you have in place to stop someone from stealing the content delivered via your service?

Rob Glaser: In general I think the content companies in most parts of the industry are moving forward well and momentum is picking up, although it varies widely.

Take sports. Baseball is doing very innovative things, for instance the new condensed games are very cool. If you haven't seen 'em, check 'em out at mlb.com.

On the other hand, the Olympics was very worried about cannibalizing their worldwide broadcast rights, so they shut down any webcasting of any video from the winter olympics in salt lake earlier this year. I think this was a mistake and lost opportunity for them, by the way.

Anyway I don't want to type war and peace so I won't go through category by category. Overall I think there's been great progress in the past year or two, but there's a lot more to come.

San Carlos, Calif.: When do you see streaming video services such as Real offering the same video and audio quality as competing services such as cable or satellite? Are current Cable and DSL speeds adequate for high quality audio and video?

Rob Glaser: We're making a lot of progress in terms of quality. People often tell me that they are blown away by how quickly the quality of RealVideo has improved.

With RealVideo 9, we can deliver basically TV quality video at 300-400 kilobits/second. Most DSL and Cable service plans deliver at least this much bandwidth to the consumer.

Check out foxsports.com for instance and see for yourself (I think most of their RealVideo 9 requires that people be members of RealOne superpass).

The biggest issue that people may still run into is if the "middle" of the internet is busy. We're making progress here as well, in part by working with the cable and DSL providers to install servers within their local networks that store or "cache" the most popular content.

Leslie Walker: Microsoft's Windows Media Player has been catching up to your player in usage, and now it's embedded in Windows XP. If the courts don't order an unbundling, how will the operating system bundling affect RealNetworks?

And in general, what's your strategy for competing against a behemoth like Microsoft?

Rob Glaser: I don't know that I accept your premise Leslie. We have been growing in terms of the number of users we have and the amount of time they spend using our products.

In categories like premium content, we have been widening our lead. At the beginning of 2001 we had about 100,000 subscribers and microsoft had 0. Today, we have over 600,000 subscribers, and Microsoft has, well, zero.

Microsoft has been bundling its inferior media delivery products with Windows for several years, yet we continue to be the leader. The reasons are simple -- best quality technology, best content, most content.

Kirkland, Wash.: Reading the answer about the default installation, I beg to differ about what users prefer. If you choose the recommended installation for RealOne and have Musicmatch on your system too (which I do), there is a constant war on my desktop involving Real's background "helper" application. Even if I tell Musicmatch to be my default player, RealOne will reclaim the default automatically in just a few minutes - even if RealOne is not running at the time! It's confusing and annoying. Why are you so aggressive about this?

Rob Glaser: We would love there to be a standard way for users to specify what software they want to use for each of the specific functions that a multipurpose product like RealOne does.

Unfortunately there is no standard way today for users to specify what their preferences are that spans applications.

We proposed such a standard almost 4 years ago, but we weren't able to get other leading companies (most notably, Microsoft) to go along. To learn more, check out this document on our Web site.

Bottom line, I strongly encourage consumers to raise this issue with everyone in the industry -- Microsoft, Musicmatch, AOL, us, and others. It would be a great thing for consumers and, I think, ultimately for the industry as well.

Baltimore: How do you envision video appearing on the Internet three years from now in terms of accessibility -- will there still be plug-ins, or will the experience be more seamless?

Rob Glaser: I think the experience is getting more seamless. One of the key features that we've built into RealOne is an auto-updating capability.

For instance, we released RealOne in December of last year, and RealVideo 9 in April of this year. If someone goes to a RealVideo 9 clip and they have the older version of RealOne, we automatically update the player right before the clip plays.

We are working to make the experience even more seamless. For instance we're now bundling RealOne with all Compaq consumer PCs, and we have arrangements for RealOne and RealPlayer with other manufacturers.

San Francisco: When we produced large webcasts a few years ago, economies of scale were the barrier to a sustainable business. What's changed? Doesn't broadband just increase the peak bandwidth cost but add zero to the revenue?

Leslie Walker: This is a key issue, one critics of streaming often raise. I'm really interested in your view, Rob, of how this business scales economically, especially under your "all you can eat" RealOne subscription plan. Is it advertising that helps you scale the revenue?

Rob Glaser: The fundamental economics of streaming are getting a lot better for 3 reasons: bandwidth cost, improved compression, and better content distribution/caching.

Bandwidth costs are probably down 80% from what they were just 2 years ago. While this is tough news for bandwidth providers, it is excellent news for consumers and webcasters.

Improved compression we talked about earlier -- a 30% improvement in quality equals a 30% decrease in bandwidth cost for the same quality.

In terms of content distribution there are a number of smart strategies spanning edge caching, multicasting, and client-side caching.

Bottom line there are still cost issues for certain applications, but for many applications we have already crossed into the profit zone and for others it's coming in the next 12-18 months.

Washington, D.C.: Rob, when you graduated from college, you told your friends you were going to make technology work for the political Left. And the first name of your company was Progressive Networks. These days, the Right (and its messages and messengers) seem to dominate the Internet, as well as cable. You've got big bucks. Time for you to do something?

Rob Glaser: Real as a company is committed to making sure that technology is used to enable a wide range of voices to be heard. We have a significant effort working with Nonprofits of many varieties called RealImpact. Check it out at realimpact.org

In terms of my personal stuff, we have a family foundation (www.glaserfoundation.org) that gives money to a wide range of good causes.

Leslie Walker: So does that mean you don't think bundling Windows Media Player with XP poses a serious competitive threat?

Rob Glaser: Since I answered the question once, I infer that you're asking about/because of the MS antitrust case.

We have an excellent general counsel who tracks legal and public policy issues. I focus on making sure that RealNetworks has a great team, smart strategies, and great products and that we treat our partners and customers right. If we do all those things we will succeed, whether or not our competitors abide by the law.

Leslie Walker: San Francisco sent this reply to the former question:

San Francisco Thanks thanks for earlier response. But isn't Multicast a canard? I don't know a single network engineer who will open Multicast-IP on his router for fear of spoofing, flooding and general chaos. BTW: I wish we had multicast too.

Rob Glaser: Thanks a lot everyone, I've enjoyed your questions and our conversation a great deal.

Please keep giving us feedback on how to make our products better. We really value your perspective and truly appreciate all of the support we've gotten over the years.

Best, Rob

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© 2002 The Washington Post Company


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