RealNetworks Beefs Up To Stave Off Competitors

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RealNetworks Inc. took action last week to solidify its
leadership position in media streaming, amid signs that wide-scale competition in the
broadband space could spell trouble for the Seattle-based software company.

RNI is concentrating on the mass market -- which remains
largely a dial-up base of users -- with a new portal designed to facilitate access to
hundreds of sites that use the company's server software to stream media, product manager
Rob Grady said.

"We've always focused on delivering content that will
play back in the real world, and 75 percent of the people using our player are on
narrowband networks," Grady said.

RNI's approach to broadband since it introduced its
"G2" platform last year has been to provide developers with the ability to
deliver the same file at four different access rates of their choosing, typically ranging
from 28 kilobits per second to a few hundred kbps. This way, content suppliers can serve
the mass market of dial-up users, while offering a higher-quality audio/video feed to
users with high-speed access.

But a growing number of companies are challenging RNI by
taking a broadband-specific tack, developing content that exploits broadband capacity. For
example, a new company, ClearBand LLC, is offering streaming technology that it says can
translate any TV or video feed in real time into a streamed MPEG-2 channel operating at 30
frames per second and full-screen resolution at data rates as low as 300 kbps.

"We're in discussions with several telephone companies
and other major players that want to be able to offer high-quality video to the PC and,
eventually, the set-top over networks with fairly limited bandwidth," said Joe
Hawayek, chief operating officer at Burlingame, Calif.-based ClearBand. "The real
sweet spot in the market appears to be 512 kbps, and it will be for some time to
come."

Streaming technologies that offer at least VHS-quality
video at higher data rates will be limited in their market reach, while those optimized to
operate at much lower rates will miss the full benefits of delivering everything from Web
video to cable-TV channels, Hawayek added.

"We have a lot of DSL-based [digital subscriber line]
customers that are looking for ways to compete in video services, and they must have a
platform that delivers high-quality pictures with consistently high performance," he
said.

RNI has taken steps to improve the broadband-level
performance of its streaming platform, Grady said. "It meant rewriting some code, but
we've been able to gain over a 50 percent improvement in performance," he added.

This means frames are dropped far less frequently than was
the case previously, and VHS quality at full screen can be achieved at 300 kbps for some
feeds, such as a newscaster talking, Grady added. "We demonstrated the system using a
trailer from the new James Bond movie [The World Is Not Enough], which is
high-action, at 800 kbps, and it was pretty transparent to what you'd see on a TV
screen," he said.

The new RNI portal site, Real.com, was unveiled in
conjunction with the release of version seven of the company's streaming client software,
which users download and store on their hard drives so that whenever they access a site
with RNI-streamed multimedia, they can get the feed instantly.

"RealPlayer 7," which provides users with a
gateway to the new Real.com portal and a best-of-the-day live-event compilation known as
"take5," speeds the start-up time of the feed by 40 percent and consumes less
memory than previous versions, Grady said.

But users need to download the player, which may prove to
be a liability in the future, said Sujata Ramnarayan, an analyst with Dataquest Inc.,
which recently issued a report on Web streaming. "RNI has to contend with the fact
that everyone who buys a computer with [Microsoft Corp. operating system] Windows 98 is
equipped with 'Windows Media' [the Microsoft streaming player]," she added.

Microsoft has registered more than 40 million downloads of
its player software, most embedded in the OS, compared with 70 million for RNI, according
to Dataquest. But it is hard to gauge what this means at this early stage, since a far
greater share of the base of streamed media on the Web is designed to work with the RNI
player.

Microsoft has begun to focus on streaming applications in
broadband through an initiative dubbed "Jumpstart," now involving about 35 other
companies, targeting DSL and other high-speed-data platforms.

Cisco Systems Inc. has also teamed up with Microsoft in a
streaming initiative targeted to the business market.

But Cisco's move points to the limitations of the
mass-market leaders' technologies and the opportunities that are open to upstarts like
ClearBand and Pixelon Inc., another developer of software that supports high-quality
MPEG-2 video streaming at well under 1 megabit per second.

Cisco -- relying on the Windows Media platform as a user
interface and for some streaming applications -- has developed its own streaming server
and client software to better exploit the broadband environment, noted Heather Rose, group
manager for product marketing in its video Internet-services unit.

Where Windows Media-based streaming is designed to
accommodate the hazards of packet navigation over public networks, Cisco's
"IP/TV" software taps into the latest Internet Engineering Task Force standards
-- such as "IP Multicast," "Real Time Streaming Protocol" and
"Real Time Transport Protocol" -- to add higher quality-of-service management,
Rose said.

"The key point is that the IP/TV protocols tend to
work best with managed routers and switches, whereas the protocols Microsoft uses assume
that the routers and switches across the public Internet aren't going to be cooperating
with each other in a particular streaming session," she explained.

At ClearBand, optimizing for broadband right from the start
allows the company to avoid the encumbrances of the narrowband operational environment,
Hawayek noted.

Moreover, he said, the company has developed a Java-based
player that downloads with the video stream and disappears after the session ends. This
eliminates the need for storing a player on the hard drive and overcomes the inability of
content providers to reach users who lack player software.

"We've developed an all-software solution where
everything is done in the client-server mode," Hawayek said. "We think the
ability to encode any source of video in real time on a Pentium III PC and deliver it at
30 frames per second in full-screen resolution to anyone with a Pentium I or better PC is
basic to the success of streaming media in the broadband environment."

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