Report: Real seeks musical duet with Apple

RealNetworks Chairman and Chief Executive Officer (CEO) Rob Glaser has urged Apple Computer's CEO Steve Jobs to partner its digital music businesses against rival Microsoft Corp., according to a report published Thursday in The New York Times online edition.

In an e-mail sent April 9, Glaser offered to create a "tactical alliance" with Jobs and Apple, the report said, citing the message that was obtained by The New York Times "from a person close to Apple."

Should Apple and RealNetworks be unable to reach an accord, RealNetworks may turn to Microsoft to pursue "very interesting opportunities," the report quoted Glaser as writing.

A RealNetworks spokesman at the company's Seattle headquarters later on Thursday confirmed that Glaser sent an e-mail message to his counterpart at Apple, but the spokesman said it was intended as a private message. Apple representatives did not return calls requesting comment. A spokesman for Microsoft in Europe said he was unaware of the report.

An alliance between RealNetworks and Microsoft would be an about-face in the relationship between the two companies. RealNetworks has long lobbied against Microsoft's market dominance and currently has a private lawsuit lodged against Microsoft in the U.S. accusing the company of using its monopoly powers to control the digital media market with its Windows Media Player to the detriment of Real's competing player.

But given that Apple is currently the digital music market leader with its iTunes online music store, Glaser would like see RealNetworks license Apple's Fairplay digital rights management system in exchange for making Apple's popular iPod music player the primary device for the RealNetworks store and for the RealPlayer software, according to the report.

Though RealNetworks' encrypted music services, Rhapsody and the Real music store, both support the digital music technology standard favored by Apple -- AAC -- the RealNetworks services cannot currently be played over an iPod. That limitation may force RealNetworks to switch to Microsoft's competing WMA format, the report quoted Glaser as writing.

However, he was quoted as writing, "instinctively I don't want to do it because I think it leads to all kinds of complexities in terms of giving Microsoft too much long-term market momentum."

Glaser has repeatedly criticized Apple for locking down the iPod player so it only plays Apple's own secured music technology, Fairplay, and not formats used by competing online music stores.

"We have consistently stated that Apple should open the iPod and Rob (Glaser) recently communicated that directly to Steve (Jobs)," RealNetworks spokesman Greg Chiemingo said.

"The digital music market is very good and everybody is very excited about it. However, we're still very early in this market, and in order for the market to really take off, consumers should expect that if they buy songs in any legal online store they will be able to play it on any device," Chiemingo said.

Glaser has not received a response from Apple's Jobs and it is unlikely Apple would agree to Glaser's proposals, the report said.

If the two companies were to come to a deal, it would probably be very narrow and mostly benefit RealNetworks, said Richard Doherty, research director at The Envisioneering Group.

Apple and RealNetworks have taken different approaches to the digital music market. RealNetworks' model is subscriptions: It sees its music store as a front door for the Rhapsody subscription service. Apple concentrates on music sales through iTunes, Doherty said.

Microsoft so far has been the sleeping giant in the online music space. Although Windows Media technology has been used for several music services, the fight for consumers among Microsoft, Apple and RealNetworks is likely to become much more heated after Microsoft launches its MSN music store later this year.

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Laura Rohde

IDG News Service
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