RealNetworks, Sony get tighter over digital media

RealNetworks and Sony have extended their partnership in the area of digital audio and video, announcing a revised agreement Tuesday that should help both companies widen the reach of their respective digital media technologies.

As part of the deal, the companies will carry out joint research and development to ensure that products from Real, such as its RealOne software, work well with new and existing consumer gadgets from Sony. For its part, Real will continue to incorporate Sony media technologies such as its ATRAC3 (Adaptive Transform Acoustic Coding) audio compression system with future Real software.

Signalling a deeper commitment to the Seattle, Washington, company, Sony also agreed to purchase a minority stake of 1 percent in RealNetworks, the companies said in a statement. Specific financial terms of the deal were not disclosed.

Sony and RealNetworks have been partners on digital media since early 2000 when they announced a similar agreement to use each other's products and technologies. In May of last year Sony's Sony Computer Entertainment division said it would embed RealPlayer in the PlayStation 2, allowing users to view content downloaded from the Internet on its gaming console.

Today's agreement is significant because it calls for a "far deeper commitment" to the joint development efforts, according to Brian Turner, chief financial officer at RealNetworks. In addition, the agreement extends the partnership to include a wider range of Sony products, including networked consumer devices that have yet to be announced by the Tokyo-based company, he said.

The original agreement "was primarily aimed at the PC platform," Turner said. "Now it's all of these devices as well."

Aside from the PlayStation 2, Sony makes a vast array of digital products, including its Vaio line of desktop and notebook PCs, MP3 music players, digital still and video cameras and the Clie PDA (personal digital assistant), which is based on PalmSource Inc.'s Palm operating system.

Tuesday's agreement lays out a framework for "regular product and business reviews" of the companies' joint efforts, the statement said. Real will continue to integrate Sony's ATRAC3 technology with its products and will give "consideration" to using Sony's OpenMG copy protection technology in its distribution products. Sony will continue to use RealNetworks' content distribution software in music players and other products.

The deal is nonexclusive, meaning Sony is also free to work with RealNetworks rivals such as Microsoft Corp., Turner said.

"Sony is free to work with Microsoft, but Sony is a natural ally for RealNetworks," he said.

Sony acquired its stake in RealNetworks from a third-party shareholder, not from RealNetworks itself, and it does not provide Sony with a seat on the RealNetworks board of directors, Turner said.

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James Niccolai

PC World
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