Glaser: Harmony is the way forward

Your "freedom of choice" campaign gets at what the record labels have been asking for, and what consumers have been asking for in terms of digital music interoperability. But in terms of Real's interests, if everyone else also winds up being compatible, is that a good thing?
You have to assume long-term that everything is going to be compatible with everything else. Is it good for us if that happens? Absolutely, that means there's a bigger market. Our view is that the switchover of the industry from the $30bn physical music sales industry to hopefully over time an equally large digital business is a tremendous opportunity.

We think we benefit significantly when there is freedom of choice. That doesn't mean we end up with a monopoly in the business because we don't think that's the nature of the business. Yahoo doesn't have a monopoly in portals, but they have a great business in that world. Amazon doesn't have monopoly on the place where you buy physical goods on the Internet, but they have a great business. So in our view you can have a very fine business in a rapidly growing marketplace even if you're not a monopoly.

Do you still ultimately see yourselves focusing more heavily on subscriptions?
We still think that long-term, most consumers will have subscriptions. Long-term we think that we want to serve that kind of dial tone need for the largest base of subscription.

What we now have with Harmony are two things that are relevant. We have something that is differentiated and better. While we will license it to other people, we will license it on terms where if people use it and they pay us a little money for it and we multiply that by the volume of all the songs, that's great.

If nobody uses it and it turns out we're the only ones with Harmony technology for a year or two and ours is the best and the most reliable and whatever because we've been at it the longest, then we have that benefit too.

So we will put relatively speaking more emphasis on [individual] tracks than on subscription than we had because we have a compelling differentiation in both those areas. But I think at the end of the day we will continue to focus very substantial amount on subscriptions. We have had great success with Rhapsody. Not only with the number of subscribers, but with how active they are and with the kind of feedback they give us. Which is why I think it's not either/or, it's both/and.

But we'll also follow consumers. We'll learn.

You are in licensing talks now for Harmony?
I would say preliminary talks. We just introduced Harmony three weeks ago, and we're just releasing the RealPlayer with Harmony as a consumer product on Tuesday, so any of the conversations we're in are in very preliminary phases.

Do you see yourself doing the same kind of thing with Sony? Or are you talking about licensing their DRM?
We support (the Sony music format) ATRAC. We have had interoperability for in-the-clear music with OpenMG-based devices, which is Sony's DRM, in the past, and we may well do that in the future.

Today, Sony's hardware products for this market are not particularly significant in the marketplace. They still have some significant limitations, like they don't play MP3s natively. So the poor consumer has to transcode all their MP3s for these devices, which is kind of a backward way of looking at things.

We think Sony's a terrific company and have a good relationship with them on a number of fronts, so I wouldn't rule anything out. But by covering Helix, and Windows Media and FairPlay or iTunes devices, we've covered 90 percent of the secure devices that are out there.