In 1995, RealNetworks CEO Rob Glaser pitched sceptical record labels on using the company's then-new audio-streaming technology to build a "jukebox in the sky."
Eight years later, that dream is reality in Glaser's mind. And its manifestation -- monthly subscription music services such as that offered by RealNetworks' Rhapsody -- will be the predominant way people access audio online in the years to come, Glaser contends. His evidence: the company's 46 percent rise in subscribers for Rhapsody and RealOne's premium radio from the second to third quarter.
That may also serve to steady concerns that RealNetworks' core subscription service for streaming video, RealOne SuperPass, may be losing steam. Indeed, RealNetworks has a head start on a raft of rival services, including Apple's iTunes pay-per-song service and an overhauled Napster that's emerging to compete with the top-rated Rhapsody.
At the same time, the company faces continuing weakness in sales of system servers for delivering digital audio and video files -- a business Microsoft dominates on the PC but Real aims to command in the wireless market. ZDNet UK' sister site CNET News.com talked to Glaser a day after RealNetworks announced third-quarter revenue that met analysts expectations, based on a rise in music subscriptions.
Q: Revenue was up this quarter, and music subscriber numbers were up. Can you talk about the main driver of this growth?
A: Glaser: Not only is RealNetworks doing extremely well, but the subscription model, which we have long advocated, is at the core of how consumers are going to experience music. It's not the only way, but we think that it may be the single most important way and certainly the most logical successor to services such as the old pirate Napster and Kazaa.
Why is the subscription model better?
It's simple economics. The average consumer who uses Rhapsody -- and we now have a quarter-million music subscribers -- listens to more than 100 different songs per month. That pattern's pretty consistent. If you go with a purchase model, that costs you over $100 a month as a consumer. If you go with subscription model...we are able to deliver that same experience to consumers and have a good business at selling it at $10 a month. So it's less than a tenth the cost.
That was the great thing about Kazaa and pirate Napster from the consumer standpoint -- that you got access to all this stuff, and you didn't have to choose before you listened to a song whether you wanted to buy it or not. We offer the same thing: You can listen to 100 songs a month or 1,000 a month. Listen to five seconds of them or 30 seconds of them. You decide if it's something you want to permanently own.
