RealNetworks brings streaming music to mobiles

17 Feb 2004

US streaming media giant RealNetworks is to bring its technology to 180 million mobile users after signing a deal with five network operators, including Vodafone in the UK and Ireland. The news should add impetus to Real’s battle against Microsoft for the hearts, PCs and mobiles of music lovers everywhere.

In a blitzkrieg of deals RealNetworks has signed deals with Wind in Italy, Telefonica in Spain, O2 in the UK, TeliaSonera in Sweden and Vodafone in Ireland and the UK. The deals follow earlier agreements with AT&T Wireless and Sprint in the US.

Unlike the PC world, where Real and others are battling against a Microsoft currently undergoing anti-competitive charges in Europe for bundling its own MediaPlayer technology with every Windows PC, the mobile world is open season for accomplished and ambitious players like RealNetworks. More than 510m mobile phones were sold to consumers around the world last year and less than 1pc of these were equipped with Microsoft’s Windows Mobile Software.

For example, the move should also bring Real closer to mobile handset manufacturers like Nokia, which has taken a controlling stake in the Symbian operating system alliance, that are keen to stave off Microsoft from doing the same thing to the nascent mobile sector that it has done to the PC market.

In recent months RealNetworks signed up Swedish and Japanese mobile joint venture Sony-Ericsson to pre-install its software on its handsets.

However, Real faces competition not only from Windows MediaPlayer, but from other streaming media software vendors such as PacketVideo, Emblaze, Apple’s QuickTime and open standards MPEG4 vendors who are also eyeing the mobile market hungrily.

While the market potential may seem to be huge, making money out of the mobile music market may seem harder than most people realise. Although there have been notable exceptions such as the fact that ringtone downloads outsell actual CD singles in the UK, even music download services in the music downloads to computers market have yet to see a proper profit.

Dario Betti, a senior analyst at Ovum who was researching O2’s particular move into music download services, notes: “The business for mobile music does not look like a very profitable one yet. Even fixed Internet players in larger geographical markets haven’t fared very well in terms of profits. Take the world market leader in the fixed music download market: CEO Steve Jobs admitted that Apple makes no revenue from the online download service, iTunes Music Store, that sells songs at US$0.99 per song. Apple controls a market share of about 80pc of the commercial offering, and it still cannot make money. Almost all the cash is flowing back to the copyright holders. Luckily for Apple it also sells the music player the iPod, and Apple makes plenty of money from it. O2 also sells its music player, the O2 DMP, but they don’t make money on it; O2 subsidises it.”

However, players like RealNetworks are more stoical about the growing popularity of streaming and cites its own Rhapsody music download service. Last month the company revealed that consumer usage of its award-winning Rhapsody Internet jukebox service jumped 10pc in January, with customers streaming more than 42m songs on-demand. The company also announced that in January the service’s library of music grew beyond 500,000 songs for the first time.

“Every day, partners like are introducing more consumers to Rhapsody and helping them rediscover their passion for music,” said Sean Ryan, vice president of music services, RealNetworks. “Rhapsody hands music fans the keys to the record store, letting them explore a library of more than 35,000 albums for less than US$10 a month. It’s no surprise that interest in the service is continuing to grow.”

By John Kennedy