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RealNetworks Tries to Get Real with Apple

RealNetworks
RealNetworks

There's a reason that when we cover Apple Inc.'siTunes, it normally carries the added noun of "juggernaut." The online service has sold a staggering 5 billion songs, tens of millions of TV shows and movies, has become the nation's largest music retailer, supplanting Wal-Mart, and continues to beat back any challenger. I'm not saying that's good or bad, I'm just saying...

Which brings me to today's news from RealNetworks, Verizon Wireless, and MTV, announcing VCast Music with Real's Rhapsody service which will deliver the subscriber "unlimited monthly access" to phones running the Real software, and PCs with Real's RealMedia player loaded. And all for $14.99 a month. Access to 5 million titles is good, and there's a complementary DRM-free master copy users can download as well. The cool thing is you can simultaneously download songs to your phone and computer. But here's the rub: as I understand it, in addition to the monthly subscriber fee, if you download a song wirelessly direct to your phone, you have to pay $1.99.

This could be good for a variety of reasons, not the least of which is the rumored BlackBerry Thunder, coming from Research in Motionin the Fall and expected to run on Verizon's network. That touch-screen device linked to an online music service could indeed pose some kind of competitive threat to the iPhone/iTunes (say it with me) juggernaut. But how realistic is that?

I've spoken to RealNetworks' CEO Rob Glaser a number of times about his company's initiatives and he gives a compelling pitch. But either the message isn't coming across, or consumers just don't care. Investors certainly don't. This stock has gone mostly nowhere. And for a long time. Glaser says if he builds the right products at the right prices for consumers, the stock will follow and everything will take care of itself. But it hasn't. At least not yet.

Sure, RealNetworks is trending higher these last five years, but only to the tune (get it?) of 5 percent. And I'm not talking compounded annually. I mean, a total of five percent, or an average of 1 percent annually. Come on. Apple's up a little more than that: 1,702 percent. But that's a post for another time.

I mean, it's hard to go up against a competitor like Apple, which controls 70 percent of the market. And heaven forbid, I'm not suggesting that these companies don't try to unseat the lead dog. Glaser was on CNBC earlier today, but I didn't hear anything that jumped out at me as a game-changer. In other words, there's a model out there that leads the market, and short of something truly extraordinary, I don't see what Real, Rhapsody and MTV are doing to change that. More to the point, AT&T also has a subscription based arrangement with Napster and I'm not clear that's eaten away any of Apple's market share. Amazon's enjoyed some success with its music service, thanks to it being DRM (in fact, I know a number of people who are shopping there for DRM free titles, and loading them onto their iPods. So maybe Rhapsody will see the same kind of traffic, but not if Amazon's already there.) Either way, Apple is still the king pin.

If anything, the RealNetworks deal shows an increasingly pliable Hollywood when it comes to arranging deals for digital distribution. For one, RealNetworks will let consumers listen to the entire song before buying it--and pay the recording labels and artists for that--whereas Apple lets listeners only hear 30 seconds of a selected song. The DRM feature is always a plus, and what was once the bugaboo of the recording labels is fast-becoming a selling point to get their music properties to as wide an audience as possible.

Competition is good. Innovation is better. Until we see true measures of both, Apple is untouchable.

Questions? Comments? TechCheck@cnbc.com

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