Priming the content pump

Many have tried. Many are still trying - those that haven't burned through their start-up capital, fired half their staff or been hauled before a judge to defend their business model. Now RealNetworks believes it has a better chance than any other provider to get paid for delivering premium multimedia content on the Internet.

The manufacturer of RealPlayer software, one of the most widely used systems for playing audio and video on the Web, will offer RealPlayer GoldPass, a package of software, services and special content for $9.95 per month. Subscribers also will have to buy RealPlayer 8 Plus, the latest release of the company's multimedia software, for $29.99.

While RealNetworks has been lining up relationships with content providers for some time, the move to a subscription model is a dramatic shift from its origins as a licensee of streaming technology.

"This is a logical next step for RealNetworks and an important next step for the industry," said company founder, Chairman and CEO Rob Glaser.

It's also a risky one because RealNetworks will now have to pull viewers with high-quality content, something that other entertainment start-ups have found difficult - even for free. Providers generally like to see a pre-existing audience before they offer their best stuff.

RealNetworks has some first contracts with multimedia providers in hand, including Walt Disney Co., ABCNews.com and House of Blues. But the company said it was only priming the content pump with those initial offerings and expects the GoldPass announcement to draw more distinctive content in the coming months as subscribers enroll. Providers will receive a portion of the GoldPass subscription fees in return for some sort of exclusive rights to their content.

The ubiquity of RealNetworks' software provides a deployed base unmatched by that of any other multimedia player. Almost 140 million global users have RealPlayer software installed on their computers. As of March, RealNetworks had 29.7 million U.S. users, according to Media Metrix, its nearest competitor; Microsoft's Windows Media Player had 18.2 million registered users.

"We have the fifth most-used piece of software on those computers, period - and that's including [Microsoft's] Word for Windows and Internet Explorer," said Mark Hall, vice president of media publishing and programming for RealNetworks. "We have one of the most visited sites on the Internet, Real.com. Now we not only have this unparalleled platform and network to deliver listeners and viewers for content providers, but we're going to be able to deliver paying listeners and viewers."

One consideration that dents those subscription prospects is that only about 2 million of those 140 million users have actually paid for their RealPlayer software. The rest have downloaded the company's free version, which offers fewer added tools and less control of the media quality.

That free download has been a longstanding RealNetworks policy to lock in market share, but it's an open question how many of those users will pay for RealPlayer 8 Plus and one-third the monthly cost of basic cable to see the Sports Illustrated swimsuit video and purported alien sightings from UFO TV.

The company concedes that building an audience for all-you-can-stream media will be a stepped process, adding it will concentrate first on those 2 million users who have paid for the premium RealPlayer editions.

All GoldPass content will be delivered in two speeds - one to give users with broadband connections a DVD-like, full-screen video experience at about 230 kb/s, and another designed to optimize viewing in a half-screen size over a dial-up modem. New codecs in RealPlayer 8 Plus, which went into final release on the day of the GoldPass announcement, tailor the stream to fit whatever connection the player detects, said Leslie Grandy, group product manager at RealNetworks' consumer division.

The analogies to the birth of cable TV flew thick and fast at the GoldPass launch, but it was online music that was playing in the background. The recent travails of free music service Napster have multimedia companies looking for a formula to make music downloads pay, and RealNetworks seems to be grooming GoldPass as a flat-fee music service.

Not that those capabilities will be included in the $9.95 monthly fee.

"This is our basic cable offering," Grandy said. "You can imagine that in the not-too-distant future we'll have the expanded services, the tiered model, where we'll have some very targeted segment offerings that take a deeper, more vertical approach to content - a music subscription service or a sports service."

But if Napster and its freebie ilk are an inducement to set up GoldPass, they are also the threat to its success. Almost all Web content now is free, and more is added every day.

"This is a trial balloon, floating a service out there to see how it will do," said Nitsan Hargil, senior Internet analyst with Kaufman Bros. "Frankly, I don't see it adding anything to the bottom line."