Streaming media giant faces uncertain future

While the fortunes of streaming media firm Real Networks have been in decline, the company is not taking it lying down, writes Danny...

While the fortunes of streaming media firm Real Networks have been in decline, the company is not taking it lying down, writes Danny Bradbury.

Real Networks' share price fell last year from a high of just over $90 in February to about $8 at the end of December. Rather than licking its wounds, the company is still focusing on enhancing digital delivery. In mid-December, it announced the Realsystem iQ architecture, which attempts to make digital video more scalable.

Previously, digital video worked on an "origin and edge" basis, where the content was put onto a server on one part of the network and distributed from there to the client over the network architecture. The latest product changes this, the company explains, by creating

a honeycomb of servers across the network. When installed in a firm, these servers can talk to each other using a Real Networks system called Neuralcast.

When delivering media content, Neuralcast balances the workload by distributing content across the honeycomb so that Real NetworksÕ clients can access video from the nearest geographical server. According to David Shickle, European technical director for the company, the network can scale to deliver video to more people this way.

"Let's say a customer has 10,000 streams and they have a network of ten machines. Added to this, they are geographically spread across the UK," he says. "If a particular server is being hit significantly, it will attempt to redirect or spread that load across other servers."

The technology sounds good in theory but one has to ask how many companies will be big enough, and focused enough, on video to install a network of servers such as this?

Apart from large, content-focused companies, the commitment of the average firm to creating scalable video networks is questionable. There is a vast difference between, say, a news agency wanting to transmit video reports over the Internet and a firm wanting to transmit a message from its CEO to its customers.

The buoyancy of the market must be worrying Real Networks at present. The company recently issued an earnings warning for its fourth quarter, ending 31 December 2000, in which CEO Rob Glaser spoke of the downturn in Internet-related spending. Most Realaudio and Realvideo content on the Internet is free and companies rely on advertising to make the delivery of that content worthwhile. Yet the success of online advertising is still in question.

The alternative market for Real Networks is internal media delivery, for broadcasting executive messages or company news updates to employees, for example.

But again, it is not clear whether such a market will strengthen Real Networks' sagging growth pattern.

As a concept, streaming content will survive, but the commercial model surrounding it will undergo some re-adjustment over the next two years, as part of a general rethinking of Internet-based content revenue models. In the meantime, the need for highly scalable digital video delivery systems will be limited because the number of companies making money out of it will be relatively small.

Hopefully, if and when companies start charging for content, the true size of the market for software such as Realsystem iQ will be clearer.

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