RealNetworks, Microsoft Face Off on DRM

On Wednesday, RealNetworks Chief Executive Officer Rob Glaser unveiled a digital rights management solution called RealSystem Media Commerce Suite to empower the "next phase of digital media delivery." The long-awaited DRM system will be used to power the security of MusicNet, the digital music company formed recently by RealNetworks, BMG, EMI and Warner Music.

During his keynote at Streaming Media West 2001, Glaser showed the first live public demo of MusicNet, a browser-based subscription service that lets users search and store their music online. In the demonstration, Dave Halprin, MusicNet’s director of product marketing, illustrated how a user can stream and download music after acquiring a license from the RealSystem Media Commerce Suite.

According to Glaser, the DRM system, which was in planning for about two years, was one of the "missing pieces" of such a service. Some of the tamper-proof technologies came courtesy of Aegisoft, which RealNetworks acquired in January 2001. Glaser said that RealNetworks wanted to take an integrated approach. "We wanted to unveil a very comprehensive solution to the marketplace," he said.

Glaser stressed that the company wants to securely deliver "all media, to all devices," in any format including downloads, streaming, peer-to-peer, and even physical form.

To underscore the importance of the new technology, Ben Rotholtz, general manager of systems and tools for RealNetworks, said this is one of the company’s top three announcements ever.

Late to the Game?

Microsoft, however, did not seem impressed at the news. According to Michael Aldridge, lead product manager at Microsoft’s digital media division, "We’ve had [DRM] since 1999." He said that Microsoft has powered over 8 million secure transactions already, with audio, video and even e-books.

Microsoft’s DRM technology is also in its second version — the company released DRM 7.0 in July 2000. "[RealNetworks’] DRM is coming late to the game," said Aldridge. "They have a lot of catching up to do and will have a huge learning curve." He pointed to services like CenterSpan’s Scour, a file-sharing system that operates exclusively with Windows Media and that uses digital rights management to control access to files, so if a user shares a file with someone else, that user must register and use Scour to play the file.

Aldridge pointed to announcements this week that showed Windows Media being adopted by digital asset management companies to control and protect content. Partners such as Mediasite, Bulldog and Jaguar have built on top of Windows Media to help manage digital media for news organizations and pay-per-view systems. "We’ve developed great core technology that allows customers to build on top of that," said Aldridge.

Apple’s Absence

Phil Schiller, vice president of worldwide marketing for Apple, said DRM is "very, very important." But with RealNetworks’ announcement, Apple is the only major player not to have its own DRM solution. This may make QuickTime less attractive to content providers that want to make money with audio and video. "There are digital rights systems that work with QuickTime," said Schiller, pointing out SealedMedia as one such provider.

Schiller wasn’t convinced, however, that RealNetworks’ solution is the best way to go. "It’s important for the industry to have solutions that work with all," he said. "It’s still a wild, wild west for DRM and we need to have standards."

What Price DRM?

When Real’s Rotholtz sees Microsoft’s claims of 8 million secure transactions, he scoffs. "I would strongly question that number," he said, wondering what percentage of transactions actually generated some revenue. When asked what level of success RealNetworks would settle for, Rotholtz said, "Eight million transaction in 10 months? That’s pretty sad." He said that Microsoft, in the end, just wants to sell more copies of Windows. "We don’t have an agenda," he said.

But RealNetworks has yet to release information about how it intends to price the new RealSystem Media Commerce Suite. Rotholtz said to expect some pricing news in 30 to 60 days. But some clues are already emerging. Rotholtz said that although RealNetworks won’t act as a clearinghouse for transactions, companies will have "a relationship" with RealNetworks. "We’re in the water together," he said.

Ready to Pay?

DRM solutions are clearly beginning to mature, but are consumers ready to pay for audio and video content? Despite the big news by RealNetworks, consumers have shown they prefer to get their content for free — what’s often referred to as the "Napsterization" of society. Glaser said that RealNetworks’ GoldPass subscription service — which now has over 200,000 subscribers paying about $10 a month — is proof that users are willing to pay. GoldPass features premium content from the NBA, Major League Baseball, exclusive music and more.

Glaser said that a lack of DRM standards is what’s holding back a lot of content providers from going online. "A lot of content owners say, ‘Heck, I’ll just wait until next year or next month’," he said. According to Glaser, XMCL – the technology behind the Media Commerce Suite — will "fuel the availability of digital media and lower the cost of deployment because there’s no custom work to build a solution."

XMCL, Glaser said, will eventually be submitted to standards bodies like the W3C or the IETF for ratification. Glaser hopes to push XMCL as a standard "much like HTML was unleashed on the Web." He pointed out that RealNetworks has done similar things with SMIL and RTSP, now standards in the streaming industry. "It’s great for the industry and the spirit of collaboration," he said.

With a list of backers that includes technology companies and content owners (including IBM, Adobe, Sony, MGM Pictures, Intertrust, Sun and Starz Encore), RealNetworks is in direct competition with Xerox spin-off ContentGuard. ContentGuard is pushing for the XrML (eXtensible rights Markup Language) standard, with the help of Microsoft’s DRM technology. Partners backing XrML are Adobe, Xerox, Hewlett-Packard, Portal and others. It seems the competition between XrML and XMCL—and RealNetworks and Microsoft in the DRM space — is just beginning.