RealNetworks Accuses Microsoft of Sabotage

Highlight from Senate hearings: CEO Robert Glaser claims Windows Media Player intentionally disables RealNetworks product.

Brian McWilliams, PC World News Radio

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"We don't want special treatment from the government. All we want is to be able to compete in an open environment in which our products win or lose based solely on their merits. Thus, it is with great personal sadness that I report that Microsoft is beginning to inject other factors into the dynamic, using its market power to unfairly impair free competition. Specifically, Microsoft recently released a new product called the Windows Media Player that, in many cases, breaks RealNetworks' products," said RealNetworks Chief Executive Officer Rob Glaser Thursday at the Senate Judiciary Committee's hearings on Competition in the Digital Age.

During Glaser's hour-long testimony, which opened today's hearings, he demonstrated his point by installing Microsoft's new Windows Media Player version 5.2 on a PC that was already running the latest version of RealNetworks' player. After installing the Windows Media Player, Glaser showed how accessing RealAudio and RealVideo clips generated cryptic error messages--clips that had played back just fine using RealNetworks' player before.

News Radio verified this claim on Thursday. Installing the Windows Media Player disabled both the G2 beta and RealSystem 5 players on a Windows 98 system. RealNetworks has posted a white paper at its site describing the issue.

During questioning from committee member Mike DeWine of Ohio, Glaser said his company first brought the issue to Microsoft's attention in May, when the Media Player was still in beta format.

"We had a series of conversations, one I vividly remember. Somebody from Microsoft said, 'We will basically be compatible with your products and we will do this with or without your cooperation,'" recalls Glaser. "On a technical matter, I don't really know what this means because our technology had a lot of advanced features and capabilities, but there certainly was the suggestion that we were being very strongly urged to cooperate. I think it means that Microsoft wanted their media player to be the standard media player into which we would plug in."

Glaser, a former Microsoft executive, said he was reluctant to accept Chair Orrin Hatch's invitation to appear before the Senate committee, in part because Microsoft owns a 10 percent stake in RealNetworks and has licensed its RealAudio 4 technology. But he said he was forced to go public because Microsoft plans to bundle the media player in future versions of Windows 98.

Hatch praised Glaser for coming forward, despite the risks for his company.

"I have no desire to mistreat Microsoft, but I'll tell you this, we're getting complaints from all over the place from people just like you who are suffering in ways that are similar to the way your company has been treated," said Hatch. "If they are going to have 90 percent control of the online operating system, make it interoperable for everybody so that competition is not stifled."

Microsoft Declined Invitation
Microsoft was invited to attend the hearings but declined. Spokesperson Adam Sohn on Thursday told News Radio that his company didn't intend to disable the RealPlayer, and that it has no desire to torpedo RealNetworks.

"We want them to be successful," he said. "We want consumers to have a choice of media players to play multimedia content. ... It was never anyone's intention to break any application. That's not how we do business. We never, have never, and will never intentionally attempt to disable someone else's application."

But Zona Research analyst Martin Marshall says there's only one possible excuse for Microsoft breaking software that was previously functioning.

"Microsoft gets paid a great deal of money to make these things work and make them simpler. It's a simple programming chore," asserted Marshall. "That's just decent respect for the end-user and the fact that they are not doing it has to come from a competitive motivation."

As we reported on Wednesday, Zona predicts that Microsoft's distribution advantages from bundling will make the Windows Media Player the dominant technology for streaming media by the end of 1999.

But RealNetworks President Bruce Jacobsen told News Radio that reports of his company's impeding demise are greatly exaggerated.

"We just announced a record quarter of $15 million, 115 percent year-to-year growth," he noted. "At this point we download more than 100,000 players a day from our Web site. That's faster than Windows 98, another very successful product, is being sold. Our challenge is to be innovative enough to add a bunch of bells and whistles to get some small fraction of people to pay us money. So we don't think we are going to be the road kill of bundling."

Nonetheless, Oracle Chief Executive Officer Larry Ellison, who testified after Glaser at Thursday's hearing, said the government must stop Microsoft and Chief Executive Officer Bill Gates from killing off industry innovation.

"If an innovative piece of software comes along, Microsoft copies it and makes it a part of Windows," said Ellison. "Bill calls this innovation. It is the opposite. It is the end of innovation. Bill made the Internet browser a part of Windows as a blatant attempt to destroy the Internet innovator Netscape. ... Bill plans to keep using this 'just add it to Windows' strategy to extend his monopoly into dozens of other software areas. ... Microsoft is already the most powerful company on earth. But you ain't seen nothing yet."

Tune in to PC World News Radio to hear today's news broadcast via RealAudio.

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