Disclaimer: just because I used to work for Real and now work for Microsoft doesn’t mean I actually know anything. In this case, I don’t, so I’m just offering speculation. It’s educated, but likely wrong.
As seen pretty much everywhere, Microsoft has agreed to settle with RealNetworks over Real’s anti-trust suit. Some interesting tidbits:
- $460 million cash money. So Real’s balance sheet goes from $263MM ($363M - $100MM debt) to $743MM… that’s almost triple!
- $301 million in cash and services. As near as I can tell, this means Microsoft advertises and includes Real stuff (which means Rhapsody) and gets a bounty for every subscriber Microsoft sends to Real. Presumably, there’s a minimum number of new subscribers per epoch, otherwise Microsoft coughs up more cash for that epoch.
Here’s another fun bit from the AP article:
Among other agreements, Microsoft’s MSN online unit will feature RealNetworks’ Rhapsody music subscription service on its MSN Music download site. It also will provide links in its MSN Search results that let people listen to songs through Rhapsody.
RealNetworks also will take steps to support Microsoft’s MSN Search, and the companies agreed to jointly promote use of Windows Media technologies with Rhapsody To Go, a music subscription services for portable devices.
Right now, say you do a search for Miles Davis on MSN. You’ll get an Instant Answer blurb about him. Presumably, this means you’ll see Rhapsody stuff there soon. It also means on Rhapsody, you’ll likely see some gateways to MSN Search.
Analysis, speculation, and wild guesses time:
- This is great for all the Real employees that stuck it out. If you’re an old-timer, Real did a stock option buy-back where the strike price was $7.22. Now, all those options for all those employees are above water! Granted, like $0.50 above water, and they could sink fast, but it’s better than hovering between $5 and $6 as it has for the past five years.
- This is the lottery for all the hired guns Real brought on in the past five years. Real has hired a bunch of folks lately, including some well paid execs and almost-execs, who are now liquid. Life isn’t fair, and timing is everything.
- RIP RealPlayer. OK, this is just a guess on my part, but at the end of the day, I think the Real format is dead, and Real is slowly but surely going to have to admit that. Nobody cares about formats, they just care about their music. Promoting Windows Media for portable Rhapsody To Go is the first step. That Cingular deal Real got may also turn positive for Microsoft (just a wild guess there).
- Real has no more excuses for failure. For a long time, Real has been griping that bad old Microsoft was the cause of its financial underperformance… I know a number of people, myself included, that would say at least part of the blame is on sub-par products. I won’t point out specifics, but I’ll just say that if you’re standing up against Microsoft, and the SlashDot crowd hates you, then you might be doing something wrong. With Microsoft no longer playing the Big Bad Wolf, Real is going to be forced to make good products… hopefully, this means some people will actually get back to writing specs and thinking about the end-to-end experience and what’s best for the customer, versus just hacking something out on a deadline.
- And the big one… Microsoft and Real have both realized that nobody gives a crap about either of them in the music space. The real business of streaming media is being able to sell streaming media. People aren’t going to buy players, and really they aren’t going to by servers or converters either. That’s commodity stuff nowadays. So you gotta sell music. The problem is, the only one selling music right now is Apple, because iPods are sexy, and everything else isn’t. So it’s time to join forces and hope that it isn’t too late to get into the game. Gonna be interesting for a few years I think!