It's official: RealNetworks to compete with iTunes

Net multimedia company RealNetworks plans to announce a sweeping overhaul of its digital and video software today, along with a digital song store aimed at competing with Apple Computer's leading iTunes service.

The latest entry in an increasingly crowded digital download market, Real is betting that the flexibility of its music-playing software will distinguish it from rival stores and software packages. To this end, the company said it has created a jukebox that will play all the media formats used by its own and other song stores - including secure downloads from the iTunes store.

Real showed off a beta, or test, version of the download service to reporters in advance of the official announcement, set to take place today at the Consumer Electronics Show in Las Vegas.

RealNetworks' song store, built directly into its RealPlayer software, is similar in price and breadth to its rivals, offering 99-cent downloads and a growing catalogue of about 300,000 songs, although a 10-day promotion will offer 10-cent songs to new listeners.

Analysts acknowledged that Real faces stiff competition from Apple, Napster and others. But they say the company's one-player-fits-all approach is a welcome innovation in a crowded and often confusing field, and could point the way toward smoothing over if not eliminating incompatibilities between song formats, software programs and portable players.

"The pan-player capability is pretty cool," said Mike McGuire, an analyst with GartnerG2, a division of the Gartner research firm. "We're seeing some very important steps toward... hiding some of the complexities. The mass of consumers couldn't care less about the underlying technology."

The announcement, which comes almost 10 years after RealNetworks launched its first net audio software, marks the company's biggest technological overhaul in several years. Coupled with the anti-trust lawsuit filed against Microsoft late last year, the releases are aimed at winning back momentum in the multimedia business that had been slipping toward Microsoft and Apple.

Microsoft is far ahead in winning support from device makers and rival music stores for its Windows Media format, used by Napster, Musicmatch, Wal-Mart and others. Apple's iTunes store, by contrast, has sold more than 30 million songs, or about 70 per cent of the total legal digital music market, according to Nielsen Netratings.

On the audio front, Real is substantially updating its technology in several ways. Songs sold in the music store will be distributed in the Advanced Audio Coding (AAC) format, an open standard developed by the Moving Picture Experts Group (MPEG), rather than a proprietary RealNetworks format. However, they'll be wrapped in RealNetworks own Helix digital rights management technology, which will limit the number of players or other software applications they can be used in.

The move away from its own technology isn't entirely new. Some previous download applications, including the partially RealNetworks-owned MusicNet service, had used Sony's ATRAC 3 format instead of an in-house version.

The company is also releasing a multichannel version of its RealAudio codec that can support features such as 5.1 channel audio for DVDs, and a new high-quality version of its in-house format. The entire package is being dubbed RealAudio 10.

A new video format called RealVideo 10, which the company says improves the efficiency of past products by about 30 per cent, is also part of the release. Using the new format, service providers will be able to stream DVD-quality video on connections averaging about 1Mbps or well within the high end of cable modem subscribers' bandwidth availabilities, the company said.

"We think the legal online distribution of movies is going to be a big business sooner than a lot of people think," said RealNetworks senior VP of marketing Dan Sheehan. "With today's bandwidth via broadband, that can be a reality."

The Real player itself has also been substantially revised, adding more personalisation features, the ability to transfer songs to MP3 players including the iPod, and the support for new formats, including the Apple iTunes-purchased songs.

That feature is likely to prove controversial. However, RealNetworks says it has tapped into the workings of Apple's well-publicised QuickTime technology, without any need to break through the digital rights management features which protect iTunes songs against unauthorised distribution.

Instead, the RealNetworks essentially triggers the QuickTime and iTunes content-authorisation process in the background, instead of breaking through it. That means that a computer must already have iTunes installed, and be authorised to play a given song, in order for the iTunes song to play in RealNetworks' software.

"We don't believe in violating digital rights management," said Ryc Brownigg, general manager of RealNetworks' consumer products. "We work with copyright holders, and we make digital rights management software ourselves."

Apple did not immediately comment on RealNetworks' iTunes support.

John Borland writes for CNET News.com.