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RealNetworks Ambushes iPod/iTunes with Price War, Puts Gun to Apple's Head

RealNetworks Ambushes iPod/iTunes with Price War, Puts Gun to Apple's Head

RealNetworks, the company Apple won't talk to, put a gun to Apple's head Tuesday to force it to deal.

Since Apple won't negotiate, RealNetworks has set out to rustle its customers.

Real has already picked the lock on Apple's precious iPod, making it possible for the gizmo to play the songs that Real sells - which are no different and usually no differently priced than the songs that Apple sells - and freed iPod users from captivity to Apple's iTunes Music Store.

Now, in the name of giving people a choice, Real is selling its tunes at half price, 49 cents a pop - less than it costs Real to buy them - to stampede Apple's users into the Real corral. Most albums have been slashed to $4.99.

Real CEO Rob Glaser figures this so-called Freedom of Choice campaign, which could run through Labor Day weekend in early September, will be the biggest music sale ever, big enough to cost Real maybe a penny a share this quarter.

The widgetry making this little maneuver possible is a thing called RealPlayer 10.5 - the first RealNetworks products to include the controversial Harmony Technology that picks the lock on iPod.

RealPlayer plus Harmony means that people who use it to download tracks from the Real Music Store can play those tracks on a hundred portable devices, including all four generations of the iPod and the iPod mini.

Real trotted out the Harmony beta at the end of July to the protests of Apple, which branded Real a hacker and threatened it with Digital Millenium Act retribution and changes in its own iPod code that would make Harmony fail.

Tuesday Apple said nothing about taking Real to court but reiterated its threats to make iPod incompatible with Harmony.

Real describes Harmony as a DRM translation system, the first of its kind, supposedly developed in a clean room - a claim that may have stayed the hand of Apple's lawyers - that lets people transfer the music they bought from Real to just about any popular music player that uses Apple's cracked FairPlay protection technology, Microsoft's Windows Media Audio DRM or Real's own Helix DRM.

Glaser told the New York Times that he expects the cheap music push to make Apple realize that it should open up the iPod to tracks sold by competitive digital music services. Real won't make any money but Glaser is expecting to reap "residual benefits" and long-term "increase the odds the digital music world will operate the way the physical world will." He compares RealPlayer with Harmony to the way CDs and DVDs work.

The potentially massive giveaway has forced Real to revise its Q3 estimates and project a GAAP net loss of three cents-five cents a share. It previously figured it would only lose three cent-four cents a share.

The company still expects to reach profitability, excluding the cost of its antitrust litigation against Microsoft, by the end of this year.

Harmony will be available later this year in other Real music products, including its Rhapsody subscription service.

As part of the Freedom of Choice campaign, Real is launching a new Web-based community at www.freedomofmusicchoice.org to give consumers a place where they can air compatibility issues.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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