RealNetworks claims lead in Web video

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May 29, 2000
Web posted at: 10:40 a.m. EDT (1440 GMT)

by Dominic Gates

(IDG) -- The Seattle-based market leader in digital media has launched an enhanced version of its technology, codeveloped with Intel, that can deliver VHS-quality streaming video to anyone with a cable modem or DSL. For higher-end DSL, the picture is full-screen size.

But the new offering -- RealSystem 8 -- represents only one piece of the technology necessary for quality Internet video. Distribution remains a major challenge.

"We're a ways away from a mass market of [streamed] full-length feature movies," says Doug Schulze, marketing VP for Seattle-based Loudeye, which digitizes audio and video content for both RealNetworks and its main rival, Microsoft.

Still, if the Internet is not quite ready for prime time, there's a music video of Christina Aguilera on the RealNetworks Web site that could make believers out of skeptics. However, depending on where you live, Christina might freeze midnote and remain in suspended animation while the dreaded "Net congestion · buffering" message appears in the status line.

When the Internet pipes unblock, the image quality -- viewed via regular cable access using the new RealPlayer 8 -- is movie-sharp and smooth, even when the screen edges are dragged out so that the picture fills half the screen. For anyone used to postage-stamp-size, pixelated Web video clips, it's an eye-opener.

But is this really a technology breakthrough? "Absolutely," says Schulze.

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RealSystem 8 uses Intel Streaming Web Video software to enhance both the user and broadcaster ends of an Internet video system. For the broadcaster, tweaks in the encoder that digitizes and compresses content enable simultaneous encoding at different bit rates, allowing efficient production of different versions of the content for the full range of viewers, from those using 56Kbps modems to broadband customers.

For the users, it's all about the image quality. The decoding and decompression end of the system, integrated into RealPlayer 8, uses new algorithms that improve picture quality and smooth out motion. Intel's tuning ensures that the pictures will look even better on computers running Pentium III chips.

RealSystem 8 promises full-screen VHS-quality at 500Kbps, a speed that few home users can achieve. However, RealNetworks claims half-screen VHS-quality at 300Kbps, which is run-of-the-mill speed for cable/DSL.

Unfortunately, heavy traffic on the Net can still turn a video into a slide show, irrespective of the quality of the encoding and compression technology. That's a problem addressed by companies such as Akamai, iBeam and a growing number of startups installing proprietary infrastructure.

"From a few routers away from the consumer, you can deliver a much better quality video," says Scott Ryan, CEO of Atlanta-based Incanta, a startup that distributes digital media.

Nevertheless, as the infrastructure grows apace, current cable and DSL users can glimpse the future of Internet video.

Loudeye's Schulze declined to make a direct comparison between RealSystem 8 and Microsoft's competing Windows Media Technology 7. Loudeye, founded by an ex-Microsoftie, partners with both RealNetworks and Microsoft, and the Redmond, Wash., software giant owns a small stake in Loudeye.

But for RealNetworks executives, the advance in their technology represents a leap away from Microsoft, which has been gaining ground in the sometimes bitter race to win the digital media market.

Microsoft says Windows Media Technology 7 will match RealSystem 8 and that it hopes to offer proof soon.

"There's nothing on the Net right now that's using our latest technology because it's still under development," said Kevin Unangst, group product manager for Microsoft's digital media division. He was responding to a request for a comparable quality video available on the Web now that uses Windows Media Technologies 7, a beta of which was released in early April. Unangst promises a direct comparison demo on Microsoft's Web site within days.

Whoever has the better technology -- and consumers will judge that for themselves -- the advent of high-quality video at lower data speeds could dramatically increase business opportunities for content providers.

"A year ago, it took 1,500Kbps to deliver VHS quality," says Ben Rotholtz, general manager of products and systems at RealNetworks. "Now it takes 500. You're getting the 'wow effect' at less and less bits."

Because providing more bandwidth into people's homes is an expensive undertaking, that's a significant development for the digital video industry overall.

The number of broadband subscribers in the U.S. has reached almost 3 million, so there's already an audience waiting to be served at 300-500Kbps. Music videos and short films could gain a broader following online, and although the net congestion problem places the concept of mass-market pay-per-view streamed movie features out of reach for the moment, it no longer seems futuristic.

When RealSystem 8 was launched in San Jose, Calif., movie director Francis Ford Coppola was on hand to offer his endorsement of the product, echo the company's PR sound bite that "RealNetworks has broken though the Internet's video barrier" and to gush about the wonders of a "new mass medium."

While RealNetworks clearly hopes to impress the Hollywood creative community, it is also targeting Hollywood business-types.

RealSystem 8 incorporates third-party software that adds commercial features aimed at generating revenue for Internet broadcasters and content providers. Also included in the system is software from Princeton Video Image that provides virtual video ads and interactive elements. That makes possible, for example, the insertion of ads behind the batter in video highlights of a baseball game, a concept similar to the controversial not-really-there CBS News ad behind Dan Rather during the New Year's Eve broadcast from Times Square.

Another commercial feature the new technology makes possible is support for computer-generated video ad technology from Israel-based RichFX (formerly WebGlide; RealNetworks took a 20 percent equity stake in the company last week), which produces ads that can run at lower bandwidths. The system also supports Macromedia Flash technology, allowing a page to cycle through a series of images, a feature that can be used to display products on e-commerce pages.

With these technologies, RealNetworks is straying into Microsoft territory, specifically the Internet Explorer browser, which supports all of these rich-media advertising technologies. For example, at the recent Victoria's Secret fashion show at the Cannes Film Festival, the Windows Media Player video stream was synchronized with the Web page so that the page changed to present items for sale in time with the pictures.

"This technology is in place and in use today," says Gary Schare, a Microsoft product manager at the Digital Media Division, dismissing the new RealPlayer e-commerce features as playing catch-up with the browser. In any case, he added, MIcrosoft hasn't seen any great demand for rich-media ads.

Clearly, RealNetworks is hoping that ad-business demand will follow from better quality video.

Before now, several small companies have been trying, without much luck, to get attention for their versions of low-bandwidth TV-quality video. (Notably New York-based On2.com and California-based Pixelon, which got plenty of negative attention when it crashed to earth in April, steered by a convicted felon.)

Now that the big players in digital media have stepped up, 3 million broadband customers are ready for that "wow effect."

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