Steve Jobs Declines RealNetworks' FairPlay Licensing Offer

by , 9:00 AM EDT, April 16th, 2004

Rob Glaser, CEO of RealNetworks, wanted to talk to Steve Jobs about an online music alliance, but Steve Jobs would have none of it, according to an article at CBS Marketwatch. The New York Times reported yesterday that Mr. Glaser was looking to license Apple's FairPlay DRM scheme for use in Real's own digital music download service. In exchange, Real Networks would have made the iPod the primary music player on its own download services. CBS Marketwatch is reporting that Real executives have said that Mr. Jobs rebuffed the offer, even refusing to meet with Mr. Glaser. From CBS Marketwatch:

Seattle-based RealNetworks said Thursday that Apple chairman Steve Jobs had rebuffed an offer by RealNetworks' chief executive Rob Glaser to meet and discuss forming an online music alliance involving Apple's best-selling iPod portable players.

"He's in the neighborhood, but whatever meeting Rob wanted with Steve isn't happening," RealNetworks spokesman Greg Chiemingo said Thursday. "Steve just doesn't want to open the iPod, and we don't understand that."

Executives at Cupertino-based Apple declined to comment.

There's more information in full article at CBS Marketwatch.

The Mac Observer Spin:

We are hardly privy to the behind-the-scenes goings on at Apple, but we think it is foolish of Apple not to reach out to other partners. The time to exploit Apple's dominance in the music download business, as well as in the music player business, is now.

When you are on top, as Apple is, and you are pursuing a go-it-alone approach, the only place to go is down. That has always been the case. The market eventually rallies around whatever "standard" is competing with the go-it-alone technology, even if it is inferior. VHS/Betamax, DOS/Apple II, Windows/Macintosh, and so far WMA/QucikTime are all excellent examples of the standard, or at least licensable technology, beating the proprietary one.

Note that this situation is very different from the computer business, where Apple has significant advantages in controlling the whole widget, the hardware and the software. The music delivery and music player businesses don't have the same complexities as the computer business does, making comparisons between the two not applicable. The time for licensing the Mac OS is long gone, but the time to license FairPlay and iPod is at hand.

We can't argue with the initial success that Apple achieved with a locked down music player/music download business; but once a company has excelled with that strategy, it is best to leverage those gains by bringing on partners. Perhaps Apple is doing so, and indeed, HP is the first and only company to be so signed, and perhaps Steve Jobs considers Real to be headed up by bozos; from our vantage point, however, we think that Real would have made a fantastic ally against Microsoft and the WMA juggernaut.

We would also have been delighted had Apple made an offer to buy RealNetworks. Such a deal would land Apple major content delivery contracts that are not only lucrative, many of them could be migrated to QuickTime. That would be a huge market share grab for Apple, but then it was just this week that Apple CFO Fred Anderson explained that Apple wasn't interested in market share.

CBS Marketwatch