TMO Reports - Jobs Says Real Partnership "Not Worth It"

by , 5:15 PM EDT, April 22nd, 2004

In his first public comment since word surfaced that Real Networks would like to license Apple's FairPlay digital rights management technology in MP3 players, Apple CEO Steve Jobs told shareholders that such a partnership would not be in the best interest of the company and "doesn't make any business sense." More specifically, he said that expending the resources to insure iPod compatibility "just isn't worth the effort."

Mr. Jobs also said that "This is not the first request [RealNetworks CEO Rob Glaser] has made." Noting that RealNetworks operated a variety of businesses, Mr. Jobs said that Real's download service, Rhapsody, has been less than a success. He cited market share numbers from Nielsen SoundScan to say that Apple has some 70% of the legal download market, with the implication that Real's far smaller market share wasn't worth going after in terms of iPod sales.

Mr. Glaser had sent an e-mail to Steve Jobs asking for such an alliance, and for Apple to license FairPlay to Real for use in its own music download service. In return, Real would make the iPod the "primary" music player for its music services.

Word quickly came down that Steve Jobs had rejected the offer, but without any kind of details as to why. With the company coming under criticism for the closed nature of both the iPod and iTMS -- in addition to MP3s and AAC files that are not copy protected, the iPod supports downloads only from the iTMS, while iTMS downloads can be played only on computers or the iPod -- many thought Apple should work with companies like Real, especially in the face of increasing competition from Microsoft's Windows Media Player format (WMA).

Apple traditionally hosts a question and answer session during its annual shareholders meeting, held today at Apple's corporate headquarters in Cupertino, CA. While Steve Jobs and his executive team tend to be closed-mouthed about their decisions, and how they reached them, they are also known to open up, at least a bit, during the company's annual shareholder meeting. Such was the case today, as Steve Jobs responded directly to the shareholder question with details on why it was not going to work with RealNetworks.

For his part, Rob Glaser has been publicly exhorting Apple to open up the iPod. In a panel at NAB, Mr. Glaser compared Apple's business model on the iPod and iTMS to a Soviet model. CNet News reports that Mr. Glaser said "Apple's (market) share will go down if they continue to do this. The only way to presently put songs on an iPod is to (buy) them from iTunes. There is a good opportunity to say to Steve, 'You've done a good job of promoting this thing, but now one of two bad things will happen. One, Apple's market share will go down to its historical single-digit levels, or two, it will slow down the development of this market."

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