RealNetworks Strategies and Planning By Margaret Johnston RealNetworks

RealNetworks Three Businesses in One 3 Product lines: Players Servers, Tools Three Businesses in One For Content Producers For Consumers 5 Web Properties Broadcasting Services

RealNetworks’ Mission Short Term To produce the best Internet media software technologies Long Term To own the software media delivery system market All media, including TV & Radio, will run on RealSystem technology

Recent New Developments Microsoft divestiture Release of G2 Gold, Update 1 and Update 2 RealJukebox release, MP3 player Purchase of Xing New Competitive Pressures WMP 6.0 - “better quality audio” QuickTime 4.0 - “streaming media with free server”

Changing Market Conditions High-bandwidth solutions coming online ADSL and cable modems provide higher quality video and audio, making RealPlayer more valuable Won’t have critical mass until late 2000, due to infrastruction constraints Microsoft investing in ADSL market space MP3 market growing - but little support from record companies Media appliances like Web TV becoming more prominant

Real JukeBox Jae Kim, an analyst at Paul Kagan & Associates, says, "This is going to do to digital music what Windows did to DOS-based computing. It takes [digital music] out of the hands of enthusiasts and into the hands of the mass market." Mark Hardie, an analyst at Forrester Research who predicts that digital music downloading will be a billion-dollar business within five years, goes even further. "It is a significant step toward leading consumers to digital consumption of music — buying and listening to it on digital devices.” Real Jukebox

Music Player Positioning Map Value to Consumer wanting Music Playback SSpinner RRealPlayer (free) LOW USER COST FREE HIGH PRICE User Cost* RRealPlayer Plus QQT 4 WWMP 6.0 WWimAmp (MP3) TTaiko QQT Pro 4

News Player Positioning Map Value to Consumer wanting News Playback WWMP 6.0 QQT 4 LOW USER COST FREE HIGH PRICE RRealPlayer (free) RRealPlayer Plus QQT Pro 4

New Strategic Questions Can’t rely on press to promote Real products, can’t rely on content providers to promote free player - is advertising necessary? How can we stop Server customers from switching to NetShow? How can we grow the RealPlayer business? How should we position RealJukebox relative to RealPlayer? Same customers or different? Same Web pages or different? Sames subscriptions program or different? Is becoming profitable necessary this year in order to satisfy stock holders? How can we keep up with new set-top box technologies?

RealNetworks’ Strategy On Server/tools front, compete on advanced features and cross-platform support New Ad server features New 3D text data type IP multicasting On Player front, compete on access-to-content RealChannels and Presets Search RealGuide On MP3 player front, provide the most complete solution for consumers and partner with Music companies Build distribution partnerships: Lotus, Sun, Netscape, AOL, PC OEM, ISPs. Build technolgy partnerships: Intel, Spinner, Lotus, Sun Explore new opportunities one by one

International Expansion Feb 15, released new localized players in 6 languages Added new international RealChannels Adding new regional management staff Concerns Localizing every release is expensive - but server customers want this Not enough regional staff to drive player promotions

Final Thoughts RealNetworks is by far the market leader for Internet media players RealNetworks is also functioning in a market where there are no obvious strategic choices New technology trends like MP3, ADSL, and set-top boxes are cropping up everywhere What makes us successful is that we’re really good at knowing the trends and picking the right projects. Always staying a step ahead of our competitors Rob Glaser Clip