TiVo Adds RealOne Media Player to its DVRs

The convergence of home entertainment and technology continued on a strong note Tuesday at the 2002 international Consumer
Electronics Show in Las Vegas as San Jose, Calif.’s TiVo Inc. and Seattle’s RealNetworks Inc. penned a deal that will grant the top digital video recorder (DVR) service provider’s customers access to music,
streaming video and other digital content through RealOne Player and RealOne Music.

In the multi-year agreement, for which financial terms were not disclosed, RealOne Player — the latest incarnation of RealNetworks’
vaunted media player — will be added to TiVo’s new Series2 DVR, where it will sit as the default digital music management software for
TiVo subscribers. TiVO, with a subscriber base of about 280,000, hopes to hook new users with Series2, which offers up to 60 hours of recording time. This will be available to consumers beginning in February 2002 for $399.

How does this add value for consumers? Rather than have a separate piece of hardware to play audio, consumers will be able to manage
music and other digital offerings from one central location — the DVR, which presumably sits atop their television. In addition to
having access to some 10,000 tunes from RealNetworks’ digital library, TiVO customers may copy their CD collections from an external
CD drive or a PC onto the TiVo DVR hard drive; download music through RealOne Music; manage their music collection by remote control
on their TVs; transfer music onto portable devices and burn audio CDs through an external CD-R drive.

Payment plans vary. In one, TiVo users may activate the RealOne Player for an incremental monthly subscription fee when they
activate the TiVo Service; the outfit will also offer consumers a subscription to RealOne Music, enabling them to download and
stream tracks via the MusicNet platform.

Larry Jacobson, president and COO of RealNetworks, summed up the import of the deal: “TiVo redefined its customers’ relationship
with television. Now with RealOne Player TiVo customers will be able to access the Internet and manage their music from one
location, their TiVo DVR.”

The RealNetworks/TiVo deal is slated to reach fruition for consumers in the second half of 2002. As part of the agreement, consumer
electronics and other OEM licensees of TiVo’s DVR service and technology will have access to the embedded RealOne Player and the
RealOne Music service.

With a bear market for hardware, DVRs, unlike DVD players, have yet to enjoy significant adoption (the DVR sector is far more
nascent). According to an August survey by the Consumer Electronics Association, DVRs have been
described as one of the catalysts that will transform the way Americans watch TV, although sales have yet to meet initial

“At this point, we’ve yet to see a huge boom in the DVR market primarily because the recording needs of consumers are still being
met by the VCR,” said Todd Thibodeaux, vice president of market research for CEA. “But the strong interest in DVRs is certainly a
promising sign of things to come. As the shift from analog to digital continues, the possibility of combining DVRs with other
products, such as DVD or satellite set-top boxes, would be a good way to provide consumers with the DVR functions they clearly want
with the added benefit of other useful digital technologies.”

The desire to drive digital exists as digital TV products enjoyed a strong holiday season, according to CEA. A recent report
revealed that November unit sales totaled 195,914, which is a 105 percent increase over unit sales in November 2000. Dollar sales
last month exceeded 346 million – an 82 percent jump from the same period in 2000.

In related news, RealNetworks’ main competitor on the home entertainment media front would be Microsoft Corp., which announced some additions to its own DVR service, UltimateTV. Sprucing up the mix are satellite Remote Record, which allows UltimateTV subscribers to set their DIRECTV Receiver with UltimateTV service to record while they’re away; UltimateTV Movies, which simplifies the process of finding and recording favorite movies on the DIRECTV service; and Auto Record, in which UltimateTV automatically records programs set to subscriber preferences.

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