AOL 9.0 Represents Streaming Sea Change

ANALYSIS: America Online’s latest desktop software version 9.0
came out in beta this week, and the advances in its own Winamp multimedia
player have some industry players convinced that its partnership with media
player RealNetworks is in decline.

As testers poke through the beta and pore over the advanced version of
the Winamp media player from AOL’s Nullsoft division, they say that Real’s
technology is hard to find.

But a person familiar with AOL’s plans disputed the speculation,
insisting that the company’s in-house media player — dubbed AOL Media
Player — includes support for all the major media player formats such as
RealNetworks, Microsoft’s Windows Media Series 9 and Apple’s QuickTime.
Those formats will work alongside AOL’s own proprietary streaming formats,
such as .NSV.

The company’s strategy is and has always been to make the media player effortless
for the consumers, this person said of the AOL Media Player built into
version 9.0. With AOL 9.0, the media player plays the widest variety of
content, and no one player format is getting pushed aside, the source said.

Lisa Amore, a spokesperson for RealNetworks, said the company’s
technology enjoys the same prominent placement in the upcoming 9.0 version
as it did in AOL 8.0, which defaults to the RealPlayer when an AOL
subscriber launches certain audio or video files. Amore said the 9.0 upgrade
automatically detects the RealPlayer that is installed in prior versions of
the AOL service and upgrades the RealPlayer as well.

An AOL spokesperson declined to comment on the beta version, and on
how extensively RealNetworks’ technology is being deployed in AOL 9.0.

However, Doug McIntyre, CEO of video compression technology firm On2
Technologies , confirmed that the company’s VP5 codec, which
AOL licensed
in April
, is being deployed extensively in AOL’s player.

“As far as we know, this is the first time we’ve seen it deployed,”
McIntyre told

Licensing terms of the On2 deal let AOL distribute certain products and
services to its subscribers that contain VP5 and VP6 encoders and decoders.
It allows AOL to use the codecs on PCs and even on gaming and wireless
devices, making it a safe bet that On2’s codec has been fitted into the AOL
Media Player to speed up video compression.

Since AOL began investing in building its own end-to-end multimedia
player based on Nullsoft’s Winamp technology, industry players have been
watching to see how AOL’s relationship with RealNetworks would play out.

Real’s success with its fee-based RealOne service, which serves up a
variety of content from various content providers, including AOL Time
Warners’ CNN and other media divisions, increasingly places it in
competition with AOL’s own broadband subscription service, which also hawks
an array of exclusive content and services to AOL subscribers.

The question about how AOL will manage its relationship with Real isn’t
new. The talk started building well over a year ago, following a report in
Fortune magazine (which is part of AOL Time Warner) that
examined AOL’s efforts to build its own end-to-end audio and video streaming

But another person familiar with AOL disputed that the company is
distancing itself from RealNetworks. In some cases, AOL’s broadband service
does compete with the RealOne service, the person said, but in other cases,
Real’s technology is deployed in a variety of services.

Separately, AOL has created its own content-streaming technology for
audio and video formats that works well on both dial-up accounts and on its
broadband service. The distinction is key to the company’s strategy of
growing its broadband subscription base while, at the same time, offering
broadband-like audio and video to its eroding dial-up base.

But the latest advances with AOL’s Media Player signal that AOL
is making sure that it is not completely beholden to one media player
format. In the wake of the recent $750 million
of AOL Time Warner’s lawsuit against Microsoft over its
bundling strategy that stifled AOL’s Netscape browser, AOL Time Warner
has a seven-year licensing agreement to use Microsoft’s Windows Media Player
in upcoming media services.

That may help explain why the company is making sure that its own player
becomes increasingly agnostic to different and often frustrating
player formats that online media consumers have to contend with.

The online division of AOL Time Warner is expected to
roll out AOL Media Player as part of its 9.0 version later this year.

Updates prior version

* Ryan Naraine contributed to this report.

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