Tech Talk—RealNetworks Chief Draws Crowd at Tech Pow Wow

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How do you get L.A.’s top media company executives, venture capitalists, investment bankers, entertainment lawyers and talent agents in one room and seize their attention?

You bring them a new media executive from Seattle.

This is not a joke.

Last week, the promise of a breakfast chat with Rob Glaser, CEO of RealNetworks Inc., the Seattle-based digital media company, brought a group of Tinseltown’s new-media elite to the Four Seasons Hotel.

Among Glaser’s rapt audience were Barry Porter of Clarity Partners, attorney Howard Weitzman, Intertainer Inc. CEO Richard Baskin, talent agents from William Morris Agency Inc. and Endeavor Agency LLC, David Cremin of Zone Ventures, AOL Time Warner exec Peter Sheil, Kevin Wall of Shelter Ventures, iFilm Corp. CEO Kevin Wendle, Lynda Keeler of Redleaf Group and Brian Wong of Bear Stearns Cos.

All the fuss about a public tech company with no profit, declining revenues and a stock value that has tanked seems like an affront to the back-to-basics, show-me-the-money mentality that prevails in the local investment community today.

But there is something about Glaser, the former Microsoft Corp. exec who is bravely taking on his former boss and trying to make money for content owners.

“We’ve seen a lot of silliness, and when someone serious comes along with a piece of the puzzle already figured out, this town pays attention,” said Dennis Miller, general partner with Constellation Ventures and host of the breakfast. “(Glaser) has a very strong, working understanding of how media dynamics work. He’s not wild-eyed about Hollywood. He’s thoughtful about where the tensions are and sober about consumer uptake.”

Miller said that RealNetworks’ “differentiated content strategy” is of interest to the local crowd, which he describes as “people who have a strong interest in how technology platforms are going to use content to build businesses.”

One of those people, Shelter’s Kevin Wall, said the enthusiasm was less about the business model or RealNetworks’ stock value and more about Glaser’s take on Hollywood.

“It’s difficult to find executives from the tech sector who have a deep understanding of the content-relationship market in which we live here in L.A.,” he said. “There’s a huge disconnect, but he has a handle on the nuances of trying to do business in this town. It’s a company that’s going to increasingly embrace what this city does, which is create product that gets monetized across a number of different platforms.”

There is no doubt that compelling content will sell on digital platforms, Glaser said, especially when the Internet architecture gets up to speed.

“Then it can propagate in all kinds of ways and give users more personal control over entertainment,” he said.

RealNetworks’ RealPlayer, a downloading service, already has 200 million registered users, Glaser said.

But a critical mass of support from content owners is still necessary. Earlier this month, Glaser managed to form a joint venture with AOL Time Warner, Bertelsmann AG and EMI to create a subscription service called MusicNet. Details of the post-Napster business model haven’t been disclosed, and Glaser didn’t discuss it during his April 24 talk.

Glaser also discussed recent deals with the National Basketball Association and Major League Baseball, which made RealNetworks the exclusive platform for a range of online services.

For some at the Four Seasons last week, the breakfast with Glaser was like a ring-side seat at the fights.

“A lot of people love the fact that (RealNetworks) is head to head with Microsoft,” said Frank Creer, managing director of Zone Ventures. “Nobody wants Microsoft to have free play in the market. There’s a suppressed psychological need to have a competitor to Microsoft, and we’re willing to pay cash to see it happen.”

Does Glaser stand a chance against Bill Gates?

“You can’t argue with the fact that they’re in a space that’s growing,” Creer said. “The adoption curve just hasn’t caught up yet. So we’ll let Microsoft and Real slug it out in what we all know is going to be a market. At some point, it’s like going to Vegas and betting on the fights.”


Increasing Users, Revenues, Losses

Taking Hollywood online has been problematic for local Net companies, but taking the real estate business online has been a boon for Homestore.com Inc. Its success with online advertising suggests that bricks-and-mortar companies have not lost faith in the medium.

Homestore last week reported strong revenue growth for the first quarter ended March 31, and CEO Stuart Wolff said the company expects to see “strong, steady growth” through 2001.

The Westlake Village-based company reported a net loss of $67.1 million (71 cents per share) for the first quarter, compared to a net loss of $29.2 million (39 cents per share) for the like year-earlier quarter.

Its first quarter revenues were $105.5 million, up from $38.6 million in the like year-earlier quarter.

The earnings announcement comes on the heels of Homestore’s February acquisition of Move.com, which had been a unit of Cendant Corp. That acquisition expanded Homestore’s national lead in the online real estate business.

Wolff said the acquisition of Move.com would start adding to revenue and earnings in the second quarter of 2001.

On a pro forma basis, Homestore’s advertising sales increased to $42.6 million in the first quarter, up from $37.9 million in the fourth quarter of 2000. Ad sales accounted for 36 percent of Homestore’s total revenue in the period.

The number of real estate professionals who subscribe to Homestore’s services rose to 359,000, up from 184,000 in the previous quarter.

Staff reporter Hans Ibold can be reached by phone at (323) 549-5225 ext. 230 or [email protected].

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