As a boy growing up in a middle-class New York suburb, Robert Glaser was a
rabid New York Mets fan. A numbers whiz who memorized large sections of the
3,000-page Baseball Encyclopedia, when anyone asked what he wanted to be when he
grew up, Glaser would say he planned to replace Mets announcer Lindsey Nelson.
"Robert always liked the underdog," says his mother.
Robert Denis Glaser |
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These days, Glaser is the underdog. The 39-year-old software entrepreneur
pioneered streaming media–technology that zips audio and video files over the
Web and allows people to view and hear them on their PCs. The Internet became a
multimedia affair. And Glaser’s RealNetworks turned into a dot-com darling,
rewarding him with a personal fortune of $5 billion when the stock was at its
peak in February, 2000. Real turned a modest profit of $6 million in 1999 and
nearly doubled its sales during the first half of 2000, but slackening demand
for the multimedia software and a falloff in advertising on its websites have
since taken their toll. Revenues slid 24%, to $47.9 million, in the quarter
ended June 30, and, since mid-2000, the company has lost $150 million and has
seen $14 million in market capitalization evaporate. On July 26, Real laid off
15% of its workforce. Today, Glaser’s stock is worth just $380 million.
It could get worse with chief rival, Microsoft planning to release its new
operating system, Windows XP. This is the software powerhouse’s most
aggressive move ever to supplant RealPlayer–the Real software that can be
loaded into PCs–as the leading source for audio and video on the Internet.
Click on a Web music file from the Start menu, load a CD, or tune into an online
radio station, and Windows Media Player launches to handle the task. Real has
cut deals with five of the seven top PC makers to have its playback software
included on their computers, but even when Real is an alternative, Microsoft’s
media player is easier to find on Windows XP screens and menus.
To Microsoft’s critics, this could be an instant replay of the way the
software giant vanquished Web-browser pioneer Netscape Communications.
Threatened by Netscape, Microsoft bundled its browser with Windows at no cost,
gradually taking over the market lead–until Netscape gave up and sold itself
to America Online. Microsoft’s enemies warn that unless the government acts
now, the company will have yet another monopoly. "They would have control
over the way music is digitized, the way digital music is played, and control
over the royalties," says AOL Time Warner executive VP Kenneth Lerer.
"We don’t think one player should own the market."
Microsoft scoffs at such an idea. The software giant says it intends to
become the No 1 streaming-media company. But it plans to get there on the back
of its technology, not by leveraging its operating system monopoly.
For former Microsoft executive Glaser, beating onetime mentor William Gates
III is a personal quest, not just a professional vocation. He vows that Real won’t
become the next Netscape. He has faced down the giant before, and he doesn’t
view the threat from Windows XP as being dramatically different from previous
bids by Microsoft to dislodge Real. Add to that the recent appeals court
decision–which found Microsoft violated antitrust laws by preventing computer
makers from adding its competitors’ software to Windows–and Glaser thinks he
has more than a fighting chance.
His is one of only a handful of companies that have taken Microsoft head-on,
and it is still winning. In July, more than twice as many home-PC users–29.8
million–used Real’s software to watch audio and video over the Web as used
Microsoft’s rival product, according to Nielsen/NetRatings. Worldwide, 215
million people have registered to use RealPlayer (most of them using basic, free
versions of the software), making RealPlayer ubiquitous among Web surfers. More
than half of the audio and video files on the Web are in Real’s format, making
it costly for websites to switch to Microsoft’s technology. "Real is the
dominant force in streaming media," says a Jupiter Media Metrix analyst.
"Don’t expect it to roll over."
Still, Glaser knows Microsoft can eventually outdo him if he has to fight it
out on the PC desktop. So he’s coming up with new offerings that take Real out
of the direct line of fire. A new RealPlayer due out this fall blends Real’s
media-playback technology with its RealJukebox, a program that stores and finds
favorite music and video files. At the same time, Glaser is trying to turn Real
into a media delivery company. Last fall, he introduced GoldPass, a subscription
service that gives users a souped-up media player as well as access to a wide
selection of music, round-the-clock videos from CBS’s Big Brother reality
show, and live baseball broadcasts. Already, more than 300,000 customers pay
$9.95 a month for the service.
This fall, he’ll launch MusicNet, an online music subscription service that
will use Real’s technology to provide access to the music catalogs of its
three partners, AOL Time Warner, EMI Group, and Bertelsmann. It’s a huge
opportunity. Jupiter Media Metrix expects subscription music sales to climb from
$29 million this year to $789 million in 2004. But analysts don’t expect Real
to pocket a big payoff anytime soon. "This is a grand experiment and we’re
cautious about it," they say.
Undeterred, Glaser envisions a time when consumers will be able to surf a sea
of channels on the Web, picking through television programs, movies, and music
to enjoy whatever they want, whenever they want it. While the slow adoption of
broadband connections to the home has delayed the fulfillment of his vision,
Glaser plans to have Real’s technology providing the foundation when such
connections are as common as cable TV is today.
For Glaser, anything short of total victory would be a failure. "We come
to win. That’s a core value in the culture," he says. Mark Cuban,
co-founder of Web media pioneer Broadcast.com and owner of the Dallas Mavericks,
says: "It’s a zero-sum game for Rob. He either wins or he loses
everything." That attitude helps explain Glaser’s edgy relationship with
Microsoft Chairman Gates. During his 10 years at Microsoft, Glaser prospered
under Gates’s tutelage. Now, even though some friends say Glaser still seeks
Gates’s approval, he’s determined to show the Microsoft chief who’s boss
in the streaming media realm. And he’s not afraid to criticize Gates. "I
don’t think I’d take an antitrust class from him," Glaser quips.
Yet Glaser’s toughest adversary may be himself. He is a demanding
taskmaster, and when he’s not pleased with results, frustration sometimes
boils over into angry outbursts. "Rob’s an absolute genius," says
one senior executive who left because of Glaser’s behavior. "But he’s
an incredibly difficult person to work with." Not infrequently, Glaser
belittles workers with streams of profanity when they don’t meet their goals.
And on a couple of occasions he has thrown full Diet Coke cans in the direction
of subordinates to express his displeasure.
His behavior has contributed to a high turnover rate among Real’s
management team. Recently, the company hired its third COO in four years, and it
is searching for its third CFO. In 1997, Real’s directors were so concerned
about turnover that they brought in a management consultant who worked with
Glaser to tone down his behavior.
Glaser says the meetings helped. These days, he tries to be more sensitive to
the effect he has on subordinates. Jim Breyer, a Real director and a venture
capitalist with Accel Partners, says Glaser’s management style has improved:
"He’s a better CEO today than he was five years ago." But it is not
clear that Glaser has changed substantially. Current and former Real executives
say outbursts are still commonplace. "Real has a dysfunctional internal
culture because of Rob," says ex-CTO Philip Rosedale, now the chief
executive of San Francisco’s Linden Labs, who still keeps in touch with Real
managers.
Glaser is an unusual mix of capitalist and liberal do-gooder. In fact, Real
began its life as Progressive Networks, a company that hoped to deliver socially
conscious programming over the Web. The company’s focus shifted when it became
apparent that the streaming-media technology that it had pioneered could become
a nifty business on its own. But Glaser wrote into the company’s prospectus
that 5% of its future profits would go to charities.
At times, it is an uneasy coexistence. Take recent layoffs. During his
student days at Yale University, Glaser had sided with unionized workers in
their disputes with the administration. Yet now he is the boss, and he decided
he had to do what was best for shareholders.
Glaser was raised from the cradle to care about social issues. His father ran
a small printing business in Yonkers, and his mother was a social worker. His
parents were political activists. As a 12-year-old, he handed out leaflets
supporting the United Farm Workers’ grape boycott. His parents sent him to the
Ethical Culture Fieldston School in Riverdale, NY, a K-12 school with a
humanistic curriculum.
Glaser’s academics carried him to Yale in 1979. Glaser graduated with three
degrees: a BA in computer science, another in economics, and a master’s in
economics.
Real Headaches |
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RealNetworks is the leading provider of software for audio and video delivery via the Net, with 215 million consumers signed on and more than 400,000 streaming-media computers within companies |
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True to form, he took the career path less traveled. After graduation, he
considered going to graduate school, working for tech-industry graybeard
Hewlett-Packard, or signing on with a little-known software company in Seattle
called Microsoft. His friends never expected him to choose Microsoft, but Glaser
told them about MS-DOS, the software program Microsoft made to run every PC.
Every time a personal computer is sold, Microsoft makes money, Glaser said. At
the same time, he told friends that he hoped that he could help progressives get
access to technology–the means of production in the Information Age. Glaser
packed his Toyota and headed west.
After a decade at Microsoft, Glaser was ready to build a company of his own.
In the fall of 1993, he hooked up with his college pal Halperin. The pair
dreamed big and came up with an idea of creating a culturally progressive media
company–something of a cross between MTV and the Public Broadcasting System.
But it quickly became clear that it was their technology, not their plan for a
new media company, that would get funding from investors.
From the beginning, Glaser knew that Microsoft would ultimately be his enemy.
But he tried to buy time. Real cut a deal with Microsoft to distribute its
RealAudio Player with every copy of Internet Explorer in 1996. Within a year,
Microsoft was beginning to recognize the potential of streaming media and
plunked down $75 million to buy Real competitor Vxtreme. Glaser quickly
persuaded Microsoft to pay $30 million to license Real’s audio and video
technology and embed it in the Windows Media Player alongside its own
technology. Eventually, Glaser thought, Microsoft would attack. But the longer
he held off the assault, the better chance Real had to survive it.
By the summer of 1998, though, it was a shooting war. Glaser was getting
reports that the latest version of Windows Media Player was automatically
replacing or disabling Real’s playback software. Just weeks earlier, the
government filed its antitrust case against Microsoft. Now, foes such as Senator
Orrin Hatch were eager to uncover more Microsoft transgressions. Hatch pressed
Glaser to testify at a Senate Judiciary Committee hearing.
It was perhaps the most difficult decision of Glaser’s life. While at
Microsoft, he had found a kindred spirit in founder Gates. The Microsoft
chairman hosted the bachelor party for Glaser’s first wedding. So when their
business relationship went sour, Glaser offered to talk things over with Gates
before he was to testify before Congress–hoping Microsoft would make changes
that would eliminate the technical problems with Real’s software. After a few
brief e-mail exchanges, Gates shot him down. "I’ve decided that it doesn’t
make sense for us to meet. I’m not very familiar with our relationship,"
Gates wrote.
Glaser was devastated. "I really wanted to resolve this situation
privately and amicably. And I lamented they weren’t able to," Glaser
says. Two weeks later, he put on a gray suit, marched up to Capitol Hill, and
said to a packed hearing room: "Microsoft is taking actions that create
obstacles to the freedom and openness of the Internet." Microsoft denied
the allegations, claiming the problems were caused by a bug in Real’s
software.
Glaser’s relations with Gates and Microsoft never recovered. Glaser tries
to shrug off the break. He acknowledges that he once looked up to Gates–"the
way you look at someone when you’re 21 and they’re 27 is that they seem like
Methuselah to you." But he insists that he’s over it. "I think I
look at the world pretty differently now," he says. His friends, though,
aren’t so sure. "Rob respects Bill almost more than anybody in the world–even
now," says college chum Rubin. While Glaser has since aligned himself with
the anti-Microsoft faction led by AOL and Sun Microsystems, people who know him
well say he still wishes he could regain Gates’s approval.
With the imminent arrival of Windows XP, Glaser’s relationship with
Microsoft is once again in the spotlight. This time, Glaser has the government
squarely behind him as the battle commences. Glaser says that since the
appellate court ruling, computer makers have become more open to installing Real’s
software on their PCs, although Real hasn’t inked any new deals yet.
Those agreements will be critical for Glaser to prevent momentum swinging
over to Microsoft. And this would be a particularly inopportune time for Real to
lose its grip on the market. The potential for delivering video and music on the
Web has just begun to be realized. But broadband has been slow to develop, and
that has stunted Real’s growth
All the more reason for Glaser to forge into new businesses. Fortunately for
him, he has a knack for spotting opportunities before others do. With GoldPass,
he has built a rapidly growing subscription business on the Web. And it was
Glaser who had the idea–and the skills–to broker the deal with three
fiercely competitive recording labels to launch MusicNet, potentially one of the
most promising new Net businesses. "Rob was so smart that he could bridge
the different interests," says Thomas Middelhoff, CEO of Bertelsmann, one
of the partners.
The odds may be stacked against Glaser. With the economy foundering and
Microsoft breathing down his neck, he’s facing his biggest challenge to date.
If worse comes to worst, he could follow the Netscape strategy and turn to AOL
to buy the company, but Glaser doesn’t expect to need a bailout. Like his
boyhood heroes, the Mets, he thrives when competitors underestimate him. And
Glaser just might be able to pull off a bit of a miracle, too.
By Jay Greene with Steve Hamm in New York and Jack Ewing in
Frankfurt in BusinessWeek. Copyright 2001 by The McGraw-Hill Companies, Inc