RealNetworks Files Antitrust Suit

Digital media company RealNetworks has filed a private antitrust lawsuit alleging that Microsoft violated U.S. and California antitrust and competition laws and harmed RealNetworks’ business. The filing, which seeks damages that could amount to US$1 billion or more, avoids certain pitfalls that caused an appeals court to throw out or leave undecided many aspects of the federal antitrust case brought by the U.S. Department of Justice (DoJ) and 19 states. As a consequence, this lawsuit presents the most serious legal threat to Microsoft in the United States since the company settled with AOL in June 2003.

A History of Competition

Founded by Microsoft alumnus Rob Glaser in 1994, RealNetworks (then called Progressive Networks) competes with Microsoft in a number of areas related to digital media, including media playback applications, streaming media servers, and media formats.

RealNetworks initially created a proprietary format, server software, and player to facilitate the use of “streaming audio”—audio files that play as they’re downloaded over a network, reducing the time users have to wait before hearing the file. RealNetworks subsequently offered other digital media products, including products for creating and playing streaming video, and for implementing digital rights management (DRM—a technology for controlling how digital media files may be copied and used). In Nov. 2001, RealNetworks launched RealOne, a subscription service that offers streaming video files, and in Apr. 2003 it bought Rhapsody, a subscription-based downloadable music store. Today, these two subscription services make up 70% of RealNetworks’ revenue.