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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

December 16, 2010 at 9:39 AM

RealNetworks CEO on Unifi, restructuring and more

RealNetworks’ business has zigged and zagged so many times in its 15-year history that it’s hard to get too worked up about the company’s latest restructuring.

But after spending an hour with Bob Kimball, the former company lawyer who took over as chief executive last January, I think I understand where the company’s now heading.

It’s also getting interesting again, but for different reasons.

The 1,400-employee Seattle company is no longer revolving around a streaming-media player and feuding with Microsoft and Apple.

Real is rebuilding and morphing into a hybrid. It still offers RealPlayer and other media products to consumers, but it’s making most of its money providing software and services to mobile-phone companies.

More than half its revenue now comes from about 90 carriers around the world.

This isn’t as glamorous as the early days, when Real was one of the biggest names in digital music and video. That’s now ancient history.

But I wouldn’t write Real off. There’s a long tradition of Seattle companies quietly building big businesses that provide technology to phone companies.

Netflix, YouTube and Hulu may be the big consumer brands in streaming video. But Real’s now powering the on-demand video services that Verizon and AT&T offer to their mobile customers.

Real is also sending about 1.6 billion text messages per day for wireless companies, routing them through servers in Seattle.

The company also makes money from RealPlayer and plans to make more from a new online-media-handling service called Unifi, which it’s launching in early 2011.

Unifi will collect and catalog users’ music, photos and videos and store them online, where they can be streamed to phones, computers and other devices.

It will also reflect the new RealNetworks.

It’s a consumer service that Real will offer directly. But Real is also offering the service to mobile-phone companies.

Real’s big advantage nowadays is being able to offer digital-media products that reach both sides of the market, said Kimball, 46.

“Very few companies have that kind of heavyweight carrier-grade service plus a huge consumer channel,” he said. “Finding the right products that can be sold through both channels is a unique advantage that RealNetworks has and we want to take advantage of that.”

Here are edited excerpts of my interview:

Q: Where are you in the restructuring process – are you almost done?

A: I really do feel like we have the lion’s share behind us and plan to finish the remaining work in the first half of 2011. I want to get to the point where we can simply say we have the right size and shape, operational structure for the business we have and foresee growing over time.

Q: Which products will grow in 2011?

A: If you look at the games business, we have a very nice footprint in casual games. We’ve got strength really in online, download, mobile and we’re starting to grow in social [gaming] … that’s an area where we can get some decent growth in the core business in 2011.

I also think that where we are in the software-as-services business to carriers is a good place to be. Carriers are really driving a lot of usage and a lot of new and different media experiences for consumers.

Q: Are you still going to spin off the games business?

A: We don’t want to separate it until we have it ideally positioned for the kind of growth and potential that business has. So, yes, the long-term goal is still to separate but I’m in no rush because it’s a good business, it’s a quality business, and I’d like to get that business into a sequential-growth profile before really looking at separating.

Q: The carrier business, could that be separated? Could you spin off everything?

A: Well, anything’s possible in theory. Our focus is really on trying to get the most leverage for the combined set of assets we have. There is value in having, for example, this combination of a strong carrier channel with over 90 carriers worldwide, plus a strong direct to consumer channel with our games business and RealPlayer business. It enables us to sell products like Unifi … through both channels.

Q: I didn’t realize Unifi would be sold through carriers.

A: We absolutely plan to sell that through carriers. They’re very excited about what it can do for them in terms of subscribers, churn, keeping them relevant in the media space.

Q: Do you have regrets about spinning off Rhapsody [music service] in April? It would seem to fit well with Unifi.

A: Personally, yes, it’s very sad for me to see them leave. On a business level, no, that was absolutely the right decision for the business to simplify what we’re doing and focus on what we do best.

Q: Are carriers looking at Unifi as an alternative to iTunes and Windows Media Player and Zune services?

A: I think they like this idea of having something that’s universal and supports multiple, different clients. This is going to work whether you’re an iTunes user or Android user.

Q: Do people know Real’s doing these carrier services?

A: I happen to know they don’t because I’ve just come from several weeks of traveling around the country and meeting with investors and press, talking about RealNetworks. It’s amazing how often it comes as a surprise to people that the RealPlayer’s not actually our biggest revenue stream, it’s carrier service — white label carrier services.

Q: There’s a lot of focus on streaming video. Real was going there 15 years ago.

A: It’s often been a company literally ahead of its time. One of the things we need to figure out is how to capitalize on being first to markets that are still nascent. I feel like there have been situations where we were first in line but didn’t end up with the big business win in the long run. We’ve got to find a way to change that so when our innovation gets us first to market, we hold that position as the market grows and becomes significant.

Q: So what happened? Why aren’t you Hulu today, or Netflix?

A: That’s a deep historical look … where at this point I’m trying to get the company looking forward. It’s really time for the business to look over the horizon into the future.

Comments | Topics: bob kimball, Digital media, digital media

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