LU: What about the impact of Window Media Player 9 Series?
RG: My sense is, it's actually kind of an interesting dynamic. Microsoft, for reasons that I don't understand—but I welcome—seems to be trying to cram a proprietary Microsoft-only agenda down the throat of the entire consumer electronics industry, and the entire mobile industry, and the entire media industry. We had a booth at NAB last week showing our player working on mobile phones that support mobile standards like 3GPP. We also showed our player supporting MP3 and MPEG4 and RealAudio and RealVideo. We give people a choice between the unique advantage of our innovative, award-winning, proprietary codec and support for all the other standards.

If you look at the Microsoft agenda, it's all about the Windows Media 9 codec and why it's better than MPEG4. Microsoft wants its codec to be the thing that the industry embraces. I have to tell you that the harder Microsoft pushes an anti-common-standards agenda, the better it is for us. So I certainly encourage Microsoft to keep pushing its uniquely proprietary agenda. If you're looking for mainstream solutions in the marketplace, you've got two choices. One embraces open standards and in fact is built on an open source foundation—Helix—while the other one is tied to Microsoft operating systems. For the primary formats that they're pushing and the primary formats that they're wrapping with the DRM, the whole agenda is Microsoft.

We're having this conversation in the month of the tenth anniversary of the Web browser. I think history shows that if one company, even a super-powerful company, pushes a proprietary solution and the rest of the industry is behind open standards, open standards win.

LU: What's your take on Microsoft's move into digital cinema and theaters?
RG: I think Microsoft focusing on high-end digital movie theaters is great. I think it's a great boon to all the little companies that have been making the old 35-millimeter sprocket projects. It's a pretty low-volume market—but I certainly think it's kind of neat from a technical standpoint. We'll focus on the 100 million phone handsets that Nokia ships every year, or the 50 million PlayStation 2s that are installed. I don't want to say that we'll ignore the market of the 20 digital theaters that are out there capable of playing satellite-delivered movies. You know, we'll probably go after that market eventually, but we'll probably wait till it's a little more of a volume play.

LU: What's the playback quality on these small devices like the Nokia?
RG: In terms of, actually, the CPU of those devices, you can get a pretty darned good frame rate if you've got a couple hundred [kilobit] stream. If you look at the image quality on the screen itself, it's pretty darn good. The bigger issue is network bandwidth. We're in this period where we're getting good data rates. I would say we're getting data rates that are like the data rates we got when we launched RealAudio in 1995. You're getting 24 kilobits now on the GPRS networks, and that's in the US. On the CDM networks like Sprint and Verizon, you're probably getting 40 or 50 kilobits depending a little bit on coverage area.

So what that means as a practical matter is that these devices, like the Nokia, are great streaming audio devices. They're very fine video downloading devices, though the streaming video at this point is more of a technology demonstration. That doesn't become a reliably deliverable consumer experience until you have the 3G services. But as I can tell you from the launch of RealNetworks, we spent our first two years just doing streaming audio and didn't even do video until '97. We figured, hey, that doing video that looks more like pop art than a visible video stream isn't doing anybody any good.

We'll have some video download services if you just want to get a movie trailer and watch it, but in terms of streaming content, we'll mostly be doing audio—the stuff we did back in '95 with the PC. So in the everything-old-is-new-again world, we're seeing familiar trends in the mobile market. The carriers are doing the thing that we hoped they would do, which is being super-aggressive on the next-generation image phones and camera phones that are also media-player phones. We're starting the process of educating consumers that mobile media creation and delivery is becoming a very practical reality. It can become part of people's lives, just like PC streaming started to be in '95.