Five Really Dumb RealNetworks Moves

There are lots of things that Rob Glaser did right at RealNetworks (s RNWK) — among them, as Dan Rayburn points out on his blog, kickstarting the streaming media industry. Long before anyone else had really figured out how to deliver video at scale, RealNetworks introduced a very efficient codec for audio and video delivery over low-bandwidth connections, as well as a scalable media server that didn’t have to run on Windows servers. That said, RealNetworks made some stupendously bad decisions under his watch.

With Glaser’s resignation announced, here are five of the worst moves Real made while he was at the helm:

Hacking the iPod. Back in 2004, RealNetworks sought a way to get music from its Rhapsody music service onto multiple portable media players. To do so, the company introduced an application called Harmony to allow users to transfer music to multiple music services, including the iPod, which was fast becoming the primary device for personal music consumption among consumers. There was just one problem: Harmony was created by reverse-engineering Apple’s FairPlay DRM technology. As such, it was quickly shut down by Apple (s AAPL).

Taking Hollywood to court. Here’s a case of putting the cart before the horse: Before RealNetworks even had any customers for its RealDVD DVD copying software, it had a lawsuit on its hands — a lawsuit that it filed. Real introduced the new software and filed a pre-emptive lawsuit against the major motion picture studios, guessing correctly that they would file suit to halt sales of the software. Despite the fact that DVD-copying software is widely available for free on the Internet, the court stopped sales of RealDVD, and RealNetworks ended up losing both cases against the Hollywood studios.

Signing up for MusicNet. Before Rhapsody, there was MusicNet, a subscription music service that RealNetworks launched as part of a joint venture with record labels from AOL Time Warner, Bertelsmann and EMI Group. Despite having one of the largest libraries of music available at the time — more than 100,000 titles — no one really signed up for the $9.95 RealOne Music service offered as part of MusicNet. The joint venture was such a failure for Real that it bought Rhapsody as part of its acquisition less than two years later — despite the fact that Rhapsody competed with MusicNet and used Windows Media technology for its service.

Competing with its customers. RealNetworks was in the business of licensing its software to service providers, but it also was in the business of providing video delivery services to media clients through its Real Broadcast Network, which became a source of conflict with some of its licensees. As Rayburn put it, “That was a really bad move on Real’s part and was one of the reasons Microsoft (s MSFT) was able to get their foot in the door since so many delivery networks were upset with Real’s licensing practice.”

Turning RealPlayer into bloatware. This is the thing that most people remember RealNetworks for, and is part of a legacy that ruined the consumer side of its business. The company became notorious early on for packaging third-party adware and malware into its RealPlayer installations. Which is a shame because, despite the fact that media companies could usually get better streaming results by using Real’s encoding technology than any other competing technology, and that Real’s media servers scaled relatively well and could be deployed on non-Windows hardware, after a time it had a hard time retaining customers because no one wanted to install the RealPlayer client.