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An Old Model for New Media

A little more than two years ago — when the Internet bubble started its slow-but-devastating leak — streaming-media software provider Real Networks Inc. launched a subscription-content package that looked a lot like cable television.

Borrowing a page from cable's guide, Real Networks fashioned packages of Internet audio and video content from sports, news, music and entertainment providers, and offered them to consumers for $9.95 per month.

At the time, there were still plenty of executives who were bullish on Internet advertising — and bearish that consumers would actually pay for online content.

But Real's RealOne SuperPass service is near the 1 million subscriber mark — and the company has grafted several new packages onto its basic offering. More important, it's shown that the right content mix can draw Internet subscriptions, providing a more stable revenue stream than advertising.

"Real saw the opportunity to aggregate premium content," said president and chief operating officer Larry Jacobson, a former Fox Network president who joined the company in February 2001, six months after the launch of SuperPass.

Built for broadband

Today, SuperPass boasts of delivering content from, CBS's Big Brother 3, Cable News Network, E! Entertainment Television, Fox Sports and Major League Baseball to its more than 850,000 subscribers.

What's more, more than half of SuperPass subscribers access the service using a high-speed modem — making it one the first content services built for broadband.

For those reasons, RealOne SuperPass is the recipient of Multichannel News's Innovator Award for New Media.

"Our plan was to take good free content and make it into great premium content," said Jacobson. The company also sought to provide a positive consumer experience with its RealOne Player, or "to make the pictures look really, really good."

Deeper content

Over the past few months, SuperPass has launched services that offer college- and high-school sports programming.

"We started in sports, entertainment, music and news," said Jacobson. "Now we're going deeper in those categories. We've been adding smaller branded content that has a real affinity audience on the Internet."

The high-school sports service is one example. A Hawaii-based surfing site that showcase waves from around the islands is another, he said.

"There is a bunch of content on the Net like that, and some is making its way to SuperPass," he said. "We're going wider with our offerings. We're also doing a lot more work with live video."

Late last season, Major League Baseball conducted a content-delivery test, streaming four televised ballgames to out-of-market fans using Real's service. It used the same technology to deliver video feeds of post-season games vat the Internet to fans beyond U.S. borders.

"There's room to slice the windows for out-of-market games," Jacobson said.

Recently, additional video has been added from Fox Sports and college football's Big 12 conference.

As is the case with cable, anything that gets heavily promoted can lure users. The outtakes from E!'s The Anna Nicole Show
and music videos from Fox's American Idol
contestants drew eyeballs, he said.

Speaking of sounds, Real is a partner in MusicNet, the online subscription music service also owned by Warner Music, EMI and Bertelsmann Music Group, which has been met with some critical reaction.

Real supplies the back-office technology for the subscription service. MusicNet is not part of the $9.95 SuperPass service, but is packaged alongside that offering.

Jacobson said the companies are working to tweak MusicNet.

"It's a complicated and big effort, and it takes some time to work through," he said. "But you can have copyrighted protected downloads that can't be redistributed. We have 100,000 tracks and have a lot of subscribers."

Real's separate $5.95-per-month RealOne Radio service now offers 3,200 online "radio" stations within its various format banks.

"If you can create an ad-free environment and good quality, they'll eat it up," Jacobson said.

Jacobson declined to discuss usage and churn figures for Gold Pass. But he noted that subscribers to its Big Brother
programming — which offers around-the-clock coverage of goings-on within the reality skein's house — were up 40 percent in August, compared with last year. And average usage totaled 100 minutes per day.

"We also used a chat room this year in addition to the live feed," he said.

Content from ABC News is typically used for 12 minutes per day, he added.

More than half the SuperPass audience connects at broadband speeds, said Jacobson. For narrowband users, though, video picture quality is getting better — particularly for news.

"We've had a lot of conversations with service providers" about packaging Real content with high-speed service, he said. Operators are debating whether to partner with such companies or create the content themselves, he said.

"I remain fairly optimistic that they'll see this is a great opportunity for them next year to reduce churn, get new subscribers and get more revenue per home."

Though some digital subscriber line providers are more committed to deploying services like Real's, in Jacobson's view, cable operators do have existing relationships with content providers and can use their traditional video service as a promotional vehicle.