Between a Rock and a Hard Drive:
Rob Glaser of Real Networks

The $40 billion music business stands at a crossroads. New technology is about to reconfigure the industry. Perhaps this technology will, as some onlookers contend, wipe out the record companies. Or perhaps these companies will shape the new technology, with spectacularly profitable results. Either way, it could be the biggest thing to hit the music business since rock itself. But it is early yet, and figuring how it will play out is like trying to extrapolate Sgt. Pepper's Lonely Hearts Club Band from “Love Me Do.”

For this reason I have invited Rob Glaser to go shopping. So here he is at the Tower Records near downtown Seattle on a Saturday afternoon, talking music and thinking, he hopes, like any other consumer. I have been told that Glaser, who is the 38-year-old billionaire founder of a technology company called RealNetworks, is likely to be an important figure in the future of the music business. Because I am trying to understand how that can be true, I suggested that we take a trip to the record store together. Maybe in this setting we can begin a discussion of how computer technology might change the record industry, or vice versa, without immediately resorting to words like “convergence.”

Glaser picks up a Clash best-of disc. Before long, he believes, the best way to own music will not be on a physical CD, but in the form of a digital computer file, downloaded from the Internet. This ought to be a big opportunity for the record companies, he says. Their catalogs will be worth more than ever. They can cleverly package up all sorts of virtual anthologies: everyone knows the Clash is an essential band, for instance, so everyone will want the Clash in his digital jukebox: “This, to me, is a no-brainer,” Glaser says. Now we're standing in front of a mass of Beatles discs. “Wouldn't you pay, say, $5 a month for access to the entire Beatles catalog?”

I don't know if I would or not. I don't know if most consumers would or not. But Glaser seems pretty confident. He makes it all sound self-evident. And very exciting. He's talking a mile a minute. In blue jeans and a stylish leather jacket, he could be any other music nut out to blow some money on a fine weekend day. “What about these guys?” he asks, pointing at a Rage Against the Machine CD. “Do you think they're for real?” He laments the lost promise of a local band called the Posies. He talks about being in the crowd at the memorial service for Kurt Cobain: “It was so surreal.”

Before people started telling me that Glaser is likely to be an important figure in the future of the music business, I had never heard of him. There are so many technology billionaires now, and all of them seem to be doing something that is supposed to change the world. Glaser, I learned, is widely seen in technology circles as a key Internet innovator — the man who, as Robert H. Reid put it in the book Architects of the Web, “ broke the Web's sound barrier.” Still, he is not a name-brand C.E.O. like Sumner Redstone, Bill Gates or Jeff Bezos.

When the people at the upper echelons of the recording industry first got to know Glaser and understand what he was up to, they were suspicious. But a newer crop of tech upstarts have ideas that seem even more threatening, and suddenly Glaser seems like more of an ally — though you get the sense at times that the alliance is a grudging one. “I think that Rob is unique,” says Edgar Bronfman, who met Glaser for the first time last September, when the two began hashing out an alliance between RealNetworks and Universal Music Group. “He was familiar with our business in a way that a lot of technology companies are not. He understands that the technology is ultimately an enabler.” In a sense then, Bronfman's praise is predicated on the notion that technology takes a backseat in the music business. But Glaser's bet is that an “enabler” is becoming an increasingly powerful thing to be.

* * * * *

The format in which music can be sold has changed many times since the birth of recording. Music was first recorded on wax cylinders, then on vinyl records. After that came tape-based formats — reel to reel, 8-tracks, cassettes — but vinyl was the dominant format for most of the postwar era. When CD's came along, part of the selling point was greater audio quality that did not deteriorate over time the way records and tapes can. Enough people were convinced of the superiority of CD sound that they were willing to buy not only new releases on CD, but also CD versions of their favorite vinyl albums. This, needless to say, was a huge windfall for the recording industry.

As a rule, however, the recording industry is notorious for dragging its feet when faced with innovation of any sort — technological or artistic. The big record companies famously fought the introduction of digital audio tape, which would have allowed consumers to tape CD's without losing audio quality. The fear was that people would make “pirate” copies of their friends' CD's. The recording industry engineered a lengthy battle over slapping a surcharge on these digital tapes, and the format eventually petered out.

The more recent round of trouble for the recording industry began on college campuses. The troublemakers' first step was figuring out how to get music, in perfect digital form, from a compact disc into a computer hard drive. This seemed harmless enough — who wants to listen to music on a computer? What'll those kids think of next?

At first, dealing with music in a digital format was very difficult — the files were impractically huge, and most computers couldn't handle them. The trick was converting the music into compressed formats that make the files easier to deal with. MP3 is the name of such a format. One thing MP3 did was enable upstart bands to post songs on Web sites, in hopes of building an audience. Another thing it enabled was the posting by college kids of their music collections on Web sites for anyone in the world to download, free. Sites offering, say, all the music on the new Pearl Jam CD in the digital MP3 format, at no charge, sprang up all over the Internet. What those kids had thought of next was how much easier it is, with digital music files, to give your music collection — in pristine, digital audio quality — to all of your friends. This became a craze; soon “MP3” was as popular a term in Internet searches as “sex.”

So here was the biggest music trend since grunge, and the big record companies (and their artists) were receiving $0 as a result. Top executives at those record companies were aghast. Top executives at Rob Glaser's RealNetworks, however, were intrigued.

Realnetworks has a short but curious history. Today, its headquarters take up four floors of a building on Elliott Avenue in Seattle, with pleasing views of Puget Sound. The company has 800 employees, 1999 revenues of $131 million and a recent market cap near $10 billion. There are touches of ragged indie-ness, pierced faces, dyed hair, dozens of Mountain Dew cans stacked in some guy's windowless office, an airy cafeteria stocked with Ping-Pong, pool and foosball, plus two regulation bowling lanes in the basement. But the overwhelming impression is of cookie-cutter cubicles, neat carpeting, standardized furniture and offices with big windows for people who make more money than Mountain Dew guy.

Glaser grew up in Yonkers, the son of a printing shop owner and his social worker wife. At Yale, he wrote a left-wing column for the school paper and earned three degrees in four years, concentrating on computer science and economics. After graduation, he headed west to work for a somewhat obscure company called Microsoft. Glaser figured he would stay a few years and move on.

He stayed a decade. When he left in 1993 — 31 years old, a millionaire several times over — he hooked up with David Halperin, a college pal who had gone to work on Capitol Hill. Together they hatched a vague, but very large, dream. “The original idea was to try to exploit what we saw as a convergence of technology, culture and politics,” says Halperin, now a national security aide to President Clinton, “a version of a Fox or a Disney that would be more politically progressive and more culturally adventurous.” They called the venture Progressive Networks.

Part of the Progressive Networks bag of tricks was software that made it possible to broadcast sound over the Internet. This now seems mundane, but at the time — when the Internet was mostly clunky text — it was astonishing to be able to listen to a Seattle Mariners baseball game on a computer in Washington, D.C. The idea of grafting sound and perhaps images onto the Internet's limitless reach captivated everyone Glaser and Halperin talked to. Naturally, the investment crowd was more interested in the technology than in a leftish media venture, but even the wonks urged Glaser and Halperin to build a business around the software and support progressive causes with the profits. (The company actually has profits now, and 5 percent goes to charity.) As the focus shifted, Halperin bowed out; Glaser soon presided over the debut of a technology called RealAudio.

Despite my previous ignorance of Glaser, I had used his company's software many times since it made its debut on April 10, 1995. It has long since become commonplace to be able to hear snippets of songs from CD's sold on Web sites like Amazon.com: click on the song title and the playback occurs in RealAudio. Similarly, many radio stations began making their broadcasts available in RealAudio. I used to use software called RealPlayer to listen to Houston Astros games from my home computer in Manhattan. The underlying technology is called streaming audio, and it is what Real rode to prominence.

The basic software is free — you just download it. Various generations of the increasingly sophisticated RealPlayer have been downloaded about 100 million times. The company's business model has evolved almost constantly; it currently sells souped-up versions of its software, but gets most of its revenue from corporate clients that pay licensing fees to use the software on their internal networks.

Glaser's company dropped “progressive” from its name in 1997. Software companies tend to be apolitical, and software itself, of course, is not supposed to make value judgments. Which was perhaps the right frame of mind to be in when MP3 came along.

* * * * *

Before MP3, the music business regarded the whole notion of distributing music over the Internet as basically a distraction. Most labels had “new media” divisions of one sort or another, but the predominant view was that the Internet had nothing to do with them. “They looked at what we were doing, on average, with a kind of amused indifference,” Glaser recalls. “I mean, if we ever spent time with them at all.”

As early as 1997, Glaser had sketched a vision of using the Web to create a sort of ultimate music distribution system; everyone would have his own personal digital jukebox, linked to the Internet. Two things stood in the way. For starters, it wasn't then possible to download music files and save them onto a computer. This is what MP3 made possible, and to Glaser's crew at RealNetworks, it looked an awful lot like a genie leaving a bottle. “Here was a format that kind of emerged in the grass roots,” Glaser says, “that was doing something that no legitimate company could do.” No legitimate company could do this because of obstacle No. 2: the big record companies, which hold the rights to most of the music that people want to listen to. The companies were pretty happy with the current system of people going to stores and buying CD's.

But then a bunch of people started making software that played MP3 files, and Web sites sprang up to offer music in this format. That's when the record companies began to figure out what a huge problem they had on their hands. The stuff that was posted legitimately — the latest offering, let's say, from an unsigned garage band in Kansas — was not something a lot of people wanted to listen to. But people did want to listen to that new Pearl Jam release, even if it meant downloading it illegally. This was the grand divide: on one side the legit but unwanted, on the other side the illegit but wildly popular. Glaser and his crew began wondering how to make a product that was in the middle — a player that had broad consumer appeal but wasn't blatantly designed for criminal activity.

Glaser's epiphany was this: while it might be illegal to download a Pearl Jam CD, you could legally digitize your own CD collection for your own personal use (it's called “ripping”), just as you might make tapes. So how about software that, in effect, digitally organizes your music: the stuff you have on CD, plus whatever you download from the Web, legally or illegally (that's up to you). There were already programs that did variations of this, but Real cooked up a user-friendly package called RealJukebox. The thinking was that eventually the record companies would get all their material online, and by that time, RealJukebox would be the dominant software. People would have already ripped their collection of 200 CD's, and that wasn't something they would want to do again. And with RealJukebox, they could organize their music, sort it, mix it up however they want; they could dump selections onto portable players like the Diamond Rio, and go jogging. I did all of this myself — except the jogging, of course — and as a music fan, I can see what is cool about this technology.

The debut of RealJukebox was scheduled for May 1999, and although the record companies were still terrified of piracy, Glaser decided that RealJukebox would be compatible with MP3 files. This was a tactically dangerous, but crucial move. “We knew that the labels had this view that anything that supported MP3 was the devil incarnate,” he says. He went ahead anyway, figuring that if Real came out with a product that did not support MP3, the kids who were out there leading this revolution would never use it. Record-industry officials were invited to see demos of the new software shortly before the launch — and the response was often tense. Mark Hall, a Real vice president, remembers an hourlong meeting in Seattle with Sony, a company with whom Real had built a close relationship. “There was a lot of disappointment in that room,” he recalls.

The labels complained that the software, among other things, made it easy to send e-mail copies of a CD you just bought to everyone you know. Real fiddled with the software to make it harder, though not impossible, to make copies, and the labels were more or less placated. “They changed their approach,” says Al Smith, Sony's top executive on digital distribution. “Real got the message that we would not support insecure music.”

But Glaser may have wound up in a better position than ever, partly because new and more menacing villains have emerged. One is Napster, an MP3 swapping site that is, in the eyes of the record companies, the equivalent of a vast flea market of stolen goods. Napster, which has become so popular that many colleges have banned its use because the traffic was slowing down their Internet servers, makes it incredibly easy to download the Beatles catalog for no charge at all. That it's illegal hasn't proved to be much of a deterrent. Maybe that's because people have bought the music in previous formats, because they see record companies as evil fat cats who don't need the money or because they just don't care.

The other threat is MP3.com, whose latest innovation is a database of 80,000 popular CD's that its subscribers can access. The record companies, via the Recording Industry Association of America, promptly filed a lawsuit saying that their intellectual property was being trampled, and that MP3.com had copied thousands of CD's for commercial use without remunerating anyone. (In an act of impressive chutzpah, MP3.com turned around and sued the R.I.A.A. right back, for defamation.) The R.I.A.A. has also sued Napster.

All of this is, indirectly, good news for RealNetworks. “We went from being I wouldn't say outlaws, but renegades,” Glaser says, to having his first face to face with Bronfman. In April, BMG announced it will be making some of its catalog available for sale digitally by June, and Universal is following suit. There are few details now, and the record companies are using several different security formats, but Real says its software will be compatible with all of them.

Glaser says he believes the labels have finally grasped the urgency of the situation. The rise of Napster, he wrote to me in March, is “a cautionary tale as to what can happen if the labels don't move quickly enough.” He's optimistic about what will happen once the labels truly jump into the fray, but he said: “It's fair to say that the clock is ticking. The likes of Napster mean that it's ticking louder than ever, by implicitly training a whole generation of kids that music is something you get, not buy.”

* * * * *

There's a scene in The Mansion On The Hill, Fred Goodman's 1997 book about the convergence of rock music and big business, that brings to life just what an uneasy fit this was. The year is 1967, and Warner Brothers Records has just signed the Grateful Dead. In a break between sets at Fugazi Hall in San Francisco's North Beach, a Warner executive, dressed in a blue blazer with a company emblem on the pocket, approaches the microphone. “I just want to say what an honor it is,” he says, “for Warner Brothers Records to be able to introduce the Grateful Dead to the world.” Jerry Garcia gives him a long, skeptical look, and takes his turn: “I just want to say what an honor it is,” he says, “for the Grateful Dead to introduce Warner Brothers Records to the world.”

A similar moment is at hand. This time, though, the record industry's problems have less to do with the radical ethos of artists than the radical ethos of tech entrepreneurs. So far, practically all the players in the digital-music scramble have emphasized that their plans are in the best interests of protecting the creative rights of artists — the biggest labels say it, and so do self-styled rebels like MP3.com. But neither the record labels nor the upstart tech companies were founded to protect artists. They were founded to make money, the same timeless elixir that brought together the Dead and Warners in the 1960's. And fans who exult in sticking it to the record companies by downloading unauthorized MP3's conveniently overlook the fact that they are sticking it to their favorite artists as well.

So will the music business shape the technology? Or will technology reshape the music business? The answer will most likely be somewhere in the middle, which is where Glaser has tried to keep his company. Throughout his career, he has shown a knack for finding his way to the right place, from his stint at Microsoft, to ditching his original alternative media vision in favor of the streaming technology, then making the needed tweaks to Real's software to win over the record companies. That kind of restless adaptability may be the single talent that separates the high-tech moguls from the high-tech dreamers. Perhaps not surprisingly, RealNetworks' most fearsome threat is Glaser's alma mater Microsoft, with which he has a stormy relationship. Microsoft plans to release an updated jukebox version of its Media Player this summer and has positioned itself as a less overbearing partner for record companies than Real. But Glaser is convinced that it is consumers, not the content companies, who will ultimately decide the platform on which the digital-music ecosystem will develop. That means that his company now must represent itself to consumers as something bigger than a software company — an evolutionary step that is likely to prove challenging.

That day at Tower, it took the better part of an hour for us to wind our way through both the CD's and DVD's. By the time Glaser arrived at the cash register, he had a huge pile of old media, the very products that his own company is pushing toward obsolescence. But that's the thing about Glaser — he's not just a high-tech ideologue. He's keeping his options open. He is well aware that, in technology as in rock 'n' roll, being an innovator does not guarantee long-term success. Just ask the Posies.

This story appeared in the April 23, 2000, issue of
The New York Times Magazine.