RealNetworks Confident of Victory in DVD Copying Software Case
RealNetworks said it’s confident it will win its court fight against Hollywood studios that want to block the company’s RealDVD copying software (WID Nov 19 p9). “We… believe that the investments we're making in this litigation will pay off for us over the mid to long term,” CEO Rob Glaser said on an earnings call.
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Hearings on a preliminary injunction against the RealDVD software are expected to begin soon in U.S. District Court, San Francisco. When downloads of the program became available for trial use Oct. 1, the MPAA studios won a temporary restraining order against its sale. The $30 program lets consumers copy DVDs they own to a PC’s hard drive, for viewing on the computer. But the programming is locked to that PC and any others with a RealDVD license registered to the original customer, and it can’t be distributed on the Internet or to portable devices. RealNetworks claims the technology doesn’t circumvent DVD’s Content Scramble System and so doesn’t violate the Digital Millennium Copyright Act.
“Based on initial press and consumer response, we believe that RealDVD is poised to be a hit product,” Glaser said last week. “These hearings usually take place a matter of weeks after TRO. However, given how high the stakes are in this case, we've agreed to have the preliminary injunction hearing delayed to allow both sides to put their best cases forward.”
The RealDVD case is RealNetwork’s second major lawsuit since the company was incorporated, Glaser said. The other was an antitrust suit against Microsoft that “turned out extremely well and resulted in us receiving a $761 million settlement,” he said. The RealDVD case is mainly different in “the duration of the case and the nature of what’s at stake. … In the RealDVD case the outcome will very likely be clear inside of a year, and success will open up a set of business opportunities that we believe represent one of the biggest opportunities in aggregate in front of RealNetworks.”
Glaser declined to elaborate on the case or say whether RealNetworks sees opportunities for the RealDVD technology other than as a retail software program. “We've said things that certainly people have interpreted as meaning we've got more in mind beyond the existing announced RealDVD PC software product, and we do. But, given the nature of the situation we're in involving litigation, I think we're going to be careful about what we say. I'd like nothing more than to be sitting with you three months from now on our next earnings call where we've got a favorable ruling in that court case, and I'm sure we'll have more to say at that time.”
RealNetworks reported a $243.9 million loss for 2008, a reversal from a $48.3 million profit the year before. Income in 2007 included a $60.7 million benefit from the Microsoft settlement. The 2008 loss came despite a 7 percent increase in revenue, to $604.8 million. Most of the loss -- $240.5 million -- resulted from Q4 impairment charges. Net income in the year-earlier quarter was $2.7 million. In the recent quarter, revenue fell 3 percent year to year, to $152.6 million. Revenue from games and music rose in 2008, RealNetworks said. Games rose 24 percent to $134.6 million. Music posted a 8 percent increase to $160.7 million.
Because of economic uncertainty, RealNetworks said, it couldn’t give a firm forecast for 2009. The company said it expects revenue to decline in Q1 from the previous period and from a year earlier. The company expects revenue to increase year over year for music and remain flat for games.