HITS Daily Double


Downgrades Q3 Financial Guidance in Bid to Lure Apple Customers
Late last month, RealNetworks took the controversial step of releasing a new version of its RealPlayer software that includes its new Harmony Technology—a way for users to format songs downloaded from Real’s RealPlayer Music Store so they can be played on Apple’s iTunes jukebox and iPod portable player. Trouble is, Apple didn’t authorize or participate in Harmony’s development.

Now, while Apple fumes and considers legal moves in response to Real’s impudence , Real has announced that it will sell all downloadable singles and albums at half off for a limited time—at least three weeks.

The nacent download price war, which Real is dubbing the “Freedom of Choice” campaign, is an attempt to lure some business away from Apple’s iTunes Music Store, which currently controls 70% of the music download market.

And Real is willing to lose money, at least in the short term, to do it. The company says it expects the promotion to lower its third-quarter results by $0.01 per share, meaning it now expects it will post a third-quarter loss of three to five cents a share, up from its previous guidance, which predicted a three-to-four cent loss.

During the promotion, Real will sell downloadable singles for $0.49 and albums for $4.99, compared to Apple’s prices of $0.99 and $9.99. Real will also run a series of print ads featuring an unlocked padlock that looks like an iPod and touting the "Freedom of Choice" slogan. Wonder how Devo feels about that.

While Apple is obviously the primary targe, Real’s stated objective is to make its downloads compatible with as many players as possible. Its Harmony technology currently also allows users to format songs in Microsoft’s Windows Media format as well as Apple’s and Real’s own.