| The market for software and services for the Internet and intranets is
relatively new, constantly evolving and intensely competitive. The Company
expects that competition will intensify in the future. Many of the Company's
current and potential competitors have longer operating histories, greater name
recognition and significantly greater financial, technical and marketing
resources than the Company. The Company's principal competitors in the
development and distribution of audio and video streaming solutions include
Microsoft, VXtreme, VDOnet, Xing, Precept, Cubic, Motorola, Vivo, Vosaic and
Oracle. The Company's RealAudio and RealVideo system also competes to a lesser
degree with non-streaming audio and video delivery technologies such as AVI and
Quicktime, and indirectly with delivery systems for multimedia content other
than audio and video, such as Flash by Macromedia and Enliven by Narrative.
Competitive factors in this market include the quality and reliability of
software; features for creating, editing and adapting content; ease of use and
interactive user features; scaleability and cost per user; and compatibility
with the user's existing network components and software systems. To expand its
user base and further enhance the user experience, the Company must continue to
innovate and improve the performance of its RealAudio and RealVideo system. The
Company anticipates that consolidation will continue in the streaming media
industry and related industries such as computer software, media and
communications. Consequently, competitors may be acquired by, receive
investments from or enter into other commercial relationships with, larger,
well-established and well-financed companies. There can be no assurance that the
Company can establish or sustain a leadership position in this market segment.The Company is committed to the continued market penetration of its brand,
products and services, which, as a strategic response to changes in the
competitive environment, may require pricing, licensing, service or marketing
changes intended to extend its current brand and technology franchise. By way of
example, the Company recently decided to distribute free of charge a version of
its EasyStart Server, which previously sold for $295 to $995. Continued price
concessions or the emergence of other pricing or distribution strategies by
competitors may have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company derives significant revenues from the electronic distribution
of certain of its products. The Company recently opened its RealStore Web site,
an online store for the sale of the Company's products, third-party streaming
media tools and utilities and Internet-based training products. The Company
competes with a variety of Web sites, such as Buydirect.Com and Sofware.Net,
which also offer software products for download. To compete successfully in the
electronic commerce market, the Company must attract sufficient commercial
traffic to its RealStore Web site by offering high-quality merchandise in a
compelling, easy-to-purchase format. There can be no assurance that the Company
will be able to compete successfully in this market, and any failure to do so
could have a material adverse effect on the Company's business, financial
condition and results of operations.
In the Internet advertising segment, the Company competes for Internet
advertising revenues with a wide variety of Web sites and Internet service
providers. While Internet advertising revenues across the industry continue to
grow, the number of Web sites competing for such revenue is also growing
rapidly. The Company's advertising sales force and infrastructure are still in
early stages of development relative to the Company's competitors. There can be
no assurance that advertisers will place advertising with theCompany or that revenues derived from such advertising will be material. In
addition, if the Company loses advertising customers, fails to attract new
customers, is forced to reduce advertising rates or modify its rate structure to
retain or attract customers, or loses Web site traffic, the Company's business,
financial condition and results of operations may be materially adversely
affected. |