RealNetworks to Apple: Partner or we will go with Microsoft

The digital music landscape is about to shift in a big way. RealNetworks CEO Robert Glaser (a former Microsoft exec) sent an email to Steve Jobs last week essentially saying that if Jobs doesn't open up the digital rights management software used in iTunes and iPod, that he will be forced to partner with Microsoft on the WMA format. How do I know all this? It turns out that the email Glaser sent directly to Jobs was leaked to the press and a great story about it is over at News.com: RealNetworks seeks musical alliance with Apple

I think this development has two interesting aspects I would like to talk about:
1) The impact of Real's impending deal with either MSFT or Apple
2) The strategic implications of the email leak

RealNetworks over the years has really moved from a technology company to one that is focused on distribution and client software. This is shown by the fact that Real hasn't really made a strong push into the DRM space, and their willingness to use other companies technology. Today's digital music landscape shapes up as: Apple Vs. Microsoft. We have all seen this battle play out once before and know how it turned out... and hence the offer from Glaser to Jobs which can be read as: "You made the closed architecture mistake once, don't do it again!" Which ever company that Real partners with will gain great momentum in the marketplace. We all know the disdain that Real has for Microsoft and that they would much rather partner with Apple, but it seems as though Jobs believes he can win this on his own... which brings me to the leaking of the email.

When a CEO of a public company sends another CEO of a public company an email around a strategic alliance, one wouldn't expect to read it the next week in the New York Times. Apparently the email was leaked from an Apple executive, and I would have to guess that it was either Jobs himself or someone leaked it with Jobs' approval (if it wasn't done with Jobs' blessing everyone should sell Apple stock).

So why leak the message? By leaking the message Jobs has put Glaser in a weaker position to partner with Microsoft. If Glaser comes to Redmond to smoke the peace pipe and cut a deal they will know that he has exhausted all of his other options... meaning that an Apple deal didn't go through and that Glaser is desperate to cut a deal. Now the people at Microsoft are smart enough to know that if Glaser wants a deal he was probably unable to work something out at Apple, but now he might not have a credible threat of an Apple partnership when he shows up to talk with Bill and the boys in Redmond.