Interview: Real Networks
>> repeating news from morgan stanley. the company is saying it will pursue the sale of its discover unit. you had morgan stanley shares jumping today that the company’s board had approved this. morgan stanley now confirms, saying it will pursue the sale of the discover unit, saying it needs to focus on the securities business. that’s a story that will continue to be developed and analyzed. and real networks are widely used by internet surfers but it is not clear how the company will compete long term with microsoft’s media player and apple’s i-tunes. matt nesto spoke with the chief executive and here’s what he said about the strategy.
>> our overall business grew 32% 2004-2003 and our music business grew triple digits, over 700,000 subscribers at the end of 2004. our view is that the digital music business, like most ofr businesses, is fundamentally on the right side of history as more and more digital, broadband and devices, and it’s subscriptions, our chosen area we’re focused on, we’re number one and ihink we’ll stay number one with great leadership opportunities.
>> presumably you’re focusing on subscriptions because if you did the number of songs downloaded, the super lative might not be as attractive?
>> we think it’s the foundation of how consumers get music. the jukebox in the sky model where the consumer gets as much music as they want with a fee, we offer the same thing. the model when you buy each song for 99 cents, works with building a library but it’s terrible for trying out songs. our average subscriber listens to over 200 different songs a month and the value proposition is 10 times the value versus buying each song individually. we think it’s a long-term model working very well and as more consumers are exposed to it, it will continue to grow.
>> will it be the death knell for the traditional big label recording industry?
>> we think digital is the growth engine for the music business. people want physical product, they want to collect them and have c.d. players in their cars, but digital is the growth engine. if you look at the u.s. music business in 2004, it was the first growth year they had in several and digital was 2% of their revenue and represented basically the core growth engine for the business so we’re bullish on the long-term music industry. there is a challenge on how you go from illegitimate models, piracy, to legitimate services and we’re on the right side of that and the music industry has done a terrific job and we have over a million songs in our library and they’ve opened up the languages pretty broadly.
>> the next big area prone to piracy is movies. obviously, you’re growing that business, as well. what will it take to make movie downloads on the internet popular wide scale?
>> we are in partnership with stars group, we have what’s considered the best product, stars ticket on real, offering access to 200 movies per month on a subscription model for $12.95. movies are bigger to download, 500 megabytes opposed to a song at 5 megabytes so it’s 100 times the storage and transmission time but as more people have broadband and bigger disks and networks to move around the home, that product will build.
>> it almost sounds like that’s technology out of your control. you can’t control consumers’ home computer capabilities.
>> our philosophy is long term. we started the company 11 years ago and launched realaudio 10 years ago. our view was let’s start with audio and move to video and we did this with technology and now consumer services and it’s a long-term view, a cycle that pays back not just in days but in months and years.
>> at some point you have to turn a profit on a full-year basis. when will that happen?
>> we have given guidance for 2005 and we’ve said we expect to do that after the cost of the tort lit litigation we’re in the middle of which many analysts discuss that separately. our business is growing profitably and we’re pleased with our trajectory.
>> are you hiring?
>> we are, in fact. if you want somed me your resume.
>> let’s check what those shares at close. a gain of just over 3%. in the past year, the shares have fallen 8%. aon has a new chief executive. the company hired former mckinzie executive, gregory case, assuming control less than a month after aon agreed to pay $190 million to settle charges from regulators, accused of deceiving clients by steering them to insurers that paid kickbacks. patrick ryan stays on as executive chairman. a check of those shares shows a gain of .3%. coming up, a preview of today’s market and tomorrow’s action in europe.
在线播报
Listen Market briefing --- Ellen (fast)
Morgan Stanley --- June (slow)
stocks rose as oil retreated, the dow up from its lowest level this year. a.i.g. leading a mid-day turnaround after new york attorney general eliot spitzer talked about a civil resolution% -of his accounting probe of the insurance giant of the let’s look at those stock indexes. what you see is the dow average up almost 17 points, again, coming off what would have been its lowest level of the year. and the s&p up just over three points, 1176. the nasdaq up six points at 1991. well, the head of government bond trading at deutsche bank securities says the tendency in the bond market right now seems to be more bearish. traders were reluctant to push prices up for a fifth day after comments from st. louis fed president william poole who said -- “evidence is accumulating that companies are able to raise prices.” in trading today, a price decline of 2/32 for the 10-year -- shares of morgan stanley jumped on a dow jones report the company’s board wants to sell the discover credit card unit. june grasso has been following this story. june?
>> shares of the world’s second biggest securities firm rose as much as 5.7%. the rally comes as eight former morgan stanley executives are taking the fight to oust chief executive philip purcell to a new level, ratcheting up the pressure, the dissidents took out a full-page ad in the “wall street journal” asking employees to contact the former executive, saying the leadership issues moob addressed and resolved. former morgan stanley executives say that purcell’s leadership failures have caused the firm’s shares to lag behind rivals. morgan stanleymorgan stanley stock has been the worst performing ploong the five biggest wall street securities firms, losing almost half its value since the december 2000 high.
>> this company has underperformed its peers. if you go back over the past four years, morgan stanley’s earnings are down over that period, their revenues are down over that period and they have serious problem areas which have not been addressed. bove says the sale of discover card means the dissidents have put enough pressure on the board to move it to action.
>> if the stock price gets high enough and the recognition exists that it will fall dramatically if nothing is done, that will pressure for change.
>> bove says potential buyers for discover include bank of america, j.p. morgan, american express and mbna. other analysts say royal bank of scotland, barclays and capital one financial may be interested in discover card.
>> we had headlines bringing us the latest developments, which is in fact morgan stanley saying it will pursue the sale of the discover unit. this had been widely anticipated. we saw the stock jump on news that the board approved this and morgan stanley now confirming it will pursue the sale of the discover unit. two other headlines on morgan stanley, the company saying that it is naming steven crawford and zoey cruz to its board of directors. it was in the past two days the two were named to be co-presidents of the company. we will bring you the latest developments as we have them. in the meantime, a top story we’re following today has to do with a jump in a.i.g. shares coming on comments from the new york attorney general. we’ll bring in allan dodds frank for the latest.
>> it’s a controversy that continues surrounding the insurance giant, a.i.g., new york attorney general eliot spitzer saying he is confident that a civil resolution can be reached with a.i.g., a resolution of the a.i.g. company reinsurance practices. earlier, a.i.g. shares had been gaining as two analysts upgraded the stock. once the spitzer headlines crossed, gains accelerated. a.i.g. dropped 8% last friday after the “wall street journal” reported the new york attorney general was considering filing criminal charges as a result of possible document destruction. a statement by spitzer followed disclosures that a document dispute erupted at an a.i.g. office in bermuda. last night, the new c.e.o. of a.i.g., martin sullivan, said -- the relevant authorities include the s.e.c. and eliot spitzer. the new york attorney general said -- the documents in dispute concern two offshore companies utilized by greenberg for 2 1/2 decades to help compensate top a.i.g. executives. the 79-year-old greenberg remains in charge of both companies. they are an insurance brokerage named c.v.-star and a company called star international, owning 12% of a.i.g.’s stock. after documents in bermuda were reported destroyed by an a.i.g. attorney, greenberg’s attorneys and the company’s attorneys each tried to take possession of the documents. compromise was reached and the company says the documents are secure. a.i.g. is trying to sort out how to handle compensation, notably stock option retirement bonuses for about 700 top executives who had been given nearly $250 million by star international since 2001.
>> thank you very much for the story. and bob glazer says his business model will trump apple computer.
