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Wednesday, March 10, 2004 - Page updated at 12:00 A.M.
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RealNetworks sues to bring back Major League Baseball games

By Monica Soto Ouchi
Seattle Times technology reporter

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RealNetworks yesterday sued Major League Baseball's Internet arm, accusing it of violating an agreement to deliver live baseball games online in the Seattle-based company's digital media format.

RealNetworks and its chief rival, Microsoft's Windows Media division, encode audio and video in competing formats to be played online. Since the start of baseball's spring training, MLB.com has offered live games solely in Microsoft's Windows Media format.

As part of the complaint, RealNetworks seeks a temporary restraining order to immediately "enforce the contract." The lawsuit was filed in U.S. District Court in Seattle.

In a prepared statement, Jim Gallagher, spokesman for Major League Baseball Advanced Media, which operates MLB.com, expressed disappointment that a lawsuit was brought by a "long-standing content partner."

"We will continue to honor the agreement we have and expect to prevail in any litigation of this matter," Gallagher said, reading from the statement. "Because of confidentiality obligations in the agreement, we can only say, at this time, that Real's allegations are without merit."

RealNetworks built the first successful cable-style Internet video subscription service, largely by striking a deal with MLB to offer consumers the chance to listen to baseball games and view highlights online.

While the subscription service grew to include other partners, MLB remained one of the centerpieces that drove subscriptions.

RealNetworks surprised analysts in January when it announced that, after three seasons as MLB's exclusive partner, it would no longer sell subscriptions to professional baseball games.

Chief Executive Rob Glaser downplayed the impact, telling analysts that MLB sales accounted for less than 2 percent of its 2003 revenue, and the change would save $5 million this year.

While MLB's move to offer spring-training games solely in Windows Media format suggests that it struck a deal with Microsoft, neither company has officially announced an agreement.

A source familiar with the situation, however, said that the RealNetworks contract calls for MLB.com to broadcast baseball games in RealNetworks' format beginning at the start of the regular season in April.
 
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RealNetworks spokesman Greg Chiemingo said the company believes that the contract calls for all live games to be available in its format. "In our view, the season began with the first game being available on MLB.com, from the first pitch of spring training through the final pitch of the World Series," he said.

Apart from RealNetworks' partnership with MLB, the lawsuit filed yesterday speaks to a broader issue: the company's competition with Microsoft.

RealNetworks in December filed a $1 billion antitrust lawsuit against Microsoft, claiming the software giant continues to use the same tactics that crushed the Netscape Navigator browser in the 1990s to derail competition in the market for digital media players.

Scott Kessler, an Internet equity analyst with Standard & Poor's, said yesterday's lawsuit suggests RealNetworks is digging in its heels.

"Do I think that the ongoing kind of war that's really been waged between these two companies over the last better part of a decade plays into a decision like this?" he said. "Most definitely."

Monica Soto Ouchi: 206-515-5632 or msoto@seattletimes.com

Copyright © 2004 The Seattle Times Company

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