> He came back to them with algorithmic improvements a bit later and they just cold shouldered him saying the existing codec was good enough.
I was involved in dial-up era 'postage stamp' video streaming. 240 pixels in 256 colors and it felt like visiting the future. Good times :-).
> who knows if the biz side folks at the time would have even seen value in better codecs
As someone who gradually went from code to the biz side, it's pretty likely they did understand it was better (at least at some levels of 'they'). A lot of times, saying "thanks, but what we have is good enough", especially to an outside contractor, isn't a technical or value judgement. It's more of a generic 'not interested right now'.
Consumer streaming as a business didn't really happen on one linear ramp. There was a period in the mid-90s I call 'proto-streaming' where there was a lot of early-adopter excitement and experimentation; but it mostly died out and then got rebooted a few years later. Although Real Networks as company did bridge the two eras, it was rough and they survived on corporate training use cases. The streaming reboot is the ramp that can be roughly traced through to today.
The reason proto-streaming didn't take off wasn't the early codecs, although it's true they weren't good enough yet to succeed. It was that the business models, content supply and distribution infrastructure weren't able to scale yet. So, Real Network's reply may have been the polite shorthand for an internal mtg that was more like a VP ranting "That's great but I got three fires burning the building down right now - and that ain't one of 'em!"