The latest version of RealNetworks' (NASDAQ:RNWK) media player is hungry for clip-culture staples. The upgraded RealPlayer software, due out later this month, allows users to download Web-based video coded in several formats, including Adobe's (NASDAQ:ADBE) Flash. Most of the popular video-sharing sites, like Google's (NASDAQ:GOOG) YouTube, use Flash to stream clips.

Users will then be able to store the videos on their hard drives or burn them to a CD (in the free version) or DVD (in the premium RealPlayer platform).

Downloading clips isn't an option on most sites, but most YouTube users know they can use free sites like KeepVid to turn YouTube URLs into downloadable Flash files. This kind of freedom, especially from a proven pioneer like RealNetworks, may initially be troubling to media giants that use YouTube as a promotional outlet, though RealNetworks insists that downloading and burning won't be allowed on videos protected by digital rights management (DRM).

It's still a bold move for RealNetworks in competing against rival Microsoft's (NASDAQ:MSFT) Windows Media Player. Obviously you don't need an actual media player running while clicking through video-sharing sites like YouTube, MySpace Video, and DailyMotion, but preloading the new version of RealPlayer will float a download button next to videos, easing the process of copying and pasting website addresses to download the clips through third-party sites.

In theory, this is the same time-shifting technology that many consumers already have with their television digital video recorders. Folks can download clips now and watch them later (even if they're not online).

It's an intriguing evolutionary step, even if that step is ankle-deep in a gray legal area. Will nixing DRM-protected downloads still provide legal protection when unauthorized DRM-free clips go up -- at least temporarily -- on the video-sharing sites?  

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Longtime Fool contributor Rick Munarriz does not own shares in any of the companies mentioned in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.