Realnetworks (RNWK) 8-K Realnetworks Announces Second Quarter 2009 Results

Exhibit 99.1

REALNETWORKS ANNOUNCES SECOND QUARTER 2009 RESULTS

SEATTLE — July 30, 2009— Digital entertainment services company RealNetworks^®, Inc. (Nasdaq: RNWK) today announced results for the second quarter ended June 30, 2009.

Quarterly Highlights:

• Revenue of $135.7 million

• Net loss of $(188.3) million or $(1.40) per share

• Adjusted EBITDA of $4.1 million

• Cash and short term investments of $362.8 million as of June 30, 2009

“In spite of a difficult consumer environment, our business remained relatively stable in the second quarter,” said Rob Glaser, RealNetworks’ Chairman and CEO. “Looking forward, even though we expect the economy to remain weak, we expect to show sequential improvement in the second half of the year based in part on new products such as our innovative RealPlayer SP.”

Second Quarter Results

For the second quarter of 2009, revenue was $135.7 million, a decrease of 11%, compared with $152.6 million in the second quarter of 2008. Foreign currency exchange rate fluctuations negatively affected 2009 second quarter revenue by approximately $6.3 million compared with the year-ago quarter. Excluding the effects of these foreign exchange rate changes, revenue declined 7% year over year. Revenue trends in each of Real’s businesses in the second quarter of 2009, including the effects of foreign currency exchange rate changes, compared with the year-earlier quarter were: a 9% increase in Music revenue to $40.5 million, offset by a 10% decrease in Technology Products and Solutions revenue to $46.2 million, a 15% decrease in Games revenue to $29.8 million, and a 34% decrease in Media Software and Services revenue to $19.3 million.

Net loss for the second quarter of 2009 was $(188.3) million, or $(1.40) per share, compared with a net loss of $(1.3) million, or $(0.01) per share, in the second quarter of 2008. Included in the second quarter 2009 net loss were non-cash goodwill impairment charges of $175.6 million. Adjusted EBITDA for the second quarter of 2009 was $4.1 million compared with $17.4 million in the second quarter of 2008. A reconciliation of GAAP net income to adjusted EBITDA is provided in the financial tables that accompany this release.

Gross margin was 59% in the second quarter of 2009 compared with 64% in the second quarter of 2008. Income tax provision was $(1.2) million in the second quarter of 2009, compared with $(3.7) million in the year-earlier period. Interest income in the second quarter of 2009 was $754,000 compared with $3.4 million in the year-earlier period.

As of June 30, 2009, Real had approximately $362.8 million in unrestricted cash, cash equivalents and short-term investments, of which nearly 90% is located in the U.S. In addition, Real had approximately $37 million in restricted cash and equity investments at June 30, 2009.

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Business Outlook

Due to the high level of uncertainty regarding consumer spending, global economic trends, foreign currency exchange rate fluctuations and credit markets, RealNetworks is not providing quantitative guidance. The company expects 2009 to continue to be a challenging year for consumer spending, online advertising and corporate infrastructure spending.

For the third quarter of 2009, Real expects overall revenue to increase sequentially but to decline year-over-year. Sequentially, the company expects revenue to be flat or increase in each of our segments. Compared with the year-ago third quarter, Real expects third-quarter Media Software and Services revenue to be flat, and revenue in Music, Games and Technology Products and Solutions to decline.

The foregoing forward-looking statements reflect Real’s expectations as of July 30, 2009. It is not Real’s general practice to update these forward-looking statements until its next quarterly results announcement.

Webcast and Conference Call Information

The company will host a webcast and conference call today at 5:00pm (Eastern)/ 2:00pm (Pacific). The live webcast featuring slides and audio will be available at http://investor.realnetworks.com. Listeners must use RealPlayer^® to listen to the conference call, which can be downloaded for free at www.real.com. The on-demand webcast will be available approximately two hours following the conclusion of the live webcast.

Conference Call Details
5:00 p.m. (Eastern) / 2:00 p.m. (Pacific)
Dial In:
800-857-5305 Domestic
773-681-5857 International
Passcode: Second Quarter Earnings
Leader: Rob Glaser

Telephonic replay will be available until 8:00 p.m. (Eastern), Aug. 13, 2009.
Dial In:
866-873-2049 Domestic
402-220-5369 International

RNWK-F

For More Information Contact
Press:Bill Hankes, (206) 892-6614, bhankes@real.com
Financial:Marj Charlier, (206) 892-6718, mcharlier@real.com

About Real Networks

RealNetworks, Inc. delivers digital entertainment services to consumers via PC, portable music player, home entertainment system and mobile phone. Real created the streaming media category in 1995 and has continued to lead the market with pioneering products and services, including: RealPlayer^®, the first mainstream media player to enable one-click downloading and recording of Internet video; the award-winning Rhapsody^® digital music service, which delivers more than 1 billion songs per year; RealArcade^®, one of the largest

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casual games destinations on the Web; and a variety of mobile entertainment services, such as ringback tones, offered to consumers through leading wireless carriers around the world. RealNetworks’ corporate information is located at http://investor.realnetworks.com.

About Non-GAAP Financial Measures

To supplement RealNetworks’ condensed consolidated financial statements presented in accordance with GAAP in this press release, the company also discloses certain non-GAAP financial measures, including adjusted revenue, adjusted EBITDA excluding impairments, adjusted EBITDA, adjusted EBITDA by reporting segment, adjusted cost of revenue and adjusted operating expenses, which management believes provide investors with useful information.

In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP net income (loss) to adjusted EBITDA, to adjusted EBITDA excluding impairments, and to adjusted EBITDA by reporting segment; GAAP cost of revenue to adjusted cost of revenue; and GAAP operating expenses to adjusted operating expenses for the relevant periods.

The rationale for management’s use of non-GAAP measures is included in the supplementary materials presented with the second quarter earnings materials, available in Exhibit 99.2 (“Information Regarding Non-GAAP Financial Measures”) to the company’s report on Form 8-K, which is being submitted today to the SEC.

Forward-Looking Statements: This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to Real’s current expectations for future revenue and other financial results, future success of Real’s new products, continued weakness of the economy and future trends in consumer and corporate infrastructure spending and online advertising. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements. Actual results may differ materially from the results predicted. Factors that could cause actual results to differ from the results predicted include: fluctuations in foreign currencies; the potential outcomes and effects of claims and legal proceedings, including those relating to RealDVD and the ongoing VeriSign arbitration, on Real’s business prospects financial condition or results of operations; development and consumer acceptance of legal online music distribution services generally and RealNetworks’ content services in particular because these are relatively new and unproven business models and markets; the potential that Real will be unable to continue to enter into commercially attractive agreements with third parties for the provision of compelling content for its subscription service offerings and the distribution of Real’s carrier application services; the emergence of new entrants and competition in the market for digital media subscription offerings, online music sales and downloadable casual games; competitive risks, including the emergence or growth of competing technologies, products and services; risks associated with business acquisitions and the introduction of new products and services; changes in consumer and advertising spending in response to disruptions in the global financial markets; risks inherent in strategic relationships, especially with competitors, and with respect to technology and service integration efforts; and risks relating to the ability of Real’s strategic partners to generate subscribers for Real’s digital content services. More information about potential risk factors that could affect RealNetworks’ business and financial results is included in RealNetworks’ annual report on Form 10-K for the most recent year ended December 31, its quarterly reports on Form 10-Q and in other reports and documents filed by RealNetworks from time to time with the Securities and Exchange Commission. The preparation of RealNetworks’ financial statements and forward-looking financial guidance requires the company to make estimates and

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assumptions that affect the reported amount of assets and liabilities and the reported amounts of revenues and expenses during the reported period. Actual results may differ materially from these estimates under different assumptions or conditions. The company assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.

RealNetworks, Rhapsody, RealPlayer and RealArcade are trademarks or registered trademarks of RealNetworks, Inc. or its subsidiaries. All other companies or products listed herein are trademarks or registered trademarks of their respective owners.

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RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

	Quarters Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
	(in thousands, except per share data)
Net revenue	$	135,725		$	152,648		$	276,498		$	300,211
Cost of revenue		55,614			55,645			111,635			111,038
Gross profit		80,111			97,003			164,863			189,173
Operating expenses:
Research and development		28,923			29,065			57,482			54,071
Sales and marketing		42,273			53,054			85,958			106,650
Advertising with related party (A)		6,865			9,240			14,288			16,580
General and administrative		19,338			18,337			42,169			35,421
Impairment of goodwill		175,583			—			175,583			—
Restructuring and other charges		—			—			794			686
Total operating expenses		272,982			109,696			376,274			213,408
Operating loss		(192,871	)		(12,693	)		(211,411	)		(24,235	)
Other income (expenses):
Interest income, net		754			3,375			1,937			8,333
Equity in net loss of investments		(269	)		(107	)		(924	)		(198	)
Gain on sale of equity investments, net		68			222			205			222
Gain on sale of interest in Rhapsody America (B)		—			3,371			—			7,097
Other income (expense), net		(449	)		50			406			818
Total other income (expense), net		104			6,911			1,624			16,272
Loss before income taxes		(192,767	)		(5,782	)		(209,787	)		(7,963	)
Income taxes		(1,210	)		(3,700	)		(2,759	)		(7,708	)
Net loss		(193,977	)		(9,482	)		(212,546	)		(15,671	)
Net loss attributable to the noncontrolling interest in Rhapsody America (C)		5,648			8,177			12,081			16,792
Net income (loss) attributable to common shareholders	$	(188,329	)	$	(1,305	)	$	(200,465	)	$	1,121
Basic net income (loss) per share available to common shareholders	$	(1.40	)	$	(0.01	)	$	(1.51	)	$	0.01
Diluted net income (loss) per share available to common shareholders	$	(1.40	)	$	(0.01	)	$	(1.51	)	$	0.01
Shares used to compute basic net income (loss) per share available to common shareholders		134,420			142,905			134,394			142,946
Shares used to compute diluted net income (loss) per share available to common shareholders		134,420			142,905			134,394			156,000

(A)	Consists of advertising purchased by Rhapsody America from MTV Networks (MTVN). MTVN has a 49% ownership interest in Rhapsody America.
(B)	Consists of gains realized from MTVN’s note payments to Rhapsody America. Effective January 1, 2009, the Company adopted SFAS No. 160Non-controlling Interests in Consolidated Financial Statements, an amendment to ARB No. 51(SFAS 160) which requires the appreciation of gains on the sale of non-controlling interest to be recorded as an equity transaction.
(C)	Noncontrolling interest in Rhapsody America reflects MTVN’s 49% ownership share in the losses of Rhapsody America.

RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

	June 30,		December 31,
	2009		2008
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	197,492	$	232,968
Short-term investments		165,266		137,766
Trade accounts receivable, net		64,413		70,201
Deferred costs, current portion		6,111		4,026
Prepaid expenses and other current assets		36,699		34,599
Total current assets		469,981		479,560
Equipment, software, and leasehold improvements, at cost:
Equipment and software		143,374		135,788
Leasehold improvements		30,954		30,719
Total equipment, software, and leasehold improvements		174,328		166,507
Less accumulated depreciation and amortization		114,109		103,500
Net equipment, software, and leasehold improvements		60,219		63,007
Restricted cash equivalents and investments		14,600		14,742
Equity investments		22,384		18,582
Other assets		3,782		3,775
Deferred costs, non-current portion		6,980		6,120
Deferred tax assets, net, non-current portion		9,442		9,236
Other intangible assets, net		14,268		18,727
Goodwill		—		175,264
Total assets	$	601,656	$	789,013
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	34,666	$	36,575
Accrued and other liabilities		117,445		118,688
Deferred revenue, current portion		39,816		39,835
Related party payable (A)		6,930		13,155
Accrued loss on excess office facilities, current portion		4,214		4,317
Total current liabilities		203,071		212,570
Deferred revenue, non-current portion		2,003		1,961
Accrued loss on excess office facilities, non-current portion		1,010		2,893
Deferred rent		4,564		4,614
Deferred tax liabilities, net, non-current portion		811		1,379
Other long-term liabilities		11,475		11,660
Total liabilities		222,934		235,077
Noncontrolling interest in Rhapsody America (B)		3,627		378
Shareholders’ equity		375,095		553,558
Total liabilities and shareholders’ equity	$	601,656	$	789,013

(A)	Related party payable reflects amounts owed to MTVN.
(B)	Noncontrolling interest in Rhapsody America reflects MTVN’s 49% ownership interest in the net assets of Rhapsody America.

RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

	Six Months Ended June 30,
	2009			2008
	(in thousands)
Cash flows from operating activities:
Net loss	$	(212,546	)	$	(15,671	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		15,522			25,701
Stock-based compensation		10,818			11,520
(Gain) loss on disposal of equipment, software, and leasehold improvements		(34	)		182
Equity in net loss of investments		924			198
Gain on sale of equity investment, net		(205	)		(222	)
Excess tax benefit from stock option exercises		(9	)		(88	)
Impairment of goodwill		175,583			—
Accrued restructuring and other charges		(3,675	)		—
Accrued loss on excess office facilities		(1,986	)		(1,592	)
Deferred income taxes, net		(682	)		(2,138	)
Gain on sale of interest in Rhapsody America		—			(7,097	)
Other		24			89
Net change in certain operating assets and liabilities, net of acquisitions		(1,975	)		(39,160	)
Net cash used in operating activities		(18,241	)		(28,278	)
Cash flows from investing activities:
Purchases of equipment, software, and leasehold improvements		(7,608	)		(15,231	)
Purchases of short-term investments		(66,192	)		(95,671	)
Proceeds from sales and maturities of short-term investments		38,692			68,741
Proceeds from the sales of equity investments		205			1,225
Purchases of equity investments		(2,000	)		—
Payment of acquisition costs, net of cash acquired		(3,154	)		(10,164	)
Decrease in restricted cash equivalents and investments, net		141			839
Net cash used in investing activities		(39,916	)		(50,261	)
Cash flows from financing activities:
Net proceeds from sales of common stock under employee stock purchase plan and exercise of stock options		819			6,041
Net proceeds from sales of interest in Rhapsody America		19,537			14,607
Excess tax benefit from stock option exercises		9			88
Repurchases of common stock		—			(681	)
Net cash provided by financing activities		20,365			20,055
Effect of exchange rate changes on cash and cash equivalents		2,316			(2,408	)
Net increase (decrease) in cash and cash equivalents		(35,476	)		(60,892	)
Cash and cash equivalents, beginning of period		232,968			476,697
Cash and cash equivalents, end of period	$	197,492		$	415,805

RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)

	2009				2008
	Q2		Q1		Q4		Q3		Q2		Q1
					(in thousands)
Net Revenue by Line of Business:
Consumer products and services (A)	$	89,517	$	97,194	$	100,282	$	100,322	$	101,353	$	96,286
Technology products and solutions (B)		46,208		43,579		52,362		51,633		51,295		51,277
Total net revenue	$	135,725	$	140,773	$	152,644	$	151,955	$	152,648	$	147,563
Consumer Products and Services:
Subscriptions (C)	$	54,446	$	59,052	$	57,853	$	57,776	$	55,658	$	55,193
Media properties (D)		14,753		15,536		18,337		19,946		23,472		18,702
E-commerce and other (E)		20,318		22,606		24,092		22,600		22,223		22,391
Total consumer products and services revenue	$	89,517	$	97,194	$	100,282	$	100,322	$	101,353	$	96,286
Consumer Products and Services:
Music (F)	$	40,452	$	44,053	$	43,882	$	41,591	$	37,170	$	38,079
Media software and services (G)		19,291		20,318		22,695		24,531		29,238		26,409
Games (H)		29,774		32,823		33,705		34,200		34,945		31,798
Total consumer products and services revenue	$	89,517	$	97,194	$	100,282	$	100,322	$	101,353	$	96,286
Net Revenue by Geography:
United States	$	90,685	$	96,666	$	101,369	$	102,363	$	100,898	$	99,169
Rest of world		45,040		44,107		51,275		49,592		51,750		48,394
Total net revenue	$	135,725	$	140,773	$	152,644	$	151,955	$	152,648	$	147,563
Subscribers (presented as greater than) *:
Total subscribers (I)		37,700		36,450		34,100		32,650		35,000		32,200
Technology products and solutions application services subscribers (J)		36,300		33,850		31,500		29,950		32,450		29,500
Music subscribers:
Consumer music subscribers:
Rhapsody subscribers		750		800		775		750		600		600
Radio subscribers		75		1,200		1,225		1,250		1,225		1,275
Total consumer music subscribers		825		2,000		2,000		2,000		1,825		1,875
Technology products and solutions application services music subscribers (K)		975		900		875		850		800		800
Total Music Subscribers**		1,800		2,900		2,875		2,850		2,625		2,675

*	Total music subscribers includes subscribers from our technology products and solutions application subscription services, such as music-on-demand, as well as our consumer music services, such as Rhapsody and Premium Radio. Although music-on-demand subscribers are included in the technology products and solutions application services subscribers and total music subscribers, these subscribers are only counted once as part of our total subscribers.
**	Prior periods have been changed to reflect current period presentation. Totals may not equal due to rounding convention.
(A)	Revenue is derived from consumer digital media subscription services, RealPlayer Plus and related products, sales and distribution of third party software products, content such as games and music and advertising.
(B)	The Technology Products and Solutions (TPS) segment includes revenue and related costs from: sales of ringback tones, music-on-demand, video-on-demand, messaging, and information services; sales of media delivery system software, including Helix system software and related authoring and publishing tools, both directly to customers and indirectly through original equipment manufacturer channels; support and maintenance services sold to customers who purchase software products; broadcast hosting services; and consulting and professional services that are offered to customers.
(C)	Revenue is derived from consumer digital media subscription services including: SuperPass, RadioPass, Rhapsody, GamePass and FunPass.
(D)	Revenue is derived from advertising and through the distribution of third party products.
(E)	Revenue is derived from RealPlayer Plus and related products, sales of third party software products, and content such as games and music.
(F)	The Music segment primarily includes revenue and related costs from: Rhapsody America’s Rhapsody and Radiopass subscription services; sales of digital music content through the Rhapsody service and the RealPlayer music store; and advertising from music websites.
(G)	The Media Software and Services (MSS) segment primarily includes revenue and related costs from: the SuperPass premium subscription service; RealPlayer Plus and related products; sales and distribution of third-party software products; and all advertising other than that related directly to our Music and Games businesses.
(H)	The Games segment primarily includes revenue and related costs from: the sale of individual games on our websites RealArcade.com, GameHouse.com and Zylom.com; the sales of games subscription services; advertising through our games websites; the sale of games through the syndication on partner sites, and sales of games through wireless carriers.
(I)	Total subscribers include technology products and solutions application services and consumer subscription services including: ringback tones, music-on-demand, video-on-demand, Rhapsody, Rhapsody-to-Go, RadioPass, SuperPass, and GamePass.
(J)	Technology products and solutions application service subscribers include: ringback tones, music-on-demand and video-on-demand.
(K)	Technology products and solutions application services music subscribers include music-on-demand.

RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)

Reconciliation of GAAP net income (loss) attributable to common shareholders to adjusted EBITDA excluding impairments and adjusted EBITDA is as follows:

	Quarters Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			March 31,
	2009			2009			2008			2008			2008			2008
	(in thousands)
Net income (loss) attributable to common shareholders	$	(188,329	)	$	(12,136	)	$	(240,499	)	$	(4,500	)	$	(1,305	)	$	2,426
Interest income, net		(754	)		(1,183	)		(2,255	)		(2,865	)		(3,375	)		(4,958	)
Stock-based compensation		5,596			5,222			6,056			5,955			6,031			5,489
Loss (gain) on equity investments, net		(68	)		(137	)		12			—			(222	)		—
Conversion of WiderThan stock options to a cash equivalent		3			17			11			16			26			89
Depreciation and amortization (net of noncontrolling interest effect)		5,815			5,726			5,784			6,165			6,186			6,282
Acquisitions related intangible asset amortization (net of noncontrolling interest effect)		1,649			1,768			1,872			5,752			6,171			6,315
Impairment of goodwill and long-lived assets		175,583			—			190,347			—			—			—
Impairment of deferred costs and prepaid royalties		—			—			19,666			—			—			—
Restructuring and other charges		—			794			6,147			—			—			686
Pro forma gain on sale of interest in Rhapsody America		3,444			4,010			6,568			—			—			—
Expenses related to antitrust litigation		—			—			179			174			202			202
Income taxes		1,210			1,549			17,392			728			3,700			4,008
Adjusted EBITDA excluding impairments	$	4,149		$	5,630		$	11,280		$	11,425		$	17,414		$	20,539
Impairments:
Impairment of deferred costs and prepaid royalties		—			—			(19,666	)		—			—			—
Restructuring and other charges		—			(794	)		(6,147	)		—			—			(686	)
Adjusted EBITDA	$	4,149		$	4,836		$	(14,533	)	$	11,425		$	17,414		$	19,853

RealNetworks, Inc. and Subsidiaries
Segment Results of Operations
(Unaudited)

	Quarter Ended June 30, 2009
	Music(A)			MSS(B)			Games(C)			TPS(D)			Other			Grand Total
							(in thousands)
Net revenue	$	40,452		$	19,291		$	29,774		$	46,208		$	—		$	135,725
Cost of revenue		24,945			2,590			8,801			19,278			—			55,614
Gross profit		15,507			16,701			20,973			26,930			—			80,111
Gross margin		38	%		87	%		70	%		58	%		—			59	%
Operating expenses:
Advertising with related party		6,865			—			—			—			—			6,865
Impairment of goodwill		37,029			46,776			41,247			50,531			—			175,583
Other operating expenses		19,808			18,417			26,761			25,512			36			90,534
Total operating expenses		63,702			65,193			68,008			76,043			36			272,982
Income (loss) from operations		(48,195	)		(48,492	)		(47,035	)		(49,113	)		(36	)		(192,871	)
Other income (expenses):
Interest income, net		—			—			—			—			754			754
Equity in net loss of investments		—			—			—			—			(269	)		(269	)
Gain on sale of equity investments, net		—			—			—			—			68			68
Other income (expenses), net		—			—			—			—			(449	)		(449	)
Total other income (expenses), net		—			—			—			—			104			104
Income (loss) before income taxes		(48,195	)		(48,492	)		(47,035	)		(49,113	)		68			(192,767	)
Income taxes		—			—			—			—			(1,210	)		(1,210	)
Net income (loss)		(48,195	)		(48,492	)		(47,035	)		(49,113	)		(1,142	)		(193,977	)
Net income (loss) attributable to noncontrolling interest in Rhapsody America		5,648			—			—			—			—			5,648
Net income (loss) attributable to common shareholders	$	(42,547	)	$	(48,492	)	$	(47,035	)	$	(49,113	)	$	(1,142	)	$	(188,329	)
Reconciliation of segment GAAP net income (loss) attributable to common shareholders to segment adjusted EBITDA is as follows:
Net income (loss) attributable to common shareholders	$	(42,547	)	$	(48,492	)	$	(47,035	)	$	(49,113	)	$	(1,142	)	$	(188,329	)
Income taxes		—			—			—			—			1,210			1,210
Interest income, net		—			—			—			—			(754	)		(754	)
Stock-based compensation		738			798			1,596			2,464			—			5,596
Conversion of WiderThan stock options to a cash equivalent		—			—			—			3			—			3
Acquisitions related intangible asset amortization(F)		278			—			101			1,270			—			1,649
Pro forma gain on sale of interest in Rhapsody America		3,444			—			—			—			—			3,444
Impairment of goodwill		37,029			46,776			41,247			50,531			—			175,583
Gain on sale of equity investments, net		—			—			—			—			(68	)		(68	)
Depreciation and amortization(F)		1,071			856			1,041			2,847			—			5,815
Adjusted EBITDA	$	13		$	(62	)	$	(3,050	)	$	8,002		$	(754	)	$	4,149

	Quarter Ended June 30, 2008
	Music(A)			MSS(B)			Games(C)			TPS(D)			Other			Grand Total
							(in thousands)
Net revenue	$	37,170		$	29,238		$	34,945		$	51,295			—		$	152,648
Cost of revenue		20,693			3,707			10,655			20,590			—			55,645
Gross profit		16,477			25,531			24,290			30,705			—			97,003
Gross margin		44	%		87	%		70	%		60	%		—			64	%
Operating expenses:
Advertising with related party		9,240			—			—			—			—			9,240
Other operating expenses		23,412			15,605			28,424			32,778			237			100,456
Total operating expenses		32,652			15,605			28,424			32,778			237			109,696
Income (loss) from operations		(16,175	)		9,926			(4,134	)		(2,073	)		(237	)		(12,693	)
Other income (expenses):
Interest income, net		—			—			—			—			3,375			3,375
Equity in net loss of investments		—			—			—			—			(107	)		(107	)
Gain on sale of equity investments, net		—			—			—			—			222			222
Gain on sale of interest in Rhapsody America(E)		3,371			—			—			—			—			3,371
Other income (expenses), net		—			—			—			—			50			50
Total other income (expenses), net		3,371			—			—			—			3,540			6,911
Income (loss) before income taxes		(12,804	)		9,926			(4,134	)		(2,073	)		3,303			(5,782	)
Income taxes		—			—			—			—			(3,700	)		(3,700	)
Net income (loss)		(12,804	)		9,926			(4,134	)		(2,073	)		(397	)		(9,482	)
Net income (loss) attributable to noncontrolling interest in Rhapsody America		8,177			—			—			—			—			8,177
Net income (loss) attributable to common shareholders	$	(4,627	)	$	9,926		$	(4,134	)	$	(2,073	)	$	(397	)	$	(1,305	)
Reconciliation of segment GAAP net income (loss) attributable to common shareholders to segment adjusted EBITDA is as follows:
Net income (loss) attributable to common shareholders	$	(4,627	)	$	9,926		$	(4,134	)	$	(2,073	)	$	(397	)	$	(1,305	)
Income taxes		—			—			—			—			3,700			3,700
Interest income, net		—			—			—			—			(3,375	)		(3,375	)
Stock-based compensation		1,089			801			1,530			2,611			—			6,031
Conversion of WiderThan stock options to a cash equivalent		—			—			—			26			—			26
Acquisitions related intangible asset amortization(F)		384			—			914			4,873			—			6,171
Gain on sale of equity investments, net		—			—			—			—			(222	)		(222	)
Depreciation and amortization(F)		1,262			897			918			3,109			—			6,186
Expenses (benefit) related to antitrust litigation:
Income		—			—			—			—			—			—
Expenses		—			—			—			—			202			202
Charitable contributions		—			—			—			—			—			—
Adjusted EBITDA	$	(1,892	)	$	11,624		$	(772	)	$	8,546		$	(92	)	$	17,414

Note: Cost of revenue and operating expenses of the segments shown above include costs directly attributable to those segments and an allocation of general and administrative and other common or shared costs.

(A)	The Music segment primarily includes revenue and related costs from: Rhapsody America’s Rhapsody and Radiopass subscription services; sales of digital music content through the Rhapsody service and the RealPlayer music store; and advertising from music websites.
(B)	The Media Software and Services (MSS) segment primarily includes revenue and related costs from: the SuperPass premium subscription service; RealPlayer Plus and related products; sales and distribution of third-party software products; and all advertising other than that related directly to our Music and Games businesses.
(C)	The Games segment primarily includes revenue and related costs from: the sale of individual games on our websites RealArcade.com, GameHouse.com and Zylom.com; the sales of games subscription services; advertising through our games websites; the sale of games through the syndication on partner sites, and sales of games through wireless carriers.
(D)	The Technology Products and Solutions (TPS) segment includes revenue and related costs from: sales of ringback tones, music-on-demand, video-on-demand, messaging, and information services; sales of media delivery system software, including Helix system software and related authoring and publishing tools, both directly to customers and indirectly through original equipment manufacturer channels; support and maintenance services sold to customers who purchase software products; broadcast hosting services; and consulting and professional services that are offered to customers.
(E)	Comprises gains realized from MTVN’s note payments to Rhapsody America. Effective January 1, 2009, the Company adopted SFAS 160 which requires the appreciation of gains on the sale of non-controlling interest to be recorded as an equity transaction.
(F)	Net of noncontrolling interest effect.

RealNetworks, Inc. and Subsidiaries
Supplemental Financial Information
(Unaudited)

	Quarter Ended June 30, 2009
						Acquisitions			WiderThan
						Related			Options
						Intangible			Converted			Antitrust
	As		Stock-Based			Asset			to a Cash			Litigation
	Reported		Compensation			Amortization(A)			Equivalent			Related		Adjusted
						(in thousands)
Expenses in accordance with GAAP
Cost of revenue	$	55,614	$	(363	)	$	(553	)	$	—		$	—	$	54,698
Operating expenses:
Research and development	$	28,923	$	(2,234	)	$	—		$	(3	)	$	—	$	26,686
Sales and marketing		42,273		(1,199	)		(1,096	)		—			—		39,978
General and administrative		19,338		(1,800	)		—			—			—		17,538
Adjusted operating expenses, net	$	90,534	$	(5,233	)	$	(1,096	)	$	(3	)	$	—	$	84,202

	Quarter Ended June 30, 2008
						Acquisitions			WiderThan
						Related			Options
						Intangible			Converted			Antitrust
	As		Stock-Based			Asset			to a Cash			Litigation
	Reported		Compensation			Amortization(A)			Equivalent			Related			Adjusted
						(in thousands)
Expenses in accordance with GAAP
Cost of revenue	$	55,645	$	(662	)	$	(2,282	)	$	(1	)	$	—		$	52,700
Operating expenses:
Research and development	$	29,065	$	(2,146	)	$	—		$	—		$	—		$	26,919
Sales and marketing		53,054		(1,433	)		(3,889	)		(7	)		—			47,725
General and administrative		18,337		(1,790	)		—			(18	)		(202	)		16,327
Adjusted operating expenses, net	$	100,456	$	(5,369	)	$	(3,889	)	$	(25	)	$	(202	)	$	90,971

	Six Months Ended June 30, 2009
						Acquisitions			WiderThan
						Related			Options
						Intangible			Converted			Antitrust
	As		Stock-Based			Asset			to a Cash			Litigation
	Reported		Compensation			Amortization(A)			Equivalent			Related		Adjusted
						(in thousands)
Expenses in accordance with GAAP
Cost of revenue	$	111,635	$	(993	)	$	(1,099	)	$	(1	)	$	—	$	109,542
Operating expenses:
Research and development	$	57,482	$	(4,058	)	$	—		$	(8	)	$	—	$	53,416
Sales and marketing		85,958		(2,265	)		(2,318	)		(11	)		—		81,364
General and administrative		42,169		(3,502	)		—			—			—		38,667
Adjusted operating expenses, net	$	185,609	$	(9,825	)	$	(2,318	)	$	(19	)	$	—	$	173,447

	Six Months Ended June 30, 2008
						Acquisitions			WiderThan
						Related			Options
						Intangible			Converted			Antitrust
	As		Stock-Based			Asset			to a Cash			Litigation
	Reported		Compensation			Amortization(A)			Equivalent			Related			Adjusted
						(in thousands)
Expenses in accordance with GAAP
Cost of revenue	$	111,038	$	(896	)	$	(4,597	)	$	(22	)	$	—		$	105,523
Operating expenses:
Research and development	$	54,071	$	(4,059	)	$	—		$	(46	)	$	—		$	49,966
Sales and marketing		106,650		(3,341	)		(7,889	)		(29	)		—			95,391
General and administrative		35,421		(3,224	)		—			(18	)		(404	)		31,775
Adjusted operating expenses, net	$	196,142	$	(10,624	)	$	(7,889	)	$	(93	)	$	(404	)	$	177,132

(A) - Net of noncontrolling interest effect.

RealNetworks, Inc. and Subsidiaries
Earnings Per Share Reconciliation
(Unaudited)

	Quarters Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
	(in thousands, except per share data)
Net income (loss) attributable to common shareholders	$	(188,329	)	$	(1,305	)	$	(200,465	)	$	1,121
Less accretion of MTVN’s preferred return in Rhapsody America		(416	)		—			(1,850	)		—
Net income (loss) available to common shareholders	$	(188,745	)	$	(1,305	)	$	(202,315	)	$	1,121
Shares used to compute basic net income (loss) per share available to common shareholders		134,420			142,905			134,394			142,946
Dilutive potential common shares:
Stock options and restricted stock		—			—			—			2,304
Convertible debt		—			—			—			10,750
Shares used to compute diluted net income (loss) per share available to common shareholders		134,420			142,905			134,394			156,000
Basic net income (loss) per share available to common shareholders	$	(1.40	)	$	(0.01	)	$	(1.51	)	$	0.01
Diluted net income (loss) per share available to common shareholders	$	(1.40	)	$	(0.01	)	$	(1.51	)	$	0.01