Exhibit 99.1
Pro Forma Consolidated Financial Information
Introduction
On March 31, 2010, the restructuring transactions contemplated by the Transaction, Contribution and Purchase Agreement dated February 9, 2010 among RealNetworks, Inc. (“Real” or “RealNetworks”), RealNetworks Digital Music of California, Inc., a wholly owned subsidiary of Real, MTV Networks, a division of Viacom International Inc. (“MTVN”), DMS Holdco Inc., a wholly owned subsidiary of MTVN, and Rhapsody America LLC , the joint venture formed by Real and MTVN (“Rhapsody,” together with the other parties listed above, the “Parties”), were completed. At the closing, Rhapsody was converted from a limited liability company to a corporation, and Real, MTVN and two minority stockholders hold the outstanding shares of Rhapsody such that MTVN owns 47.5%, Real owns slightly less than 47.5% of such outstanding shares and the minority stockholders own the remainder. Real contributed $18 million in cash, the Rhapsody brand and certain other assets, including content licenses, in exchange for shares of convertible preferred stock of Rhapsody, carrying a $10 million preference upon certain liquidation events. A portion of Real’s cash contribution was used to repurchase the international radio business that was previously contributed to Rhapsody by Real. MTVN contributed a $33 million advertising commitment in exchange for shares of common stock of Rhapsody, and MTVN’s previous obligation to provide advertising of approximately $111 million as of December 31, 2009 was cancelled. In addition, the Stockholder Agreement, dated as of August 20, 2007, between Real and Viacom International Inc., on behalf of MTVN, and the Limited Liability Company Agreement, dated as of August 20, 2007, among the Parties, were terminated, including the put and call rights held by Real and MTVN and MTVN’s rights to receive a preferred return in connection with the exercise of Real’s put right. At closing, the Parties entered into a Stockholder Agreement that contains provisions regarding the governance of Rhapsody, stock transfer restrictions and approval of certain corporate transactions. In addition, certain existing agreements were amended to, among other things, expand the technology and intellectual property licenses from Real to Rhapsody relating to the core technologies for the Rhapsody audio digital music service to provide worldwide, perpetual licenses and certain rights for use of the core technologies in business-to-business audio music services. Real will also provide certain operational transition services to Rhapsody until December 31, 2010, unless earlier terminated by Rhapsody.
As a result of the restructuring transactions Rhapsody is no longer a consolidated majority-owned subsidiary of RealNetworks, Inc. and is now an independent private company.
Pro Forma Information
The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2009 treats the restructuring transactions of Rhapsody as if they occurred on December 31, 2008. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2009 gives effect to the restructuring transactions of Rhapsody as if they occurred on December 31, 2009. The unaudited pro forma condensed consolidated financial statements are subject to the assumptions and adjustments set forth in the accompanying notes. Management believes that the assumptions used and the adjustments made are reasonable under the circumstances and given the information available. The adjustments are preliminary in nature and subject to change following the transaction based on refinements as actual data become available.
The amounts presented under the column “RealNetworks Consolidated Historical” in the accompanying unaudited pro forma consolidated statement of operations and unaudited pro forma consolidated balance sheet as of and for the year ended December 31, 2009 reflect the historical consolidated amounts as reported by RealNetworks in its Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission on March 10, 2010.
The amount presented under the column “Deconsolidation of Rhapsody” represents the historical amounts of Rhapsody, previously consolidated by RealNetworks.
