Realnetworks (RNWK) 8-K Realnetworks Announces Second Quarter 2011 Results

Exhibit 99.1

REALNETWORKS ANNOUNCES SECOND QUARTER 2011 RESULTS

SEATTLE – July 28, 2011 –RealNetworks, Inc. (Nasdaq: RNWK) today announced results for the second quarter ended June 30, 2011.

Quarterly Highlights:

• Revenue of $83.8 million

• Net loss of $(6.8) million or $(0.05) per share

• Adjusted EBITDA of $2.2 million

• Cash and short term investments of $327.9 million as of June 30, 2011

• Board declares a special dividend of $1.00 per share and 1-for-4 reverse stock split

“While our overall financial results for the quarter were not up to our expectations, we delivered against several of our key milestones for the year, including the launch of Unifi with Vodafone-Germany, the relaunch of GameHouse.com and a successful update campaign for RealPlayer,” said Mike Lunsford, interim CEO of RealNetworks.

“As we continue with the strategic review of our business, we have determined that we have more cash than we anticipate needing for our future operations or strategic initiatives,” Mr. Lunsford continued. “Therefore, we are declaring a special dividend to shareholders of $1.00 per share.”

Second Quarter Results

For the second quarter of 2011, revenue was $83.8 million, a decrease of 6% compared with the second quarter of 2010 and a sequential decline of 4% from the first quarter. Foreign currency exchange rate fluctuations positively affected second quarter revenue by $2.9 million compared with the year-earlier quarter. Revenue trends in each of RealNetworks’ businesses in the second quarter of 2011 compared with the year-earlier quarter were: a 41% increase in Emerging Products revenue to $12.7 million, a 12% decrease in Core Products revenue to $45.7 million, and a 10% decrease in Games revenue to $25.3 million.

Net loss for the second quarter of 2011 was $(6.8) million, or $(0.05) per share, compared with a net loss of $(25.9) million, or $(0.19) per share, in the second quarter of 2010. Second quarter 2010 results included $11.9 million in restructuring charges and loss on excess office facilities. Adjusted EBITDA for the second quarter of 2011 was $2.2 million, compared with $604,000 for the second quarter of 2010. A reconciliation of GAAP operating income (loss) to adjusted EBITDA is provided in the financial tables that accompany this release.

As of June 30, 2011, RealNetworks had $327.9 million in unrestricted cash, cash equivalents and short-term investments compared with $334.3 million at Dec. 31, 2010. In addition, RealNetworks had $47.7 million in restricted cash and equity investments, including its equity interest in the Rhapsody joint venture, at June 30, 2011.

1

Segment Operating Results

	2011			2011			2010			Sequential Change			Yr/Yr Change
	Q2			Q1			Q2
				(in thousands)
Revenue
Core Products	$	45,735		$	48,107		$	51,742			-5	%		-12	%
Emerging Products		12,717			11,135			8,997			14	%		41	%
Games		25,300			28,059			28,145			-10	%		-10	%
Corporate		—			—			—
Total excluding Music		83,752			87,301			88,884			-4	%		-6	%
Music		—			—			—
Total	$	83,752		$	87,301		$	88,884			-4	%		-6	%
Operating Income (loss)
Core Products	$	7,208		$	7,737		$	11,149			-7	%		-35	%
Emerging Products		370			(296	)		(2,009	)		-225	%		-118	%
Games		2,049			2,711			85			-24	%		2311	%
Corporate		(14,411	)		(15,818	)		(30,919	)		-9	%		-53	%
Total excluding Music		(4,784	)		(5,666	)		(21,694	)		-16	%		-78	%
Music		—			—			—
Total	$	(4,784	)	$	(5,666	)	$	(21,694	)		-16	%		-78	%
Adjusted EBITDA
Core Products	$	9,900		$	10,260		$	14,675			-4	%		-33	%
Emerging Products		707			(188	)		(1,732	)		-476	%		-141	%
Games		2,748			3,340			1,948			-18	%		41	%
Corporate		(11,133	)		(5,870	)		(14,287	)		90	%		-22	%
Total excluding Music		2,222			7,542			604			-71	%		268	%
Music		—			—			—
Total	$	2,222		$	7,542		$	604			-71	%		268	%

Business Outlook

For the third quarter of 2011, Real expects total revenue to be consistent with year-ago revenue and to increase sequentially. Real expects revenue in Emerging Products will increase year-over-year and be flat sequentially; revenue in Core Products will decline year-over-year and increase sequentially; and revenue in Games will decline year-over-year and sequentially. Real expects adjusted EBITDA for the third quarter to decline compared with the year-ago quarter and to increase sequentially.

For the full year, Real is not changing the guidance given in February. Real expects a small decline in 2011 revenue compared with 2010, excluding Music, due in part to the elimination or de-emphasis of products and services that generate low-profit or unprofitable revenue. Excluding the revenue from these products and services, Real expects 2011 revenue to be essentially flat compared with 2010, excluding Music. Real expects 2011 adjusted EBITDA and adjusted EBITDA margin to increase over 2010 due in large part to the restructuring, which has lowered the company’s overall cost structure.

2

Real’s outlook for the year anticipates seasonality in revenue and adjusted EBITDA, which typically declines from the fourth quarter to the first quarter, and increases through the year. Real has generated more than 70% of its annual adjusted EBITDA in the second half of the year in each of the past two years. Real expects to see similar seasonal patterns for both revenue and adjusted EBITDA in 2011.

The foregoing forward-looking statements reflect Real’s expectations as of July 28, 2011. It is not RealNetworks’ general practice to update these forward-looking statements until its next quarterly results announcement.

Dividend and Reverse Stock Split

In a separate release, RealNetworks also announced today that its Board of Directors declared a special dividend of $1.00 per share of its common stock, payable on Aug. 23, 2011, to holders of record as of the close of business Aug. 9, 2011. The cash dividend will total approximately $136.8 million.

The board also approved a one-for-four reverse stock split of RealNetworks common stock, which it expects to implement at the close of business on Aug. 30, 2011. The company expects to have approximately 34.2 million shares outstanding after the reverse split, compared with 136.8 million as of June 30, 2011.

Webcast and Conference Call Information

The company will host an audio Webcast conference call to review results and discuss the company’s operations for the second quarter at 5:00 p.m. ET on July 28. The Webcast will be available at: http://investor.realnetworks.com

Webcast participants will need RealPlayer^® to hear the webcast, which can be downloaded at www.real.com.

The on-demand Webcast will be available beginning approximately two hours following the conclusion of the live Webcast.

Conference Call Details

5:00 p.m. ET / 2:00 p.m. PT

Dial in:

800-857-5305 Domestic

773-681-5857 International

Passcode: Second Quarter Earnings

Leader: Mike Lunsford

Telephonic replay will be available until 8 p.m. ET, August 11, 2011.

Replay dial in:

866-395-9179 Domestic

203-369-0503 International

3

For More Information:

Marj Charlier, RealNetworks, 206-892-6718 or mcharlier@real.com

Press Only:

Barbara Krause, Krause Taylor Associates, 408-981-2429 or barbara@krause-taylor.com

About RealNetworks:

RealNetworks creates innovative applications and services that make it easy to connect with and enjoy digital media. RealNetworks invented the streaming media category in 1995 and continues to connect consumers with their digital media both directly and through partners, aiming to support every network, device, media type and social network. RealNetworks’ corporate information is located at http://www.realnetworks.com/about-us

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 EBITDA and adjusted EBITDA by reporting segment, which management believes provide investors with useful information.

In the financial tables of our earnings press release, RealNetworks has included reconciliations of GAAP operating income (loss) to adjusted EBITDA and to adjusted EBITDA by reporting segment.

The rationale for management’s use of non-GAAP measures is included in the supplementary materials presented with the second quarter earnings materials. Please refer to 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 RealNetworks’ plan to pay a special dividend, to effect a reverse stock split, and its current expectations for future revenue, adjusted EBITDA, adjusted EBITDA margin, seasonality of financial results and future growth and the assumptions relating to such statements. 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: RealNetworks’ ability to realize operating efficiencies, growth and other benefits from the implementation of its strategic initiatives; the emergence of new entrants and competition in the market for digital media products and services; other competitive risks, including the introduction and growth of competing technologies, products and services; the potential outcomes and effects of claims and legal proceedings on RealNetworks’ business, prospects, financial condition or results of operations; fluctuations in foreign currencies; risks associated with key customer or strategic relationships, 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; and changes in RealNetworks’ effective tax rate. More information about potential risk factors that could affect RealNetworks’ business and financial results is included in RealNetworks’ annual report on

4

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 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, RealPlayer and GameHouse 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.

5

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(in thousands, except per share data)
Net revenue	$	83,752		$	88,884		$	171,053		$	217,484
Cost of revenue		30,666			29,149			62,732			78,308
Gross profit		53,086			59,735			108,321			139,176
Operating expenses:
Research and development		17,809			27,583			37,704			62,258
Sales and marketing		28,853			27,382			57,333			65,209
Advertising with related party (A)		—			—			—			1,065
General and administrative		10,874			14,590			16,496			29,511
Restructuring and other charges		508			4,792			7,412			10,407
Loss (gain) on excess office facilities		(174	)		7,082			(174	)		7,082
Total operating expenses		57,870			81,429			118,771			175,532
Operating income (loss)		(4,784	)		(21,694	)		(10,450	)		(36,356	)
Other income (expenses):
Interest income, net		311			551			690			931
Equity in net loss of Rhapsody and other equity method investments (B)		(1,018	)		(5,427	)		(4,299	)		(5,427	)
Loss on sale of equity investments, net		—			(50	)		—			(50	)
Gain on deconsolidation of Rhapsody		—			—			—			10,929
Other income (expense), net		(311	)		994			(433	)		1,093
Total other income (expense), net		(1,018	)		(3,932	)		(4,042	)		7,476
Income (loss) before income taxes		(5,802	)		(25,626	)		(14,492	)		(28,880	)
Income tax (expense) benefit		(1,047	)		(281	)		(4,662	)		3,291
Net income (loss)		(6,849	)		(25,907	)		(19,154	)		(25,589	)
Net loss attributable to the noncontrolling interest in Rhapsody (C)		—			—			—			2,910
Net income (loss) attributable to common shareholders	$	(6,849	)	$	(25,907	)	$	(19,154	)	$	(22,679	)
Basic net income (loss) per share available to common shareholders	$	(0.05	)	$	(0.19	)	$	(0.14	)	$	(0.14	)
Diluted net income (loss) per share available to common shareholders	$	(0.05	)	$	(0.19	)	$	(0.14	)	$	(0.14	)
Shares used to compute basic net income (loss) per share available to common shareholders		136,539			135,277			136,266			135,209
Shares used to compute diluted net income (loss) per share available to common shareholders		136,539			135,277			136,266			135,209

(A) Consists of advertising purchased by Rhapsody from MTV Networks (MTVN). MTVN had a 49% ownership interest in Rhapsody prior to the restructuring transactions that occurred on March 31, 2010. See note (B) for more details regarding the restructuring and the related deconsolidation.

(B) On March 31, 2010, we completed the restructuring of Rhapsody which resulted in our ownership decreasing to approximately 47% of the outstanding equity in Rhapsody and no longer having operating control. Since the restructuring was completed on the last day of the quarter ended March 31, 2010, our statement of operations for the first quarter of 2010 includes results from Rhapsody’s operations. Beginning with the quarter ended June 30, 2010, Rhapsody’s revenue or other operating results are no longer consolidated within our financial statements and we are not recording any operating or other financial results for our Music segment. We now report our share of Rhapsody’s income or losses as “Equity in net loss of Rhapsody and other equity method investments” in “Other income (expenses)”.

(C) Net loss attributable to the noncontrolling interest in Rhapsody reflects MTVN’s 49% ownership share in the losses of Rhapsody prior to the restructuring transactions that occurred on March 31, 2010.

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	June 30, 2011		December 31, 2010
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	236,730	$	236,018
Short-term investments		91,142		98,303
Trade accounts receivable, net		46,011		48,324
Deferred costs, current portion		9,882		9,173
Related party receivable - Rhapsody (A)		527		351
Prepaid expenses and other current assets		24,845		30,441
Total current assets		409,137		422,610
Equipment, software, and leasehold improvements, at cost:
Equipment and software		146,744		144,623
Leasehold improvements		25,454		25,367
Total equipment, software, and leasehold improvements		172,198		169,990
Less accumulated depreciation and amortization		131,193		126,619
Net equipment, software, and leasehold improvements		41,005		43,371
Restricted cash equivalents and investments		10,141		10,000
Equity method investments		11,397		15,486
Available for sale securities		26,150		27,541
Other assets		3,064		3,316
Deferred costs, non-current portion		16,443		18,401
Deferred tax assets, net, non-current portion		12,943		12,805
Other intangible assets, net		9,837		6,952
Goodwill		6,502		4,960
Total assets	$	546,619	$	565,442
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	22,194	$	30,413
Accrued and other liabilities		82,199		85,702
Deferred revenue, current portion		18,010		19,036
Accrued loss on excess office facilities, current portion		1,391		1,144
Total current liabilities		123,794		136,295
Deferred revenue, non-current portion		88		460
Accrued loss on excess office facilities, non-current portion		2,430		3,380
Deferred rent		3,032		3,514
Deferred tax liabilities, net, non-current portion		2,015		1,049
Other long-term liabilities		11,231		7,999
Total liabilities		142,590		152,697
Shareholders’ equity		404,029		412,745
Total liabilities and shareholders’ equity	$	546,619	$	565,442

(A) Related party receivable reflects amounts Rhapsody International, formed on March 31, 2010, owes RealNetworks.

RealNetworks, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Month Ended June 30,
	2011			2010
	(in thousands)
Cash flows from operating activities:
Net income (loss)	$	(19,154	)	$	(25,589	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		8,116			13,973
Stock-based compensation		6,129			6,692
Loss (gain) on disposal of equipment, software, and leasehold improvements		85			(3	)
Equity in net loss of Rhapsody and other equity method investments		4,299			5,427
Loss on sale of equity investment, net		—			50
Gain on deconsolidation of Rhapsody		—			(10,929	)
Excess tax benefit from stock option exercises		(57	)		(18	)
Accrued restructuring and other charges		131			3,581
Accrued loss (gain) on excess office facilities		(174	)		6,470
Deferred income taxes, net		(351	)		(1,609	)
Other		62			22
Net change in certain operating assets and liabilities, net of acquisitions, disposals, and deconsolidation of Rhapsody		(4,576	)		(54,404	)
Net cash used in operating activities		(5,490	)		(56,337	)
Cash flows from investing activities:
Purchases of equipment, software, and leasehold improvements		(3,134	)		(9,507	)
Purchases of short-term investments		(54,844	)		(65,754	)
Proceeds from sales and maturities of short-term investments		62,005			16,559
Payment of acquisition costs, net of cash acquired		(2,888	)		—
Payment in connection with the restructuring of Rhapsody		—			(18,000	)
Repayment of temporary funding on deconsolidation of Rhapsody		—			5,869
Decrease (increase) in restricted cash equivalents and investments, net		(141	)		3,700
Net cash provided by (used in) investing activities		998			(67,133	)
Cash flows from financing activities:
Net proceeds from sales of common stock under employee stock purchase plan and exercise of stock options		1,610			1,272
Net proceeds from sales of interest in Rhapsody		—			1,213
Excess tax benefit from stock option exercises		57			18
Net cash provided by financing activities		1,667			2,503
Effect of exchange rate changes on cash and cash equivalents		3,537			92
Net increase (decrease) in cash and cash equivalents		712			(120,875	)
Cash and cash equivalents, beginning of period		236,018			277,030
Cash and cash equivalents, end of period	$	236,730		$	156,155

RealNetworks, Inc. and Subsidiaries

Supplemental Financial Information

(Unaudited)

	2011				2010
	Q2		Q1		Q4		Q3		Q2		Q1
							(in thousands)
Net Revenue by Line of Business:
Core Products (A)	$	45,735	$	48,107	$	58,030	$	51,870	$	51,742	$	51,203
Emerging Products (B)		12,717		11,135		12,558		8,778		8,997		11,428
Games (C)		25,300		28,059		27,229		25,784		28,145		30,236
Total net revenue excluding music		83,752		87,301		97,817		86,432		88,884		92,867
Music (D)		—		—		—		—		—		35,733
Total net revenue including music	$	83,752	$	87,301	$	97,817	$	86,432	$	88,884	$	128,600
Core Products Revenue by Product:
SaaS (E)	$	30,216	$	30,526	$	35,656	$	31,885	$	32,388	$	33,614
Systems Integrations / Professional Services (F)		388		1,840		4,388		953		998		367
Technology Licensing (G)		6,508		6,425		7,632		7,473		7,736		7,910
Consumer Subscriptions (H)		8,623		9,316		10,354		11,559		10,620		9,312
Total Core Products net revenue	$	45,735	$	48,107	$	58,030	$	51,870	$	51,742	$	51,203
Net Revenue by Geography:
United States	$	41,984	$	44,469	$	48,048	$	46,874	$	48,351	$	84,550
Rest of world		41,768		42,832		49,769		39,558		40,533		44,050
Total net revenue	$	83,752	$	87,301	$	97,817	$	86,432	$	88,884	$	128,600
Product Metrics (subscribers and ICM presented as greater than):
Addressable subscribers of mobile operators under contract (I)		775,000		775,000		700,000		700,000		675,000		650,000
SaaS subscribers (J)		34,550		35,900		36,700		37,500		37,600		37,950
Monthly SaaS ARPU (in cents) (K)	$	0.18	$	0.18	$	0.20	$	0.16	$	0.16	$	0.16
ICM delivered in billions (L)		157		151		136		134		128		120
Consumer subscribers(M)		475		500		550		600		600		575

Net Revenue by Line of Business:

(A) The Core Products segment primarily includes revenue from SaaS services, system integration and professional services to carriers and mobile handset companies, sales of technology licenses of our software products such as Helix for handsets, and consumer subscriptions such as SuperPass and our international radio subscription services.

(B) The Emerging Products segment primarily includes revenue from RealPlayer and related products, such as the distribution of third party software products, advertising on RealPlayer websites and sales of RealPlayerPlus software licenses to consumers.

(C) The Games segment primarily includes revenue from sales of games licenses, online games subscription services, advertising on game sites and social network sites, games syndication services, microtransactions from online and social games and sales of mobile games.

(D) On March 31, 2010, we completed the restructuring of Rhapsody, which resulted in our ownership decreasing to approximately 47% of the outstanding equity in Rhapsody, and our loss of operating control over Rhapsody. Beginning with the quarter ended June 30, 2010, Rhapsody’s revenue or other operating results are no longer consolidated within our financial statements and we are not recording any operating or other financial results for our Music segment. We now report our share of Rhapsody’s income or losses as “Equity in net loss of Rhapsody and other equity method investments” in “Other income (expense)”.

Core Products Revenue by Product:

(E) Software as a Service (SaaS) revenue includes revenue from music on demand (MOD), video on demand (VOD), ringtones, ringback tones (RBT) and intercarrier messaging services provided to network service providers, who are largely mobile phone networks.

(F) Systems Integrations / Professional Services revenue includes professional services, other than those associated with software sales, provided to mobile carriers and handset manufacturers.

(G) Technology Licensing includes revenue from sales of software and other intellectual property licenses such as Helix server licenses and Helix software licenses for handsets.

(H) Consumer Subscriptions includes revenue from SuperPass, as well as our international radio subscription services.

Product Metrics:

(I) Total subscribers reported at the end of the quarter of mobile carriers that offer one or more of our SaaS services, other than intercarrier messaging services, to their customers.

(J) SaaS subscribers include RBT, MOD and VOD services, measured at the end of the quarter.

(K) Monthly SaaS ARPU (Average Revenue Per User) is calculated by dividing (a) the total quarterly revenue from SaaS subscription services, including RBT, MOD, VOD, by (b) the number of SaaS subscribers at the end of the quarter, and dividing the resulting quotient by three.

(L) ICM (Intercarrier message) represents the total number of messages delivered across our messaging platform during the quarter.

(M) Consumer subscribers primarily includes our SuperPass and GamePass products. We repurchased our international radio subscription services from Rhapsody as part of the restructuring that occurred on March 31, 2010, and as a result, subscribers to our international radio services are included beginning in the quarter ended June 30, 2010.

RealNetworks, Inc. and Subsidiaries

Segment Results of Operations

(Unaudited)

	2011						2010			2011			2010
	Q2			Q1			Q2			YTD			YTD
				(in thousands)
Core Products
Net revenue	$	45,735		$	48,107		$	51,742		$	93,842		$	102,945
Cost of revenue		19,353			20,984			18,085			40,337			35,824
Gross profit		26,382			27,123			33,657			53,505			67,121
Gross margin		58	%		56	%		65	%		57	%		65	%
Operating expenses		19,174			19,386			22,508			38,560			46,594
Operating income (loss)	$	7,208		$	7,737		$	11,149		$	14,945		$	20,527
Adjusted EBITDA	$	9,900		$	10,260		$	14,675		$	20,160		$	27,474
Emerging Products
Net revenue	$	12,717		$	11,135		$	8,997		$	23,852		$	20,425
Cost of revenue		2,978			1,540			3,404			4,518			4,868
Gross profit		9,739			9,595			5,593			19,334			15,557
Gross margin		77	%		86	%		62	%		81	%		76	%
Operating expenses		9,369			9,891			7,602			19,260			14,635
Operating income (loss)	$	370		$	(296	)	$	(2,009	)	$	74		$	922
Adjusted EBITDA	$	707		$	(188	)	$	(1,732	)	$	519		$	1,277
Games
Net revenue	$	25,300		$	28,059		$	28,145		$	53,359		$	58,381
Cost of revenue		8,040			8,534			7,228			16,574			14,931
Gross profit		17,260			19,525			20,917			36,785			43,450
Gross margin		68	%		70	%		74	%		69	%		74	%
Operating expenses		15,211			16,814			20,832			32,025			43,603
Operating income (loss)	$	2,049		$	2,711		$	85		$	4,760		$	(153	)
Adjusted EBITDA	$	2,748		$	3,340		$	1,948		$	6,088		$	3,633
Music
Net revenue	$	—		$	—		$	—		$	—		$	35,733
Cost of revenue		—			—			—			—			21,864
Gross profit		—			—			—			—			13,869
Gross margin		N/A			N/A			N/A			N/A			39	%
Operating expenses		—			—			—			—			13,911
Operating income (loss)	$	—		$	—		$	—		$	—		$	(42	)
Adjusted EBITDA	$	—		$	—		$	—		$	—		$	4,214
Corporate
Net revenue	$	—		$	—		$	—		$	—		$	—
Cost of revenue		295			1,008			432			1,303			821
Gross profit		(295	)		(1,008	)		(432	)		(1,303	)		(821	)
Gross margin		N/A			N/A			N/A			N/A			N/A
Operating expenses		14,116			14,810			30,487			28,926			56,789
Operating income (loss)	$	(14,411	)	$	(15,818	)	$	(30,919	)	$	(30,229	)	$	(57,610	)
Adjusted EBITDA	$	(11,133	)	$	(5,870	)	$	(14,287	)	$	(17,003	)	$	(30,269	)
Total
Net revenue	$	83,752		$	87,301		$	88,884		$	171,053		$	217,484
Cost of revenue		30,666			32,066			29,149			62,732			78,308
Gross profit		53,086			55,235			59,735			108,321			139,176
Gross margin		63	%		63	%		67	%		63	%		64	%
Operating expenses		57,870			60,901			81,429			118,771			175,532
Operating income (loss)	$	(4,784	)	$	(5,666	)	$	(21,694	)	$	(10,450	)	$	(36,356	)
Adjusted EBITDA	$	2,222		$	7,542		$	604		$	9,764		$	6,329

RealNetworks, Inc. and Subsidiaries

Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment

(Unaudited)

	2011						2010			2011			2010
	Q2			Q1			Q2			YTD			YTD
				(in thousands)
Core Products
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment:
Operating income (loss)	$	7,208		$	7,737		$	11,149		$	14,945		$	20,527
Acquisitions related intangible asset amortization		710			474			1,106			1,184			2,227
Depreciation and amortization		1,982			2,049			2,420			4,031			4,720
Impairment of goodwill		—			—			—			—			—
Adjusted EBITDA	$	9,900		$	10,260		$	14,675		$	20,160		$	27,474
Emerging Products
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment:
Operating income (loss)	$	370		$	(296	)	$	(2,009	)	$	74		$	922
Acquisitions related intangible asset amortization		53			—			—			53			—
Depreciation and amortization		284			108			277			392			355
Impairment of goodwill		—			—			—			—			—
Adjusted EBITDA	$	707		$	(188	)	$	(1,732	)	$	519		$	1,277
Games
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment:
Operating income (loss)	$	2,049		$	2,711		$	85		$	4,760		$	(153	)
Acquisitions related intangible asset amortization		256			254			61			510			121
Depreciation and amortization		443			375			1,802			818			3,665
Impairment of goodwill		—			—			—			—			—
Adjusted EBITDA	$	2,748		$	3,340		$	1,948		$	6,088		$	3,633
Music
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment:
Operating income (loss)	$	—		$	—		$	—		$	—		$	(42	)
Net loss attributable to noncontrolling interest in Rhapsody		—			—			—			—			2,910
Acquisitions related intangible asset amortization (A)		—			—			—			—			58
Depreciation and amortization (A)		—			—			—			—			690
Pro forma gain on sale of interest in Rhapsody America		—			—			—			—			598
Impairment of goodwill		—			—			—			—			—
Adjusted EBITDA	$	—		$	—		$	—		$	—		$	4,214
Corporate
Reconciliation of segment GAAP operating income (loss) to adjusted EBITDA by reporting segment:
Operating income (loss)	$	(14,411	)	$	(15,818	)	$	(30,919	)	$	(30,229	)	$	(57,610	)
Other income (expense), net		(311	)		(122	)		994			(433	)		1,093
Depreciation and amortization		569			559			993			1,128			2,067
Restructuring and other charges		508			6,904			4,792			7,412			10,407
Stock-based compensation		2,686			2,607			2,771			5,293			6,692
Loss on excess office facilities		(174	)		—			7,082			(174	)		7,082
Adjusted EBITDA	$	(11,133	)	$	(5,870	)	$	(14,287	)	$	(17,003	)	$	(30,269	)
Total
Reconciliation of GAAP operating income (loss) to adjusted EBITDA:
Operating income (loss)	$	(4,784	)	$	(5,666	)	$	(21,694	)	$	(10,450	)	$	(36,356	)
Net loss attributable to noncontrolling interest in Rhapsody		—			—			—			—			2,910
Other income (expense), net		(311	)		(122	)		994			(433	)		1,093
Acquisitions related intangible asset amortization (A)		1,019			728			1,167			1,747			2,406
Depreciation and amortization (A)		3,278			3,091			5,492			6,369			11,497
Impairment of goodwill		—			—			—			—			—
Loss on excess office facilities		(174	)		—			7,082			(174	)		7,082
Pro forma gain on sale of interest in Rhapsody America		—			—			—			—			598
Restructuring and other charges		508			6,904			4,792			7,412			10,407
Stock-based compensation		2,686			2,607			2,771			5,293			6,692
Adjusted EBITDA	$	2,222		$	7,542		$	604		$	9,764		$	6,329

(A) Net of noncontrolling interest effect.

RealNetworks, Inc. and Subsidiaries

Earnings Per Share Reconciliation

(Unaudited)

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	(in thousands, except per share data)
Net income (loss) attributable to common shareholders	$	(6,849	)	$	(25,907	)	$	(19,154	)	$	(22,679	)
Less termination of MTVN’s preferred return in Rhapsody		—			—			—			3,700
Net income (loss) available to common shareholders	$	(6,849	)	$	(25,907	)	$	(19,154	)	$	(18,979	)
Shares used to compute basic net income (loss) per share available to common shareholders		136,539			135,277			136,266			135,209
Dilutive stock options and restricted stock		—			—			—			—
Shares used to compute diluted net income (loss) per share available to common shareholders		136,539			135,277			136,266			135,209
Basic net income (loss) per share available to common shareholders	$	(0.05	)	$	(0.19	)	$	(0.14	)	$	(0.14	)
Diluted net income (loss) per share available to common shareholders	$	(0.05	)	$	(0.19	)	$	(0.14	)	$	(0.14	)