RealNetworks has enjoyed real success in the world of digital media. Best known for its RealPlayer media playback software (now part of its emerging products), its primary revenue now comes from Software-as-a-Service (SaaS) used by mobile phone carriers for ringback tones (RBT), music and video on-demand, and text messaging. RealNetworks' other core products are the licensing of its Helix streaming software used to broadcast live and on-demand media, and content subscription service SuperPass, which offers access to video, games, and music. It also creates and publishes downloadable and online games (GameHouse). The company gets about half of its sales in the US.
A nearly 30% quieting of sales in the US headlined the more than 16% drop in overall revenues for 2011. About half of that decline in the US came from the company reducing its ownership in the Rhapsody music service the previous year, which had accounted for nearly $35 million in revenue, to a non-controlling interest of 47%. RealNetworks' $335 million haul for 2011 continued a revenue slide from more than $600 million in 2008, though that high was marred by the company's worst losses in the past decade, bleeding nearly $245 million. So while revenues have dwindled, restructuring has helped nurse its bottom line to a an improved state. It may have lost $30 million in 2011, but it realized a $5 million profit in 2010, and even the 2011 loss is still a marked improvement over the triple digit losses from 2008 and 2009. The restructuring was completed in 2011 and involved a 10% reduction in personnel, cutting positions in engineering, sales, marketing, and administration. It cost them $3 million on the books, but the company expects to see about $11 million in annual savings for its efforts.
Rhapsody couldn't take all the blame for the 2011 revenue abatement, as RealNetworks' SaaS offerings were down by about $18 million because of lower texting contract prices, by $8 million from game subscriptions and licenses, and by about $4 million from SuperPass. All told, total continuing operations accounted for about an equal share as Rhapsody of the overall 2011 revenue decline. The shortfall in Europe came in at about 7% on declining technology licenses ($2.4 million lower) and individual and subscription game sales (down $1.3 million). Other regions produced the only increase, where SaaS was up $2.4 million, technology licensing up $1.4 million, and RealPlayer sales gained $1.5 million, as well as a positive effect of the US dollar to the Korean won by more than $3 million.
In 2012 RealNetworks gained even more ground in those fertile "other regions" when it expanded its SaaS presence in India by partnering with the #3 mobile services operator there, Idea Cellular, to provide RBT (aka dialer tones, the audio that callers hear while waiting for their party to answer the phone) for about a third of India Cellular's customers. In 2011 RealNetworks moved to boost its offerings in Europe when it coaxed AOL (UK) to provide news, entertainment, and lifestyle content through RealPlayer to customers in that market.
To generate investment capital for new businesses and markets, it agreed in 2012 to sell about 190 patents, 170 patent applications, and next-generation video codec software to tech titan Intel for $120 million. RealNetworks kept its existing business protected by retaining some rights to use those patents on current and future products, and will team up with Intel to continue providing support and development on the codec software and related products.
That cash will help to whip up new products and services, like the media cloud service it launched in 2011 in Germany and North America called Unifi. Similar to services such as Google Play and Apple's iCloud, it's an SaaS product that allows customers to access, manage, and share their music, photos, and videos across multiple platforms and devices. It made a splash at the 2011 Consumer Electronics Show by taking the "Best of CES" award given by CBS Interactive's CNET technology publication. Also that year it began offering an iTunes music library clean-up tool called Rinse, which uses a music recognition database of more than 8 million albums and 100 million songs to correct titles, add artwork, and identify duplicates.
A key growth strategy for RealNetworks' core business is the delivery of content to wireless devices, particularly mobile phones. The company partners with leading handset makers and service operators, including Nokia and AT&T and sells to leading wireless providers SK Telecom and Verizon.
While SaaS dominates its business, it has been building its video game offerings after getting into the space several years ago. Its games business operates under the GameHouse division and brand (replacing its RealArcade brand) in North America, which is re-branded as Zylom in Europe and as Atravita in Latin America. It focuses on casual games but parts ways with companies such as Zynga by offering downloadable games for sale, in addition to the typical social, casual avenues of online subscription and ad-supported free play, third-party portals (such as Yahoo!), social networks, and mobile devices. It has a much larger catalog of titles than the Zyngas in the space, more akin to game companies like Big Fish Games, because it not only develops its original games, but games based on licensed properties, as well as licensing its properties out to external developers. It also acts, itself, as a portal for other developers. This is a model, in fact, which Zynga has started progressing toward, but it may be some time before it, with around 40 games, offers the volume found on sites such as GameHouse (3,000 titles) or Big Fish (2,500).
RealNetworks is just as keen to accommodate the growing social aspect in gaming as its competitors. In 2010 it created a platform called GameHouse Fusion specifically designed to give its games more social features and functionality, such as multi-player gaming, live chat, a cross-platform centralized virtual economy, leaderboards, notifications, and news feeds. The platform launched with support from major industry players such as Comcast, MySpace, Qualcomm, and Electronic Arts-owned PopCap Games.
Rounding out the company's operations is the emerging products segment, mainly consisting of the RealPlayer media player software, which competes against Microsoft's Media Player and Apple's QuickTime and iTunes. To keep up with fleet-footed competitors, RealPlayer has grown from something that only played media into a tool that helps customers find, obtain, manage, and even edit content. The software handles not only audio and video, but also photos, and enables users to share content to sites such as Facebook. RealPlayer had once focused on differentiating itself as a streaming platform, but now concentrates on being a content management tool that can handle many formats across a variety of devices. It's available in both a free and paid version.
Founder Rob Glaser owns about 30% of the company. Glaser stepped down as CEO in 2010, but remained chairman.