8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): May 1, 2009

RealNetworks, Inc.

(Exact name of registrant as specified in its charter)

WASHINGTON
(State or other jurisdiction
of incorporation) 0-23137
(Commission File
Number) 91-1628146
(I.R.S. Employer
Identification No.)

2601 Elliott Avenue, Suite 1000
Seattle, Washington 98121
(Address of principal executive offices) (Zip code)

(206) 674-2700
Registrant’s telephone number, including area code

Not Applicable
(Former name or former address if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02. Results of Operations and Financial Condition.
	Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of            Certain Officers; Compensatory Arrangements of Certain Officers.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURE
EXHIBIT INDEX
EX-99.1
EX-99.2

Item 2.02. Results of Operations and Financial Condition.

     On May 7, 2009, RealNetworks, Inc. (the “Company” or “RealNetworks”) announced via press release the Company’s results for its first quarter ended March 31, 2009. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and additional information regarding the inclusion of non-GAAP financial measures in certain of the Company’s public disclosures, including its first quarter 2009 financial results announcement, is included as Exhibit 99.2. The information in Item 2.02 of this Form 8-K is intended to be furnished to the Securities and Exchange Commission (“SEC”). This information shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

     Effective May 1, 2009, the Board of Directors (the “Board”) of RealNetworks appointed John Chapple as a non-employee director. Mr. Chapple fills the vacancy resulting from the resignation of Jeremy Jaech, which became effective on May 1, 2009. The Company previously reported that Mr. Jaech will not stand for re-election at its 2009 annual shareholders meeting. Mr. Chapple will serve as a Class 3 director and will serve a term expiring at the 2009 annual shareholders meeting. The Company anticipates that Mr. Chapple will be nominated to serve a full three-year term at the 2009 annual shareholders meeting later this year. The Board intends to appoint Mr. Chapple to serve as a member of the Compensation Committee of the Board.

     Mr. Chapple has served as president of Hawkeye Investments LLC, a privately-owned equity firm investing primarily in telecommunications and real estate ventures, since October 2006. Prior to forming Hawkeye, Mr. Chapple served as president, chief executive officer and chairman of the board of Nextel Partners from January 1998 to June 2006, when the company was purchased by Sprint Communications. From 1995 to 1997, Mr. Chapple was the president and chief operating officer of Orca Bay Sports and Entertainment in Vancouver, B.C., a professional sports and entertainment company which at the time owned and operated Vancouver’s National Basketball Association and National Hockey League sports franchises in addition to the General Motors Place sports arena. From 1988 to 1995, he served as executive vice president of operations for McCaw Cellular Communications and subsequently AT&T Wireless Services following the merger of those companies.

     Mr. Chapple also serves on the boards of directors of Yahoo! Inc., a leading global Internet company, Cbeyond, Inc., a voice and broadband Internet provider, and privately held companies Seamobile Enterprises, which provides integrated wireless services at sea, and Telesphere Networks, Inc., a VOIP (Voice over Internet Protocol) company. Mr. Chapple has served as a member of Syracuse University’s Board of Trustees since 2005 and as Chairman since 2008. In addition, Mr. Chapple serves on the Advisory Boards of the Maxwell School of Syracuse University; Diamond Castle Holdings, LLC, a private equity firm based in New York City; the Daniel J. Evans School of Public Affairs at the University of Washington; Apostle Islands Historic Preservation Conservancy in Wisconsin; and Jobvana, a Seattle-based internet company. Mr. Chapple holds a B.A. degree in Political Science from Syracuse University and has an Advanced Management Program degree from Harvard University.

     Upon joining the Board, Mr. Chapple was granted nonqualified stock options to purchase 45,000 shares of RealNetworks common stock under the RealNetworks, Inc. 2005 Stock Incentive Plan, as amended and restated (the “2005 Plan”), at an exercise price equal to the closing price of RealNetworks’ common stock on the date of grant as reported on the Nasdaq Global Select Market. The options granted to Mr. Chapple have a seven year term and will become fully vested on the first anniversary of the grant date. Mr. Chapple will receive $5,000 per quarter for his services as a director. Mr. Chapple will also receive $1,000 for his participation in each Board meeting and each meeting of a Board committee. Pursuant to the RealNetworks, Inc. 2007 Director Compensation Stock Plan, a sub-plan administered

under the 2005 Plan, Mr. Chapple may elect to receive all or a portion of the cash compensation payable to him in shares of RealNetworks common stock.

Item 9.01. Financial Statements and Exhibits.

     (d) Exhibits.

     Pursuant to the rules and regulations of the SEC, the attached exhibits are deemed to have been furnished to, but not filed with, the SEC.

Exhibit No.	Description
99.1	Press Release issued by RealNetworks, Inc. dated May 7, 2009
99.2	Information Regarding Non-GAAP Financial Measures

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

REALNETWORKS, INC.
By:	/s/ Michael Eggers
	Michael Eggers
	Senior Vice President, Chief Financial Officer and Treasurer

Dated: May 7, 2009

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release issued by RealNetworks, Inc. dated May 7, 2009
99.2	Information Regarding Non-GAAP Financial Measures

EX-99.1

Exhibit 99.1

REALNETWORKS ANNOUNCES FIRST QUARTER 2009 RESULTS

John Chapple Named to Board of Directors

SEATTLE — May 7, 2009 — Digital entertainment services company RealNetworks^®, Inc. (Nasdaq: RNWK) today announced results for the first quarter ended March 31, 2009.

Quarterly Highlights:

• Revenue of $140.8 million

• Net loss of $(12.1) million or $(0.10) per share

• Adjusted EBITDA of $4.8 million

• Cash and short term investments of $376.5 million as of March 31, 2009

“In the midst of the deepest recession in decades, at RealNetworks we demonstrated our resiliency and delivered steady overall results,” said Rob Glaser, RealNetworks’ Chairman and CEO.

First Quarter Results

For the first quarter of 2009, revenue was $140.8 million, a decrease of 5%, compared with $147.6 million in the first quarter of 2008. Foreign currency exchange rate fluctuations negatively affected 2009 first quarter revenue by approximately $8.7 million compared with the year-ago quarter. Excluding the effects of these foreign exchange rate changes, revenue grew 1% year over year. Revenue trends in each of Real’s businesses in the first quarter of 2009, including the effects of foreign currency exchange rate changes, compared with the year-earlier quarter were: a 16% increase in Music revenue to $44.1 million and a 3% increase in Games revenue to $32.8 million, offset by a 15% decrease in Technology Products and Solutions revenue to $43.6 million and a 23% decrease in Media Software and Services revenue to $20.3 million.

Net loss for the first quarter of 2009 was $(12.1) million, or $(0.10) per share, compared with net income of $2.4 million, or $0.02 per diluted share, in the first quarter of 2008. Adjusted EBITDA for the first quarter of 2009 was $4.8 million compared with $19.9 million in the first 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 60% in the first quarter of 2009 compared with 62% in the first quarter of 2008. Operating expenses for the first quarter of 2009 were $103.3 million, compared with $103.7 million in the first quarter of 2008. Operating expenses included $7.4 million and $7.3 million of related party advertising in Rhapsody America in the first quarter of 2009 and 2008, respectively.

Income tax provision was $1.5 million compared with $4.0 million in the year-earlier period. Interest income in the first quarter of 2009 was $1.2 million compared with $5.0 million in the year-earlier period.

As of March 31, 2009, Real had approximately $376.5 million in unrestricted cash, cash equivalents and short-term investments, of which nearly 90% is located in the U.S. In addition, Real has approximately $33.5 million in restricted cash and equity investments at March 31, 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 be a challenging year for consumer spending, online advertising and corporate infrastructure spending.

For the second quarter of 2009, Real expects overall revenue to decline year-over-year and to be flat to slightly down sequentially. Compared with the year-ago second quarter, the company expects second-quarter Music revenue to increase, and revenue in Games, Media Software and Services and Technology Products and Solutions to decline. Approximately 20% of Real’s revenue is denominated in currencies other than the U.S. dollar, most notably the euro and Korean won. Based on current currency trends, Real expects revenues to be negatively affected by foreign currency rates in the second quarter.

The foregoing forward-looking statements reflect Real’s expectations as of May 7, 2009. It is not Real’s general practice to update these forward-looking statements until its next quarterly results announcement.

John Chapple Joins RealNetworks Board of Directors

RealNetworks also announced today that John Chapple has been appointed to the company’s board of directors. Mr. Chapple brings to Real’s board more than two decades of senior executive operating experience primarily with large telecommunications companies including Nextel Partners, where he served as CEO for eight years, and McCaw Cellular Communications. Mr. Chapple also serves on the board of directors of Yahoo! Inc. and Cbeyond, Inc., a voice and broadband Internet provider.

Mr. Chapple fills the vacancy on Real’s board resulting from the resignation of Jeremy Jaech, which is also being announced today. Previously, Real had announced that Mr. Jaech would not be running for a new term on Real’s board this year. Real anticipates nominating Mr. Chapple to serve a full term at Real’s 2009 annual shareholders meeting later this year.

“We are delighted to have John Chapple join our board,” said Mr. Glaser. “John’s intellect, experience, and track record of creating substantial value will serve us well in the months and years ahead. I also want to thank Jeremy Jaech for his seven years of outstanding service on our board, and wish him well as CEO of Verdiem.”

“It is both an honor and tremendously exciting to join the RealNetworks board,” said Mr. Chapple. “Real is a fascinating company with a world-class management team and board of directors. I am looking forward to participating in the next stage of the company’s growth.”

Mr. Chapple has served as president of Hawkeye Investments LLC, a privately owned equity firm investing primarily in telecommunications and real estate ventures, since October 2006. Prior to forming Hawkeye, Mr. Chapple served as president, chief executive officer and chairman of the board of Nextel Partners from January 1998 to June 2006, when the company was purchased by Sprint Communications for $6.5 billion. From 1995 to 1997, Mr. Chapple was the president and chief operating officer of Orca Bay Sports and Entertainment in Vancouver, B.C., a professional sports and entertainment company, which at the time owned and operated Vancouver’s National Basketball Association and National Hockey League sports franchises. From 1988 to 1995, he served as executive vice president of operations for McCaw Cellular Communications and subsequently AT&T Wireless Services following the merger of those companies.

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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: First Quarter Earnings
Leader: Rob Glaser

Telephonic replay will be available until 8:00 p.m. (Eastern), May 21, 2009.
Dial In:
866-353-3016 Domestic
203-369-0082 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 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

3

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 first 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, future affects of foreign currency exchange rates, 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, particularly changes in the US dollar relative to the euro and the Korean won; 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 and online music sales; competitive risks, including competing technologies, products and services, and the competitive activities of our larger competitors, some of which have strong ties to streaming media users through other products; the potential outcomes and effects of claims and legal proceedings on our business, prospects, financial condition or results of operations; risks associated with 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 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 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
	March 31,
	2009			2008
	(in thousands, except per share data)
Net revenue	$	140,773		$	147,563
Cost of revenue		56,021			55,393
Gross profit		84,752			92,170
Operating expenses:
Research and development		28,559			25,006
Sales and marketing		43,685			53,596
Advertising with related party (A)		7,423			7,340
General and administrative		22,831			17,084
Restructuring and other charges		794			686
Total operating expenses		103,292			103,712
Operating loss		(18,540	)		(11,542	)
Other income (expenses):
Interest income, net		1,183			4,958
Equity in net loss of investments		(655	)		(91	)
Gain on sale of equity investment, net		137			—
Gain on sale of interest in Rhapsody America (B)		—			3,726
Other income (expense), net		855			768
Total other income (expense), net		1,520			9,361
Loss before income taxes		(17,020	)		(2,181	)
Income taxes		(1,549	)		(4,008	)
Net loss		(18,569	)		(6,189	)
Net loss attributable to the noncontrolling interest in Rhapsody America (C)		6,433			8,615
Net income (loss) attributable to common shareholders	$	(12,136	)	$	2,426
Basic net income (loss) per share available to common shareholders	$	(0.10	)	$	0.02
Diluted net income (loss) per share available to common shareholders	$	(0.10	)	$	0.02
Shares used to compute basic net income (loss) per share available to common shareholders		134,380			142,491
Shares used to compute diluted net income (loss) per share available to common shareholders		134,380			154,736

(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. 160 Noncontrolling Interests in Consolidated Financial Statements, an amendment to ARB No. 51 “(SFAS 160) which requires the appreciation of gains on the sale of noncontrolling 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)

	March 31,		December 31,
	2009		2008
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	211,709	$	232,968
Short-term investments		164,785		137,766
Trade accounts receivable, net		61,837		70,201
Deferred costs, current portion		6,948		4,026
Prepaid expenses and other current assets		31,004		34,599
Total current assets		476,283		479,560
Equipment, software, and leasehold improvements, at cost:
Equipment and software		138,004		135,788
Leasehold improvements		30,758		30,719
Total equipment, software, and leasehold improvements		168,762		166,507
Less accumulated depreciation and amortization		107,913		103,500
Net equipment, software, and leasehold improvements		60,849		63,007
Restricted cash equivalents and investments		14,767		14,742
Equity investments		18,754		18,582
Other assets		3,992		3,775
Deferred costs, non-current portion		6,854		6,120
Deferred tax assets, net, non-current portion		8,980		9,236
Other intangible assets, net		15,747		18,727
Goodwill		170,618		175,264
Total assets	$	776,844	$	789,013
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	48,540	$	36,575
Accrued and other liabilities		111,679		118,688
Deferred revenue, current portion		39,421		39,835
Related party payable (A)		7,598		13,155
Accrued loss on excess office facilities, current portion		4,251		4,317
Total current liabilities		211,489		212,570
Deferred revenue, non-current portion		2,087		1,961
Accrued loss on excess office facilities, non-current portion		1,909		2,893
Deferred rent		4,589		4,614
Deferred tax liabilities, net, non-current portion		866		1,379
Other long-term liabilities		11,521		11,660
Total liabilities		232,461		235,077
Noncontrolling interest in Rhapsody America (B)		5,427		378
Shareholders’ equity		538,956		553,558
Total liabilities and shareholders’ equity	$	776,844	$	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)

	Quarters Ended March 31,
	2009			2008
	(in thousands)
Cash flows from operating activities:
Net income (loss) attributable to common shareholders	$	(12,136	)	$	2,426
Adjustments to reconcile net income (loss) attributable to common shareholders to net cash provided by (used in) operating activities:
Depreciation and amortization		7,776			12,971
Stock-based compensation		5,222			5,489
(Gain) loss on disposal of equipment, software, and leasehold improvements		(33	)		75
Equity in net loss of investments		655			91
Gain on sale of equity investment, net		(137	)		—
Excess tax benefit from stock option exercises		(9	)		(50	)
Accrued restructuring and other charges		(2,951	)		—
Accrued loss on excess office facilities		(1,050	)		(841	)
Deferred income taxes, net		(212	)		(939	)
Noncontrolling interest in Rhapsody America		(6,433	)		(8,615	)
Gain on sale of interest in Rhapsody America		—			(3,726	)
Other		10			32
Net change in certain operating assets and liabilities, net of acquisitions		13,259			(18,202	)
Net cash provided by (used in) operating activities		3,961			(11,289	)
Cash flows from investing activities:
Purchases of equipment, software, and leasehold improvements		(3,042	)		(7,203	)
Purchases of short-term investments		(52,415	)		(49,798	)
Proceeds from sales and maturities of short-term investments		25,396			68,838
Proceeds from the sales of equity investments		137			350
Purchases of equity investments		(2,000	)		—
Payment of acquisition costs, net of cash acquired		(3,154	)		(6,011	)
Decrease in restricted cash equivalents and investments, net		(25	)		(9	)
Net cash provided by (used in) investing activities		(35,103	)		6,167
Cash flows from financing activities:
Net proceeds from sales of common stock under employee stock purchase plan and exercise of stock options		12			1,072
Net proceeds from sales of interest in Rhapsody America		12,667			7,406
Excess tax benefit from stock option exercises		9			50
Net cash provided by financing activities		12,688			8,528
Effect of exchange rate changes on cash and cash equivalents		(2,805	)		(1,366	)
Net increase (decrease) in cash and cash equivalents		(21,259	)		2,040
Cash and cash equivalents, beginning of period		232,968			476,697
Cash and cash equivalents, end of period	$	211,709		$	478,737

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

	2009		2008
	Q1		Q4		Q3		Q2		Q1
					(in thousands)
Net Revenue by Line of Business:
Consumer products and services (A)	$	97,194	$	100,282	$	100,322	$	101,353	$	96,286
Technology products and solutions (B)		43,579		52,362		51,633		51,295		51,277
Total net revenue	$	140,773	$	152,644	$	151,955	$	152,648	$	147,563
Consumer Products and Services:
Subscriptions (C)	$	59,052	$	57,853	$	57,776	$	55,658	$	55,193
Media properties (D)		15,536		18,337		19,946		23,472		18,702
E-commerce and other (E)		22,606		24,092		22,600		22,223		22,391
Total consumer products and services revenue	$	97,194	$	100,282	$	100,322	$	101,353	$	96,286
Consumer Products and Services:
Music (F)	$	44,053	$	43,882	$	41,591	$	37,170	$	38,079
Media software and services (G)		20,318		22,695		24,531		29,238		26,409
Games (H)		32,823		33,705		34,200		34,945		31,798
Total consumer products and services revenue	$	97,194	$	100,282	$	100,322	$	101,353	$	96,286
Net Revenue by Geography:
United States	$	96,666	$	101,369	$	102,363	$	100,898	$	99,169
Rest of world		44,107		51,275		49,592		51,750		48,394
Total net revenue	$	140,773	$	152,644	$	151,955	$	152,648	$	147,563
Subscribers (presented as greater than) *:
Total subscribers (I)		36,450		34,100		32,650		35,000		32,200
Technology products and solutions application services subscribers (J)		33,850		31,500		29,950		32,450		29,500
Music subscribers:
Consumer music subscribers:
Rhapsody subscribers		800		775		750		600		600
Radio subscribers		1,200		1,225		1,250		1,225		1,275
Total consumer music subscribers		2,000		2,000		2,000		1,825		1,875
Technology products and solutions application services music subscribers (K)		900		875		850		800		800
Total Music Subscribers**		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)	Revenue is derived from carrier application services such as ringback tones and music-on-demand, media delivery system software, support and maintenance services, broadcast hosting services and consulting services.
(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)	Revenue is derived from Rhapsody and RadioPass subscription services and sales of music content, advertising generated from our music and music related websites and the distribution of third party products.
(G)	Revenue is derived from SuperPass subscriptions, RealPlayer Plus and related products, sales and distribution of third-party software products and advertising related to our non-game and non-music related web properties.
(H)	Revenue is derived from game subscription services, sales of games, advertising generated from our games and game-related websites and the distribution of third-party products.
(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
	March 31,			December 31,			September 30,			June 30,			March 31,
	2009			2008			2008			2008			2008
							(in thousands)
Net income (loss) attributable to common shareholders	$	(12,136	)	$	(240,499	)	$	(4,500	)	$	(1,305	)	$	2,426
Interest income, net		(1,183	)		(2,255	)		(2,865	)		(3,375	)		(4,958	)
Stock-based compensation		5,222			6,056			5,955			6,031			5,489
Loss (gain) on equity investments, net		(137	)		12			—			(222	)		—
Conversion of WiderThan stock options to a cash equivalent		17			11			16			26			89
Depreciation and amortization (net of noncontrolling interest effect)		5,726			5,784			6,165			6,186			6,282
Acquisitions related intangible asset amortization (net of noncontrolling interest effect)		1,768			1,872			5,752			6,171			6,315
Impairment of long-lived assets (net of noncontrolling interest effect)		—			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		4,010			6,568			—			—			—
Expenses (benefit) related to antitrust litigation:
Income		—			—			—			—			—
Expenses		—			179			174			202			202
Charitable contributions		—			—			—			—			—
Income taxes		1,549			17,392			728			3,700			4,008
Adjusted EBITDA excluding impairments	$	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	$	4,836		$	(14,533	)	$	11,425		$	17,414		$	19,853

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

	Quarter Ended March 31, 2009
	Music(A)			MSS(B)			Games(C)			TPS(D)			Other			Grand Total
							(in thousands)
Net revenue	$	44,053		$	20,318		$	32,823		$	43,579		$	—		$	140,773
Cost of revenue		27,300			3,707			8,564			16,450			—			56,021
Gross profit		16,753			16,611			24,259			27,129			—			84,752
Gross margin		38	%		82	%		74	%		62	%		—			60	%
Operating expenses:
Advertising with related party		7,423			—			—			—			—			7,423
Restructuring and other charges		301			67			305			121			—			794
Other operating expenses		22,093			19,882			26,846			26,216			38			95,075
Total operating expenses		29,817			19,949			27,151			26,337			38			103,292
Income (loss) from operations		(13,064	)		(3,338	)		(2,892	)		792			(38	)		(18,540	)
Other income (expenses):
Interest income, net		—			—			—			—			1,183			1,183
Equity in net loss of investments		—			—			—			—			(655	)		(655	)
Gain on sale of equity investments, net		—			—			—			—			137			137
Gain on sale of interest in Rhapsody America (E)		—			—			—			—			—			—
Other income (expenses), net		—			—			—			—			855			855
Total other income (expenses), net		—			—			—			—			1,520			1,520
Income (loss) before income taxes		(13,064	)		(3,338	)		(2,892	)		792			1,482			(17,020	)
Income taxes		—			—			—			—			(1,549	)		(1,549	)
Net income (loss)		(13,064	)		(3,338	)		(2,892	)		792			(67	)		(18,569	)
Net income (loss) attributable to noncontrolling interest in Rhapsody America		6,433			—			—			—			—			6,433
Net income (loss )attributable to common shareholders	$	(6,631	)	$	(3,338	)	$	(2,892	)	$	792		$	(67	)	$	(12,136	)
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	$	(6,631	)	$	(3,338	)	$	(2,892	)	$	792		$	(67	)	$	(12,136	)
Income taxes		—			—			—			—			1,549			1,549
Interest income, net		—			—			—			—			(1,183	)		(1,183	)
Stock-based compensation		865			698			1,397			2,262			—			5,222
Conversion of WiderThan stock options to a cash equivalent		—			—			—			17			—			17
Acquisitions related intangible asset amortization (F)		278			—			144			1,346			—			1,768
Pro forma gain on sale of interest in Rhapsody America		4,010			—			—			—			—			4,010
Gain on sale of equity investments, net		—			—			—			—			(137	)		(137	)
Depreciation and amortization (F)		1,102			819			951			2,854			—			5,726
Expenses (benefit) related to antitrust litigation:
Income		—			—			—			—			—			—
Expenses		—			—			—			—			—			—
Charitable contributions		—			—			—			—			—			—
Adjusted EBITDA	$	(376	)	$	(1,821	)	$	(400	)	$	7,271		$	162		$	4,836

	Quarter Ended March 31, 2008
	Music(A)			MSS(B)			Games(C)			TPS(D)			Other			Grand Total
							(in thousands)
Net revenue	$	38,079		$	26,409		$	31,798		$	51,277		$	—		$	147,563
Cost of revenue		21,519			3,976			8,637			21,261			—			55,393
Gross profit		16,560			22,433			23,161			30,016			—			92,170
Gross margin		43	%		85	%		73	%		59	%		—			62	%
Operating expenses:
Advertising with related party		7,340			—			—			—			—			7,340
Restructuring and other charges		635			12			30			9			—			686
Other operating expenses		25,631			14,731			22,901			32,186			237			95,686
Total operating expenses		33,606			14,743			22,931			32,195			237			103,712
Income (loss) from operations		(17,046	)		7,690			230			(2,179	)		(237	)		(11,542	)
Other income (expenses):
Interest income, net		—			—			—			—			4,958			4,958
Equity in net loss of investments		—			—			—			—			(91	)		(91	)
Gain on sale of interest in Rhapsody America (E)		3,726			—			—			—			—			3,726
Other income (expenses), net		—			—			—			—			768			768
Total other income (expenses), net		3,726			—			—			—			5,635			9,361
Income (loss) before income taxes		(13,320	)		7,690			230			(2,179	)		5,398			(2,181	)
Income taxes		—			—			—			—			(4,008	)		(4,008	)
Net income (loss)		(13,320	)		7,690			230			(2,179	)		1,390			(6,189	)
Net income (loss) attributable to noncontrolling interest in Rhapsody America		8,615			—			—			—			—			8,615
Net income (loss )attributable to common shareholders	$	(4,705	)	$	7,690		$	230		$	(2,179	)	$	1,390		$	2,426
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	$	(4,705	)	$	7,690		$	230		$	(2,179	)	$	1,390		$	2,426
Income taxes		—			—			—			—			4,008			4,008
Interest income, net		—			—			—			—			(4,958	)		(4,958	)
Stock-based compensation		1,079			713			1,123			2,574			—			5,489
Conversion of WiderThan stock options to a cash equivalent		—			—			—			89			—			89
Acquisitions related intangible asset amortization (F)		384			—			805			5,126			—			6,315
Depreciation and amortization (F)		1,410			1,303			738			2,831			—			6,282
Expenses (benefit) related to antitrust litigation:
Income		—			—			—			—			—			—
Expenses		—			—			—			—			202			202
Charitable contributions		—			—			—			—			—			—
Adjusted EBITDA	$	(1,832	)	$	9,706		$	2,896		$	8,441		$	642		$	19,853

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 noncontrolling interest to be recorded as an equity transaction.
(F)	Net of noncontrolling interest effect.

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

	Quarter Ended March 31, 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	$	56,021	$	(630	)	$	(546	)	$	(1	)	$	—	$	54,844
Operating expenses:
Research and development	$	28,559	$	(1,824	)	$	—		$	(5	)	$	—	$	26,730
Sales and marketing		43,685		(1,066	)		(1,222	)		(11	)		—		41,386
General and administrative		22,831		(1,702	)		—			—			—		21,129
Adjusted operating expenses, net	$	95,075	$	(4,592	)	$	(1,222	)	$	(16	)	$	—	$	89,245

	Quarter Ended March 31, 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	$	55,393		$	(234	)	$	(2,315	)	$	(21	)	$	—		$	52,823
Operating expenses:
Research and development	$	25,006		$	(1,913	)	$	—		$	(46	)	$	—		$	23,047
Sales and marketing		53,596			(1,908	)		(4,000	)		(22	)		—			47,666
General and administrative		17,084			(1,434	)		—			—			(202	)		15,448
Adjusted operating expenses, net	$	95,686		$	(5,255	)	$	(4,000	)	$	(68	)	$	(202	)	$	86,161

(A) — Net of noncontrolling interest effect.

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

	Quarters Ended
	March 31,
	2009			2008
	(in thousands, except per share data)
Net income (loss) attributable to common shareholders	$	(12,136	)	$	2,426
Less accretion of MTVN’s preferred return in Rhapsody America		(1,434	)		—
Net income (loss) available to common shareholders	$	(13,570	)	$	2,426
Shares used to compute basic net income (loss) per share available to common shareholders		134,380			142,491
Dilutive potential common shares:
Stock options and restricted stock		—			1,495
Convertible debt		—			10,750
Shares used to compute diluted net income (loss) per share available to common shareholders		134,380			154,736
Basic net income (loss) per share available to common shareholders	$	(0.10	)	$	0.02
Diluted net income (loss) per share available to common shareholders	$	(0.10	)	$	0.02

EX-99.2

EXHIBIT 99.2

About Non-GAAP Financial Measures

To supplement RealNetworks’ condensed consolidated financial statements presented in accordance with GAAP, we present investors with certain non-GAAP financial measures, including adjusted revenue, adjusted EBITDA, adjusted EBITDA excluding impairments, adjusted EBITDA by reporting segment, adjusted cost of revenue and adjusted operating expenses.

• Adjusted revenue consists of revenue excluding the impact of foreign exchange rate fluctuations experienced in the first quarter.

• Adjusted EBITDA and adjusted EBITDA by reporting segment consist of net income (loss) attributable to common shareholders excluding the impact of the following: interest income, net; income taxes; depreciation; amortization (net of noncontrolling interest effect); stock-based compensation; expenses for employee stock options that were converted to cash rights; equity investment gains and losses from sales or impairments; income and expenses including charitable contributions related to the Microsoft agreements; impairment of long-lived assets (net of noncontrolling interest effect); and the effect of the change in accounting for the sale of noncontrolling interest in Rhapsody America.

• Adjusted EBITDA excluding impairments consists of net income (loss) attributable to common shareholders excluding the impact of the following: interest income, net; income taxes; depreciation; amortization (net of noncontrolling interest effect); stock-based compensation; expenses for employee stock options that were converted to cash rights; equity investment gains and losses from sales or impairments; income and expenses including charitable contributions related to the Microsoft agreements; impairment of long-lived assets (net of noncontrolling interest effect); impairment of deferred costs and prepaid royalties; restructuring and other charges; and the effect of the change in accounting for the sale of noncontrolling interest in Rhapsody America.

• Adjusted cost of revenue consists of GAAP cost of revenue excluding stock-based compensation expenses, acquisition costs including amortization of intangible assets (net of noncontrolling interest effect), and expenses for employee stock options that were converted to cash rights.

• Adjusted operating expenses consist of GAAP operating expenses excluding stock-based compensation expenses, antitrust litigation expenses (benefits), acquisition costs including amortization of intangible assets (net of noncontrolling interest effect), and expenses for employee stock options that were converted to cash rights.

RealNetworks believes that the presentation of adjusted revenue, adjusted EBITDA, adjusted EBITDA excluding impairments, adjusted EBITDA by reporting segment, adjusted cost of revenue and adjusted operating expenses provide important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with our past financial reports, and also facilitates comparisons with other companies in our industry, many of which use similar non-GAAP financial measures to supplement their GAAP results. Management has historically used these non-GAAP measures when evaluating operating performance because the inclusion or exclusion of the items described above provides additional useful measures of our operating results and facilitates comparisons of our core operating performance against prior periods and our business model objectives. We have chosen to provide this information to investors in order

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to enable them to perform additional analyses of past, present and future operating performance, to enable them to compare us with other companies, and as a supplemental means to evaluate our ongoing operations. In addition, RealNetworks believes that providing adjusted revenue allows investors to compare 2009 revenue with 2008 revenue in constant dollars, providing a more consistent view of revenue trends for its ongoing business. Externally, we believe that adjusted EBITDA and adjusted EBITDA excluding impairments are useful to investors in their assessment of our operating performance and the valuation of our company.

Internally, adjusted revenue, adjusted EBITDA, adjusted EBITDA excluding impairments, and adjusted EBITDA by reporting segment, adjusted cost of revenue and adjusted operating expenses are significant measures used by management for purposes of:

• supplementing the financial results and forecasts reported to our board of directors;

• evaluating the operating performance of our company which includes direct and incrementally controllable revenue and costs of operations, but excludes items considered by management to be non-cash or non-operating such as interest income and expense, stock-based compensation, tax expense, depreciation and amortization; impairment of long-lived assets; or not within management’s control, such as significant fluctuations in foreign currencies;

• managing and comparing performance internally across our businesses and externally against our peers;

• establishing internal operating budgets; and

• evaluating and valuing potential acquisition candidates.

Adjusted revenue, adjusted EBITDA, adjusted EBITDA excluding impairments, adjusted EBITDA by reporting segment, adjusted cost of revenue and adjusted operating expenses are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of RealNetworks’ results as reported under GAAP. We expect to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. Some of the limitations in relying on our non-GAAP financial measures are:

• Adjusted EBITDA, adjusted EBITDA excluding impairments and adjusted EBITDA by reporting segment are measures that we have defined for internal and investor purposes and are not in accordance with GAAP. A further limitation associated with these measures is that they do not include all costs and income that impact our net income (loss) attributable to common shareholders and net income (loss) per share attributable to common shareholders. We compensate for these limitations by prominently disclosing GAAP net income (loss) attributable to common shareholders, which we believe is the most directly comparable GAAP measure, and providing investors with reconciliations from GAAP net income (loss) attributable to common shareholders to adjusted EBITDA, adjusted EBITDA excluding impairments and adjusted EBITDA by reporting segment.

• Adjusted cost of revenue is limited in that it does not include stock-based compensation expenses and certain costs associated with our acquisitions. Adjusted operating expenses are limited in that they do not include stock-based compensation expenses, antitrust litigation expenses (benefit) and certain costs associated with our acquisitions. We compensate for

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these limitations by prominently disclosing the reported GAAP results and providing investors with a reconciliation from GAAP to the adjusted amount.

RealNetworks has included reconciliations of GAAP net income (loss) attributable to common shareholders 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 in the financial tables of our earnings press release, which is included as Exhibit 99.1 to this report.

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