Segment Information

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Segment Information

ote 17. Segment Information

In the first quarter of 2013 we reorganized the management of our businesses and as a result, we now report the following three segments: (1) RealPlayer Group, which includes sales of our RealPlayer media player software and related products, such as the distribution of third party software products, advertising on RealPlayer websites, and sales of RealPlayer Plus software licenses to consumers, sales of intellectual property licenses, and consumer subscriptions such as SuperPass; (2) Mobile Entertainment, which includes our SaaS services, systems integration, and professional services to mobile carriers, and sales of technology licenses of our software products such as Helix; and (3) Games, which includes all our games-related businesses, including sales of games licenses, online games subscription services, advertising on games sites and social network sites, microtransactions from online and social games, and sales of mobile games.

In addition, we now also allocate certain corporate expenses which are directly attributable to supporting the business to our reportable segments, rather than retaining those expenses in our corporate segment. These corporate expenses include but are not limited to a portion of finance, legal, human resources and headquarters facilities. Remaining expenses, which are not directly attributable to supporting the business, are retained in aggregate in our corporate segment. In 2012, corporate segment expenses also included the sale of patent and other technology assets, net of costs. The historical financial information presented has been recast to reflect the new segments and the new corporate expense presentation.

RealNetworks reports three reportable segments based on factors such as how we manage our operations and how our Chief Operating Decision Maker reviews results. Our Chief Operating Decision Maker is considered to be the CEO Staff (CEOS), which includes the interim Chief Executive Officer, Chief Financial Officer, President, Executive Vice President, General Counsel and certain Senior Vice Presidents. The CEOS reviews financial information presented on both a consolidated basis and on a business segment basis, accompanied by certain disaggregated information about products and services, geographical regions and corporate expenses for purposes of making decisions and assessing financial performance. The accounting policies used to derive segment results are the same as those described in Note 1, Description of Business and Summary of Significant Accounting Policies, in the 10-K.

Segment results for the three months endedMarch 31, 2013 and 2012 (in thousands):

RealPlayer Group

	Quarter Ended March 31,
	2013		2012
Revenue	$	22,383	$	22,081
Cost of revenue	5,311		4,564
Gross profit	17,072		17,517
Operating expenses	16,206		15,975
Operating income (loss)	$	866	$	1,542

Mobile Entertainment

	Quarter Ended March 31,
	2013		2012
Revenue	$	20,495	$	25,775
Cost of revenue	10,832		15,478
Gross profit	9,663		10,297
Operating expenses	9,111		14,804
Operating income (loss)	$	552	$	(4,507	)

Games

	Quarter Ended March 31,
	2013			2012
Revenue	$	13,915		$	19,108
Cost of revenue	3,800			6,713
Gross profit	10,115			12,395
Operating expenses	11,852			14,138
Operating income (loss)	$	(1,737	)	$	(1,743	)

Corporate

	Quarter Ended March 31,
	2013			2012
Cost of revenue	$	563		$	672
Sale of patents and other technology assets, net of costs	—			(1,580		)
Operating expenses	10,544			11,582
Operating income (loss)	$	(11,107	)	$	(13,834	)

Our customers consist primarily of consumers and corporations located in the U.S., Europe and various foreign countries. Revenue by geographic region (in thousands):

	Quarter Ended March 31,
	2013		2012
United States	$	28,024	$	31,814
Europe	11,255		16,212
Rest of the world	17,514		18,938
Total net revenue	$	56,793	$	66,964

Long-lived assets, consisting of equipment, software, leasehold improvements, other intangible assets, and goodwill by geographic region (in thousands):

	March 31, 2013		December 31, 2012
United States	$	26,476	$	27,915
Europe	1,830		2,350
Rest of the world	7,544		8,635
Total long-lived assets	$	35,850	$	38,900