Segment Information

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Segment Information

ote 18. 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 and our recently launched RealPlayer Cloud service; (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. All restructuring, lease exit and related charges, and, for 2013, the loss on litigation settlements, are included in the corporate segment. In 2012, the sale of patent and other technology assets, net of costs, was included in the corporate segment. 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 quarters and nine months endedSeptember 30, 2013 and 2012 (in thousands):

RealPlayer Group

	Quarters Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013		2012
Revenue	$	17,641		$	21,392	$	58,407	$	65,631
Cost of revenue	3,264			6,735		12,984		16,026
Gross profit	14,377			14,657		45,423		49,605
Operating expenses	14,449			13,082		44,656		41,849
Operating income (loss)	$	(72	)	$	1,575	$	767	$	7,756

Mobile Entertainment

	Quarters Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenue	$	19,948		$	22,820		$	59,035		$	74,600
Cost of revenue	11,972			12,740			33,974			43,093
Gross profit	7,976			10,080			25,061			31,507
Operating expenses	9,453			11,936			26,976			40,591
Operating income (loss)	$	(1,477	)	$	(1,856	)	$	(1,915	)	$	(9,084	)

Games

	Quarters Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenue	$	11,369		$	14,876		$	38,159		$	51,347
Cost of revenue	3,216			4,989			10,397			17,332
Gross profit	8,153			9,887			27,762			34,015
Operating expenses	11,513			12,023			35,120			39,962
Operating income (loss)	$	(3,360	)	$	(2,136	)	$	(7,358	)	$	(5,947	)

Corporate

	Quarters Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Cost of revenue	$	538		$	780		$	1,660		$	2,182
Sale of patents and other technology assets, net of costs	—			—			—			116,353
Operating expenses	22,990			19,978			46,201			44,445
Operating income (loss)	$	(23,528	)	$	(20,758	)	$	(47,861	)	$	69,726

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

	Quarters Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
United States	$	21,039	$	29,101	$	70,525	$	89,529
Europe	8,750		12,470		29,278		43,021
Rest of the world	19,169		17,517		55,798		59,028
Total net revenue	$	48,958	$	59,088	$	155,601	$	191,578

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

	September 30, 2013		December 31, 2012
United States	$	41,634	$	27,915
Europe	8,830		2,350
Rest of the world	5,570		8,635
Total long-lived assets	$	56,034	$	38,900