Rhapsody Joint Venture

12 Months Ended

Dec. 31, 2013

Equity Method Investments and Joint Ventures [Abstract]

Rhapsody Joint Venture

Rhapsody Joint Venture

As of December 31, 2013 we owned approximately 45% of the issued and outstanding stock of Rhapsody and account for our investment using the equity method of accounting.

Rhapsody was initially formed in 2007 as a joint venture between RealNetworks and MTV Networks, a division of Viacom International Inc. (MTVN), to own and operate a business-to-consumer digital audio music service known as Rhapsody. Prior to March 31, 2010, we held a 51% interest in Rhapsody and MTVN owned the remaining 49%. On March 31, 2010, restructuring transactions involving Rhapsody were completed, and as a result, effective March 31, 2010 RealNetworks owned approximately 47% of Rhapsody. Subsequent to the restructuring transaction, we have accounted for our investment in Rhapsody using the equity method of accounting.

As part of the restructuring transaction, RealNetworks contributed $18.0 million in cash, the Rhapsody brand and certain other assets, including content licenses, in exchange for shares of convertible preferred stock of Rhapsody, carrying a $10.0 million preference upon certain liquidation events.

Subsequent to the restructuring transaction, RealNetworks provided certain operational transition services to Rhapsody. These transition services were completed in 2013, and are discussed further in Note 19, Related Party Transactions.

In 2012 Rhapsody issued common stock as consideration for acquisitions it made. As RealNetworks did not acquire any additional Rhapsody common stock as part of Rhapsody's transactions, our equity interest decreased from approximately 47% in 2011 to approximately 45% in 2012, and we recorded a dilution gain totaling $1.7 million, which increased our carrying amount for Rhapsody by the same amount. Our policy is to record the gain in equity, as a component of Additional paid in capital.

As of December 31, 2013 the carrying value of our investment in Rhapsody was $12.5 million.

We recorded our share of losses in the operations of Rhapsody of $6.3 million, $5.7 million, and $7.9 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Summarized financial information for Rhapsody, which represents 100% of their financial information, is as follows (in thousands):

	Year ended December 31, 2013			Year ended December 31, 2012			Year ended December 31, 2011
Net revenue	$	140,596		$	143,674		$	127,184
Gross profit	34,141			36,260			39,137
Net loss	(14,663		)	(12,228		)	(13,580		)

	As of December 31, 2013		As of December 31, 2012
Current assets	$	31,245	$	34,035
Non-current assets	17,305		19,688
Current liabilities	46,458		36,756
Non-current liabilities	—		—