Segment Information

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segment Information

Note 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, beginning in the first quarter of 2013 we now also allocate certain corporate expenses which are directly attributable to supporting the business to our reportable segments, rather than reporting those expenses as corporate items. 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 reported as corporate items. All restructuring, lease exit and related charges, and, for 2013, the loss on litigation settlements, are reported as corporate items. In 2012, the sale of patent and other technology assets, net of costs, was reported as a corporate item. The historical financial information presented has been recast to reflect the new segments and the new corporate expense presentation.

RealNetworks reports the 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, General Counsel and certain Senior Vice Presidents. The CEOS reviews financial information presented on both a consolidated basis and on a business segment basis. 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.

Segment results for the years ended December 31, 2013, 2012 and 2011 were as follows (in thousands):

RealPlayer Group

	2013			2012		2011
Revenue	$	75,206		$	91,469	$	102,378
Cost of revenue	16,220			21,544		21,534
Impairment of deferred costs	—			—		633
Gross profit	58,986			69,925		80,211
Operating expenses	60,484			55,223		59,829
Operating income (loss)	$	(1,498	)	$	14,702	$	20,382

Mobile Entertainment

	2013			2012			2011
Revenue	$	81,181		$	100,318		$	135,452
Cost of revenue	47,608			57,670			74,524
Impairment of deferred costs	—			—			19,329
Gross profit	33,573			42,648			41,599
Operating expenses	35,839			52,614			61,921
Operating income (loss)	$	(2,266	)	$	(9,966	)	$	(20,322	)

Games

	2013			2012			2011
Total revenue	$	49,809		$	67,055		$	97,856
Cost of revenue	13,359			21,828			30,835
Gross profit	36,450			45,227			67,021
Operating expenses	47,177			51,890			62,595
Operating income (loss)	$	(10,727	)	$	(6,663	)	$	4,426

Corporate

	2013			2012		2011
Cost of revenue	$	1,904		$	2,689	$	(256	)
Gain on sale of patents and other technology assets, net of costs	—			116,353		—
Operating expenses	54,413			56,174		42,352
Operating income (loss)	$	(56,317	)	$	57,490	$	(42,096	)

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

	Years Ended December 31,
	2013		2012		2011
United States	$	90,250	$	117,844	$	162,720
Europe	38,155		56,473		74,602
Republic of Korea	46,601		40,467		44,261
Rest of the World	31,190		44,058		54,103
Total	$	206,196	$	258,842	$	335,686

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

	December 31,
	2013		2012		2011
United States	$	40,347	$	27,915	$	38,543
Europe	8,280		2,350		2,949
Republic of Korea	936		2,463		4,063
Rest of the World	4,078		6,172		5,286
Total long-lived assets	$	53,641	$	38,900	$	50,841