10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended June 30, 2014

OR

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

For the transition period from              to             

Commission file number 0-23137

	RealNetworks, Inc.
	(Exact name of registrant as specified in its charter)
Washington		91-1628146
(State of incorporation)		(I.R.S. Employer Identification Number)
1501 First Avenue South, Suite 600 Seattle, Washington		98134
(Address of principal executive offices)		(Zip Code)
	(206) 674-2700
	(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	ý
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No   ý

The number of shares of the registrant’s Common Stock outstanding as of July 31, 2014 was 35,995,569.

TABLE OF CONTENTS

	Page
Part I. Financial Information	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	28
Item 4. Controls and Procedures	29
Part II. Other Information	30
Item 1. Legal Proceedings	30
Item 1A. Risk Factors	30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3. Default Upon Senior Securities	38
Item 4. Mine Safety Disclosures	38
Item 5. Other Information	39
Item 6. Exhibits	39
Signature	40
Index to Exhibits	41

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REALNETWORKS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	June 30, 2014			December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	124,450		$	151,235
Short-term investments	70,583			74,920
Trade accounts receivable, net of allowances	21,580			24,613
Deferred costs, current portion	992			1,601
Deferred tax assets, current	311			306
Prepaid expenses and other current assets	9,910			9,124
Total current assets	227,826			261,799
Equipment, software, and leasehold improvements, at cost:
Equipment and software	86,755			86,721
Leasehold improvements	3,915			3,482
Total equipment, software, and leasehold improvements, at cost	90,670			90,203
Less accumulated depreciation and amortization	70,212			67,031
Net equipment, software, and leasehold improvements	20,458			23,172
Restricted cash equivalents and investments	3,000			3,000
Equity method investment	10,000			12,473
Available for sale securities	3,182			7,181
Other assets	3,073			2,332
Deferred costs, non-current portion	1,062			946
Deferred tax assets, net, non-current portion	1,405			1,409
Other intangible assets, net	11,928			12,993
Goodwill	18,005			17,476
Total assets	$	299,939		$	342,781
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	20,363		$	19,987
Accrued and other current liabilities	26,874			41,893
Deferred tax liabilities, net, current portion	911			899
Deferred revenue, current portion	7,835			7,498
Total current liabilities	55,983			70,277
Deferred revenue, non-current portion	145			166
Deferred rent	1,269			1,318
Deferred tax liabilities, net, non-current portion	1,725			1,556
Other long-term liabilities	607			483
Total liabilities	59,729			73,800
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.001 par value, no shares issued and outstanding:
Series A: authorized 200 shares	—			—
Undesignated series: authorized 59,800 shares	—			—
Common stock, $0.001 par value authorized 250,000 shares; issued and outstanding 35,992 shares in 2014 and 35,833 shares in 2013	36			36
Additional paid-in capital	613,617			610,167
Accumulated other comprehensive loss	(51,117		)	(47,695		)
Retained deficit	(322,326		)	(293,527		)
Total shareholders’ equity	240,210			268,981
Total liabilities and shareholders’ equity	$	299,939		$	342,781

See accompanying notes to unaudited condensed consolidated financial statements.

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REALNETWORKS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net revenue (A)	$	40,825		$	49,850		$	86,549		$	106,643
Cost of revenue (B)	20,786			19,519			39,572			40,025
Extinguishment of liability (See Note 10)	—			—			(10,580		)	—
Gross profit	20,039			30,331			57,557			66,618
Operating expenses:
Research and development	13,267			14,993			27,326			30,244
Sales and marketing	16,016			19,269			37,739			40,403
General and administrative	8,577			8,691			17,894			18,637
Restructuring and other charges	541			816			1,757			2,198
Lease exit and related charges	470			3,066			549			3,066
Total operating expenses	38,871			46,835			85,265			94,548
Operating income (loss)	(18,832		)	(16,504		)	(27,708		)	(27,930		)
Other income (expenses):
Interest income, net	180			179			316			826
Gain (loss) on sale of available for sale securities, net	—			—			2,371			—
Equity in net loss of Rhapsody investment	(1,802		)	(1,347		)	(2,640		)	(3,580		)
Other income (expense), net	(95		)	(137		)	(172		)	(28		)
Total other income (expenses), net	(1,717		)	(1,305		)	(125		)	(2,782		)
Income (loss) before income taxes	(20,549		)	(17,809		)	(27,833		)	(30,712		)
Income tax expense (benefit)	480			662			966			(567		)
Net income (loss)	$	(21,029	)	$	(18,471	)	$	(28,799	)	$	(30,145	)
Basic net income (loss) per share	$	(0.59	)	$	(0.52	)	$	(0.80	)	$	(0.85	)
Diluted net income (loss) per share	$	(0.59	)	$	(0.52	)	$	(0.80	)	$	(0.85	)
Shares used to compute basic net income (loss) per share	35,890			35,455			35,865			35,399
Shares used to compute diluted net income (loss) per share	35,890			35,455			35,865			35,399
Comprehensive income (loss):
Unrealized investment holding gains (losses), net of reclassification adjustments	$	(38	)	$	(1,622	)	$	(3,613	)	$	1,015
Foreign currency translation adjustments, net of reclassification adjustments	216			(388		)	191			(1,626		)
Total other comprehensive income (loss)	178			(2,010		)	(3,422		)	(611		)
Net income (loss)	(21,029		)	(18,471		)	(28,799		)	(30,145		)
Comprehensive income (loss)	$	(20,851	)	$	(20,481	)	$	(32,221	)	$	(30,756	)
(A) Components of net revenue:
License fees	$	6,664		$	10,162		$	15,243		$	22,991
Service revenue	34,161			39,688			71,306			83,652
	$	40,825		$	49,850		$	86,549		$	106,643
(B) Components of cost of revenue:
License fees	$	2,170		$	2,161		$	4,382		$	4,315
Service revenue	18,616			17,358			35,190			35,710
	$	20,786		$	19,519		$	39,572		$	40,025

See accompanying notes to unaudited condensed consolidated financial statements.

4

REALNETWORKS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities:
Net income (loss)	$	(28,799	)	$	(30,145	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	6,145			9,874
Stock-based compensation	3,010			4,058
Equity in net loss of Rhapsody	2,640			3,580
Deferred income taxes, net	10			(1,668		)
Gain on sale of available for sale securities	(2,371		)	—
Realized translation gain	(48		)	(35		)
Extinguishment of liability	(10,580		)	—
Other	—			51
Net change in certain operating assets and liabilities:
Trade accounts receivable	3,346			5,355
Prepaid expenses and other assets	94			6,749
Accounts payable	(114		)	(92		)
Accrued and other liabilities	(4,111		)	(10,612		)
Net cash provided by (used in) operating activities	(30,778		)	(12,885		)
Cash flows from investing activities:
Purchases of equipment, software, and leasehold improvements	(1,689		)	(3,181		)
Proceeds from sale of available for sale securities	2,754			—
Purchases of short-term investments	(48,326		)	(70,647		)
Proceeds from sales and maturities of short-term investments	52,663			71,327
Acquisitions of businesses, net of cash acquired	(733		)	(16,107		)
Other	(467		)	—
Net cash provided by (used in) investing activities	4,202			(18,608		)
Cash flows from financing activities:
Proceeds from issuance of common stock (stock options and stock purchase plan)	580			392
Tax payments from shares withheld upon vesting of restricted stock	(307		)	(800		)
Payment of contingent consideration	(696		)	(828		)
Net cash provided by (used in) financing activities	(423		)	(1,236		)
Effect of exchange rate changes on cash and cash equivalents	214			(1,259		)
Net increase (decrease) in cash and cash equivalents	(26,785		)	(33,988		)
Cash and cash equivalents, beginning of period	151,235			163,198
Cash and cash equivalents, end of period	$	124,450		$	129,210
Supplemental disclosure of cash flow information:
Cash received from income tax refunds	$	97		$	8,100
Cash paid for income taxes	$	1,074		$	2,147
Non-cash investing activities:
Increase (decrease) in accrued purchases of equipment, software, and leasehold improvements	$	(321	)	$	483

See accompanying notes to unaudited condensed consolidated financial statements.

5

REALNETWORKS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Quarters and Six Months EndedJune 30, 2014 and 2013

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business. RealNetworks, Inc. and subsidiaries is a leading global provider of network-delivered digital media applications and services that make it easy to manage, play and share digital media. The Company also develops and markets software products and services that enable the creation, distribution and consumption of digital media, including audio and video.

Inherent in our business are various risks and uncertainties, including a limited history of certain of our product and service offerings. RealNetworks' success will depend on the acceptance of our technology, products and services and the ability to generate related revenue.

In this Quarterly Report on Form 10-Q (10-Q or Report), RealNetworks, Inc. and Subsidiaries is referred to as “RealNetworks”, the “Company”, “we”, “us”, or “our”. “RealPlayer”, “LISTEN” and other trademarks of ours appearing in this report are our property.       

Basis of Presentation. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

The unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal, recurring adjustments that, in the opinion of the Company’s management, are necessary for a fair presentation of the results of operations for the periods presented. Operating results for the quarter and six months endedJune 30, 2014 are not necessarily indicative of the results that may be expected for any subsequent period or for the year ending December 31, 2014. Certain information and disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2013 (the 10-K).

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In addition, current economic conditions may require the use of additional estimates, and certain estimates we make are subject to a greater degree of uncertainty as a result of the current economic conditions.

Note 2. Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued new revenue recognition guidance. The guidance will require an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new guidance is effective for us on January 1, 2017. Early application is not permitted. The guidance permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that the guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor determined the effect of the standard on our ongoing financial reporting.

In April 2014, the FASB issued new guidance related to discontinued operations. The guidance changes the criteria for reporting discontinued operations and modifies the related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that represents a strategic shift that has, or will have, a major effect on an entity's operations and financial results.  The new guidance is effective for us on January 1, 2016. We are evaluating the impact that this guidance may have on our consolidated financial statements and related disclosures.

There have been no other recent accounting pronouncements or changes in accounting pronouncements to be implemented that are of significance or potential significance to RealNetworks.

Note 3. Acquisitions

6

In the quarter ended June 30, 2013, we acquired 100% of the voting interests in Slingo, Inc., a social casino games company based in the U.S., for total cash consideration of $15.6 million. The tangible and intangible assets and liabilities recognized are reported within the Games segment. The identifiable intangible assets associated with the acquisition totaled $8.0 million. Of this total, $4.5 million was related to tradenames and trademarks determined to have indefinite useful lives and will be evaluated annually in our fourth quarter for impairment, or more frequently, if circumstances indicate an impairment may exist. The remaining $3.5 million includes developed game technology and existing customer relationships with finite lives, and is being amortized over their useful lives. We recorded a net deferred tax liability of $2.7 million related to the intangible assets acquired. Goodwill totaling $9.9 million was recorded, representing the excess of purchase consideration over the fair value of net acquired assets, and was primarily related to the assembled workforce and expected synergies in the rapidly growing social casino games market. The goodwill is not deductible for income tax purposes. We expect this acquisition to enhance our footprint in the social casino games arena.

In the quarter ended September 30, 2013, we acquired 100% of the voting interests in Muzicall Limited, a ringback tone company based in London, for total cash consideration of $6.7 million. The tangible and intangible assets and liabilities recognized are reported in the Mobile Entertainment segment. The identifiable intangible assets associated with the acquisition totaled $5.4 million, and include tradenames and trademarks, developed technology, user base and carrier relationships. All identifiable intangible assets from this acquisition have finite lives, and are being amortized over their useful lives. We recorded a net deferred tax asset of $3.4 million related to the assets acquired, and a full valuation allowance. Goodwill totaling $1.3 million was recorded, representing the excess of purchase consideration over the fair value of net acquired assets acquired, and was primarily related to the assembled workforce and expected synergies in the ringback tone industry. The goodwill is not deductible for income tax purposes. This acquisition is intended to accelerate our growth initiatives within the Mobile Entertainment segment.

Note 4. Stock-Based Compensation

Total stock-based compensation expense recognized in our consolidated statements of operations includes amounts related to stock options, restricted stock units, and employee stock purchase plans and was as follows (in thousands):

	Quarters Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Total stock-based compensation expense	$	1,673	$	2,020	$	3,010	$	4,058

The fair value of options granted determined using the Black-Scholes model used the following weighted-average assumptions:

	Quarters Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Expected dividend yield	0	%	0	%	0	%	0	%
Risk-free interest rate	1.20	%	0.52	%	1.19	%	0.55	%
Expected life (years)	3.8		5.4		3.8		4.3
Volatility	40	%	48	%	40	%	48	%

The total stock-based compensation amounts for 2014 and 2013 disclosed above are recorded in their respective line items within operating expenses in the consolidated statement of operations. As of June 30, 2014, we had $11.5 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock awards. The unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 3 years.

Note 5. Rhapsody Joint Venture

As of June 30, 2014 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

7

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 2010 restructuring transactions, 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 2010 restructuring transactions, RealNetworks provided certain operational transition services to Rhapsody. These transition services were completed in 2013, and RealNetworks has no further obligations or liabilities pursuant to the support services agreement.

We recorded our share of losses of Rhapsody of $1.8 million and $2.6 million for the quarter and six months endedJune 30, 2014, respectively. Because of the $10.0 million liquidation preference on the preferred stock we hold in Rhapsody, under the equity method of accounting we do not record any share of Rhapsody losses that would reduce our carrying value of Rhapsody below $10.0 million, unless Rhapsody's book value is reduced below $10.0 million. The carrying value of our Rhapsody investment was $12.5 million as of December 31, 2013 and as of June 30, 2014 was $10.0 million.

Our share of the losses of Rhapsody for the quarter and six months endedJune 30, 2013 were $1.3 million and $3.6 million, respectively.

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

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net revenue	$	42,427		$	34,679		$	84,430		$	68,641
Gross profit	7,870			8,767			16,991			16,612
Net loss	(4,717		)	(4,375		)	(6,347		)	(9,191		)

Note 6. Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

The following table presents information about our financial assets that have been measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013, and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands).

	Fair Value Measurements as of								Amortized Cost as of
	June 30, 2014								June 30, 2014
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash	$	33,836	$	—	$	—	$	33,836	$	33,836
Money market funds	—		15,437		—		15,437		15,437
Corporate notes and bonds	—		75,177		—		75,177		75,178
Total cash and cash equivalents	33,836		90,614		—		124,450		124,451
Short-term investments:
Corporate notes and bonds	—		57,874		—		57,874		57,803
U.S. government agency securities	12,459		250		—		12,709		12,709
Total short-term investments	12,459		58,124		—		70,583		70,512
Restricted cash equivalents and investments	—		3,000		—		3,000		3,000
Equity investment in publicly traded securities	3,182		—		—		3,182		428
Total	$	49,477	$	151,738	$	—	$	201,215	$	198,391

8

	Fair Value Measurements as of								Amortized Cost as of
	December 31, 2013								December 31, 2013
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash	$	46,978	$	—	$	—	$	46,978	$	46,978
Money market funds	1		26,913		—		26,914		26,914
Corporate notes and bonds	—		77,043		—		77,043		77,044
U.S. government agency securities	—		300		—		300		300
Total cash and cash equivalents	46,979		104,256		—		151,235		151,236
Short-term investments:
Corporate notes and bonds	—		59,766		—		59,766		59,713
U.S. government agency securities	14,077		1,077		—		15,154		15,159
Total short-term investments	14,077		60,843		—		74,920		74,872
Restricted cash equivalents and investments	—		3,000		—		3,000		3,000
Equity investment in publicly traded securities	7,181		—		—		7,181		842
Total	$	68,237	$	168,099	$	—	$	236,336	$	229,950

Restricted cash equivalents and investments amounts as of June 30, 2014, and December 31, 2013 relate to cash pledged as collateral against a letter of credit in connection with a lease agreement.

Realized gains or losses on sales of short-term investment securities for the quarters and six months endedJune 30, 2014 and 2013 were not significant. Gross unrealized gains and gross unrealized losses on short-term investment securities as of June 30, 2014 and December 31, 2013 were not significant.

Investments with remaining contractual maturities of five years or less are classified as short-term because the investments are marketable and highly liquid, and we have the ability to utilize them for current operations. Contractual maturities of short-term investments as of June 30, 2014 (in thousands):

	Estimated Fair Value
Within one year	$	48,399
Between one year and five years	22,184
Total short-term investments	$	70,583

Our equity investment in a publicly traded company as of June 30, 2014 and December 31, 2013 consisted of J-Stream Inc., a Japanese media services company. This equity investment is accounted for as available for sale. In March 2014 we sold a portion of the J-Stream shares we held, resulting in cash proceeds of $2.8 million and a pre-tax gain of $2.4 million.

Items Measured at Fair Value on a Non-recurring Basis

Certain of our assets and liabilities are measured at estimated fair value on a non-recurring basis, using Level 3 inputs. These instruments are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). During the six months ended June 30, 2014 and 2013, we did not record any impairments on those assets required to be measured at fair value on a non-recurring basis.

Note 7. Allowance for Doubtful Accounts Receivable and Sales Returns

Activity in the allowance for doubtful accounts receivable and sales returns (in thousands):

9

	Allowance For
	Doubtful Accounts Receivable			Sales Returns
Balances, December 31, 2013	$	966		$	569
Addition (reduction) to allowance	341			(101		)
Amounts written off	(25		)	(4		)
Foreign currency translation	4			(1		)
Balances, June 30, 2014	$	1,286		$	463

One customer accounted for 17% of trade accounts receivable and one other customer accounted for 12% of trade accounts receivable, as of June 30, 2014. One customer accounted for 17% of trade accounts receivable as of December 31, 2013.

One customer accounted for 21% and 19% of consolidated revenue, or $8.6 million and $16.4 million, during the quarter and six months endedJune 30, 2014, and is reflected in our Mobile Entertainment segment. One additional customer accounted for 12% of consolidated revenue, or $10.5 million for the six months ended June 30, 2014, and is reflected in our RealPlayer Group and Games segments. One customer accounted for approximately 13% and 14% of consolidated revenue, or $6.5 million and $15.1 million, during the quarter and six months ended June 30, 2013, and is reflected in our RealPlayer Group and Games segments. One additional customer accounted for approximately 11% of consolidated revenue, or $5.6 million, during the quarter ended June 30, 2013, in our Mobile Entertainment segment.

Note 8. Other Intangible Assets

Other intangible assets (in thousands):

		As of June 30,						As of December 31,
		2014						2013
		Gross Amount		Accumulated Amortization		Net		Gross Amount		Accumulated Amortization		Net
Amortizing intangible assets:
	Customer relationships	$	36,350	$	33,512	$	2,838	$	35,156	$	31,262	$	3,894
	Developed technology	29,738		26,365		3,373		29,097		25,039		4,058
	Patents, trademarks and tradenames	4,145		3,784		361		4,021		3,627		394
	Service contracts	6,619		5,763		856		5,679		5,532		147
		76,852		69,424		7,428		73,953		65,460		8,493
Non-amortizing intangible assets:
	Trademarks and tradenames	4,500		—		4,500		4,500		—		4,500
	Total	$	81,352	$	69,424	$	11,928	$	78,453	$	65,460	$	12,993

In the second quarter of 2014 a small acquisition of a business related to our RealPlayer Group resulted in an intangible asset of $0.8 million being recorded.

No impairments of other intangible assets were recognized in either of the six months ended June 30, 2014 or 2013.

Note 9. Goodwill

Changes in goodwill (in thousands):

Balance, December 31, 2013	$	17,476
Increases due to current year acquisitions	460
Effects of foreign currency translation	69
Balance, June 30, 2014	$	18,005

Goodwill by segment (in thousands):

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	June 30, 2014
RealPlayer Group	$	1,043
Mobile Entertainment	2,202
Games	14,760
Total goodwill	$	18,005

In the second quarter of 2014 a small acquisition of a business related to our RealPlayer Group resulted in goodwill of $0.5 million being recorded.

No impairment of goodwill was recognized in either of the six months ended June 30, 2014 or 2013.

Note 10. Accrued and Other Current Liabilities

Accrued and other current liabilities (in thousands):

	June 30, 2014		December 31, 2013
Royalties and other fulfillment costs	$	5,033	$	16,467
Employee compensation, commissions and benefits	7,037		10,060
Sales, VAT and other taxes payable	6,862		7,237
Other	7,942		8,129
Total accrued and other current liabilities	$	26,874	$	41,893

During the quarter ended March 31, 2014, certain accrued royalty liabilities of $10.6 million associated with our historical music business, which had originally been recorded based on statutory rates, were extinguished.

Note 11. Restructuring Charges

Restructuring and other charges in 2014 and 2013 consist of costs associated with the ongoing reorganization of our business operations and our ongoing expense alignment efforts. The expense amounts in both years relate primarily to severance costs due to workforce reductions.

In the latter half of 2012, we announced the elimination of approximately 160 positions worldwide, which was concluded as of the second quarter of 2013. During 2013 and 2014, we have incurred restructuring charges consisting of costs associated with the reorganization of our business operations and our ongoing expense alignment efforts. These costs are reflected in the table below.

Restructuring charges by type of cost (in thousands):

	Employee Separation Costs		Asset Related and Other Costs	Total
Costs incurred and charged to expense for the six months ended June 30, 2014	$	1,757	—	$	1,757
Costs incurred and charged to expense for the six months ended June 30, 2013	$	1,818	380	$	2,198

Changes to the accrued restructuring cost liability (in thousands):

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	Employee Separation Costs
Accrued liability as of December 31, 2013	$	756
Costs incurred and charged to expense for the six months ended June 30, 2014	1,757
Cash payments	(2,263		)
Accrued liability as of June 30, 2014 (included in Accrued and other current liabilities)	$	250

Note 12. Lease Exit and Related Charges

As a result of the reduction in use of RealNetworks' office space, losses have been recognized representing rent and contractual operating expenses over the remaining life of the leases.

Changes to accrued lease exit and related charges (in thousands):

Accrued loss as of December 31, 2013	$	254
Additions and adjustments to the lease exit charges accrual, including sublease income estimate revision	400
Less amounts paid, net of sublease amounts	(124		)
Accrued loss as of June 30, 2014 (included in Accrued and other current liabilities)	$	530

Note 13. Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss)

Changes in components of accumulated other comprehensive income (in thousands):

		Quarters Ended June 30,						Six Months Ended June 30,
		2014			2013			2014			2013
Investments
	Accumulated other comprehensive income (loss), beginning of period	$	2,822		$	29,322		$	6,397		26,685
	Unrealized gains (losses), net of tax effects of $0, $913, $0 and $(716)	(38		)	(1,622		)	(1,242		)	1,015
	Reclassification adjustments for losses (gains) included in other income (expense), net of tax effects of $0, $0, $(4) and $0	—			—			(2,371		)	—
	Net current period other comprehensive income	(38		)	(1,622		)	(3,613		)	1,015
	Accumulated other comprehensive income (loss) balance, end of period	$	2,784		$	27,700		$	2,784		$	27,700
Foreign currency translation
	Accumulated other comprehensive income (loss), beginning of period	$	(54,117	)	$	(54,463	)	$	(54,092	)	$	(53,225	)
	Translation adjustments	216			(353		)	239			(1,591		)
	Reclassification adjustments for losses (gains) included in other income (expense)	—			(35		)	(48		)	(35		)
	Net current period other comprehensive income	216			(388		)	191			(1,626		)
	Accumulated other comprehensive income (loss) balance, end of period	$	(53,901	)	$	(54,851	)	$	(53,901	)	$	(54,851	)
Total accumulated other comprehensive income (loss), end of period		$	(51,117	)	$	(27,151	)	$	(51,117	)	$	(27,151	)

Note 14. Income Taxes

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As of June 30, 2014, there have been no material changes to RealNetworks’ uncertain tax positions disclosures as provided in Note 14 of the 2013 10-K. We currently anticipate the expiration of the statute of limitations within the next twelve months that may decrease the Company's total unrecognized tax benefit by an amount up to $0.9 million.

We file numerous consolidated and separate income tax returns in the U.S including federal, state and local, as well as foreign jurisdictions. With few exceptions, we are no longer subject to U.S federal income tax examinations for tax years before 2008 or state, local, or foreign income tax examinations for years before 1993. We are currently under audit by various states and foreign jurisdictions for certain tax years subsequent to 1993. We are currently under United States federal audit for the consolidated group (RealNetworks, Inc. and Subsidiaries) for the year ended December 31, 2012.

Note 15. Earnings (Loss) Per Share

Basic net income (loss) per share (EPS) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) by the weighted average number of common and dilutive potential common shares outstanding during the period. Basic and diluted EPS (in thousands, except per share amounts):

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net income (loss)	$	(21,029	)	$	(18,471	)	$	(28,799	)	$	(30,145	)
Weighted average common shares outstanding used to compute basic EPS	35,890			35,455			35,865			35,399
Dilutive effect of stock based awards	—			—			—			—
Weighted average common shares outstanding used to compute diluted EPS	35,890			35,455			35,865			35,399
Basic EPS	$	(0.59	)	$	(0.52	)	$	(0.80	)	$	(0.85	)
Diluted EPS	$	(0.59	)	$	(0.52	)	$	(0.80	)	$	(0.85	)

During the quarter and six months endedJune 30, 2014, 6.3 million and 6.2 million shares of common stock, respectively, of potentially issuable shares from stock awards were excluded from the calculation of diluted EPS because of their antidilutive effect.

During the quarter and six months endedJune 30, 2013, 4.3 million and 4.3 million shares of common stock, respectively, of potentially issuable shares from stock awards were excluded from the calculation of diluted EPS because of their antidilutive effect.

Note 16. Commitments and Contingencies

We may become subject to legal proceedings, governmental investigations and claims in the ordinary course of business, including employment claims, contract-related claims, and claims of alleged infringement of third-party patents, trademarks and other intellectual property rights. Such claims, even if not meritorious, could force us to expend significant financial and managerial resources. In addition, given the broad distribution of some of our consumer products, any individual claim related to those products could give rise to liabilities that may be material to us. In the event of a determination adverse to us, we may incur substantial monetary liability, and/or be required to change our business practices. Either of these could have a material adverse effect on our consolidated financial statements.  

Note 17. Guarantees

In the ordinary course of business, RealNetworks is subject to potential obligations for standard warranty and indemnification provisions that are contained within many of our customer license and service agreements. Our warranty provisions are consistent with those prevalent in our industry, and we do not have a history of incurring losses on warranties; therefore, we do not maintain accruals for warranty-related obligations. With regard to indemnification provisions, nearly all of our carrier contracts obligate us to indemnify our carrier customers for certain liabilities that may be incurred by them. We have received in the past, and may receive in the future, claims for indemnification from carrier customers.

In relation to the patents and other technology assets we sold to Intel in the second quarter of 2012, we have specific obligations to indemnify Intel for breaches of the representations and warranties that we made and covenants that we agreed to in the asset purchase agreement for certain potential future intellectual property infringement claims brought by third parties

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against Intel. The amount of any potential liabilities related to our indemnification obligations to Intel will not be determined until a claim has been made, but we are obligated to indemnify Intel up to the amount of the gross purchase price that we received in the sale.

Note 18. Segment Information

We have three reportable 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, our recently launched LISTEN product, 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.

We allocate certain corporate expenses which are directly attributable to supporting the business to our reportable segments. 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 loss on litigation settlements are included in the corporate segment.

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 Chief Executive Officer, Chief Financial Officer, our Presidents, 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, in the 10-K.

Segment results for the quarters and six months endedJune 30, 2014 and 2013 (in thousands):

RealPlayer Group

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue	$	8,556		$	18,383		$	23,771		$	40,766
Cost of revenue	3,620			4,409			7,138			9,720
Gross profit	4,936			13,974			16,633			31,046
Operating expenses	12,489			14,001			30,276			30,207
Operating income (loss)	$	(7,553	)	$	(27	)	$	(13,643	)	$	839

Mobile Entertainment

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue	$	23,182		$	18,592		$	43,095		$	39,087
Cost of revenue	14,298			11,170			26,248			22,002
Gross profit	8,884			7,422			16,847			17,085
Operating expenses	9,424			8,412			19,040			17,523
Operating income (loss)	$	(540	)	$	(990	)	$	(2,193	)	$	(438	)

Games

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	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue	$	9,087		$	12,875		$	19,683		$	26,790
Cost of revenue	2,717			3,381			5,846			7,181
Gross profit	6,370			9,494			13,837			19,609
Operating expenses	8,769			11,755			18,535			23,607
Operating income (loss)	$	(2,399	)	$	(2,261	)	$	(4,698	)	$	(3,998	)

Corporate

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Cost of revenue	$	151		$	559		$	340		$	1,122
Extinguishment of liability	—			—			(10,580		)	—
Operating expenses	8,189			12,667			17,414			23,211
Operating income (loss)	$	(8,340	)	$	(13,226	)	$	(7,174	)	$	(24,333	)

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):

	Quarters Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
United States	$	15,092	$	21,463	$	35,520	$	49,486
Europe	6,968		9,272		15,380		20,528
Republic of Korea	11,092		11,259		21,386		20,223
Rest of the world	7,673		7,856		14,263		16,406
Total net revenue	$	40,825	$	49,850	$	86,549	$	106,643

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

	June 30, 2014		December 31, 2013
United States	$	37,107	$	40,347
Europe	8,348		8,280
Republic of Korea	763		936
Rest of the world	4,173		4,078
Total long-lived assets	$	50,391	$	53,641

Note 19. Related Party Transactions

Transactions with Rhapsody. See Note 5, Rhapsody Joint Venture, for details on the 2010 restructuring transaction involving Rhapsody. Subsequent to the restructuring transaction, we were obligated to provide Rhapsody with certain support services. These support services, which included information technology and limited operational support provided directly to Rhapsody, were completed in 2013. RealNetworks has no further obligations or liabilities pursuant to the support services agreement.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, and projections about RealNetworks’ industry, products, management’s beliefs, and certain assumptions made by management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. All statements contained in this report that do not relate to matters of historical fact should be considered forward-looking statements. Forward-looking statements include statements with respect to:

• the expected benefits and other consequences of our growth plans, strategic initiatives, and restructurings;

• our expected introduction, and related monetization, of new and enhanced products, services and technologies across our businesses;

• future revenues, operating expenses, income and other taxes, tax benefits, net income (loss) per diluted share available to common shareholders, acquisition costs and related amortization, and other measures of results of operations;

• the effects of our past acquisitions and expectations for future acquisitions and divestitures;

• plans, strategies and expected opportunities for future growth, increased profitability and innovation;

• the expected financial position, performance, growth and profitability of, and investment in, our businesses and the availability of resources;

• the effects of legislation, regulations, administrative proceedings, court rulings, settlement negotiations and other factors that may impact our businesses;

• the continuation and expected nature of certain customer relationships;

• impacts of competition and certain customer relationships on the future financial performance and growth of our businesses;

• our involvement in potential claims, legal proceedings and government investigations, and the potential outcomes and effects of such potential claims, legal proceedings and governmental investigations on our business, prospects, financial condition or results of operations;

• the effects of U.S. and foreign income and other taxes on our business, prospects, financial condition or results of operations; and

• the effect of economic and market conditions on our business, prospects, financial condition or results of operations.

These statements are not guarantees of future performance and actual actions or results may differ materially. These statements are subject to certain risks, uncertainties and assumptions that are difficult to predict, including those noted in the documents incorporated herein by reference. Particular attention should also be paid to the cautionary language in Item 1A of Part II entitled “Risk Factors.” RealNetworks undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise, unless required by law. Readers should, however, carefully review the risk factors included in other reports or documents filed by RealNetworks from time to time with the Securities and Exchange Commission, particularly the Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.

Overview

RealNetworks creates innovative products and services that make it easy to connect with and enjoy digital media. We invented the streaming media category in 1995 and continue to connect consumers with their digital media both directly and through partners, aiming to support every network, device, media type and social network.

We manage our business and report revenue and operating income (loss) in three segments: (1) RealPlayer Group, (2) Mobile Entertainment, and (3) Games. Within our RealPlayer Group, revenue is derived from the sale 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. Our Mobile Entertainment business generates revenue from the sale of its SaaS services, which include ringback tones, music on demand, intercarrier messaging, and our recently launched LISTEN product, and sales of technology licenses of our software products such as Helix. Our Games business, through its Slingo, GameHouse and Zylom brands, derives revenue from sales of games licenses, online games subscription services, advertising on games sites and social networks, microtransactions within online and social games, and sales of mobile games.

We allocate certain corporate expenses which are directly attributable to supporting our businesses, including but not limited to a portion of finance, legal, human resources and headquarters facilities, to our reportable segments. The allocation of these costs to our business units ensures accountability for financial and operational performance within each of our reportable

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segments. Our most significant expenses relate to cost of revenue, compensating employees, and selling and marketing our products and services.

For the quarter and six months endedJune 30, 2014, our consolidated revenue declined by $9.0 million and $20.1 million, respectively, compared to the same periods in 2013. The decline in revenue for the quarter in our RealPlayer Group was $9.8 million and $3.8 million in Games. Revenue increased for the quarter in Mobile Entertainment by $4.6 million. For the year to date period, the decline was primarily due to a decline of $17.0 million in our RealPlayer Group and a decline of $7.1 million in Games. For the year to date period, revenue increased by $4.0 million in Mobile Entertainment.

Revenue from our legacy products continues to decline as a result of certain changes in our businesses and market-driven factors. In our RealPlayer Group segment, revenue suffered from pricing pressure and lower distribution in our intellectual property licensing business and from installation declines as well as lower rates in our third party software distribution business. Moreover, as we focus more of our distribution and marketing efforts on our new RealPlayer Cloud service, sales of RealPlayer Plus licenses are declining, resulting in reduced revenue. The business also continues to be negatively impacted by a decline in subscribers, primarily attributable to our SuperPass product. In our Games segment, our business continues to be challenged in line with overall trends in the online games market, including the shift from downloadable PC games to social networks and mobile devices. In our Mobile Entertainment segment, the revenue increase was related primarily to our music on demand services in Korea and our acquisition of Muzicall in September of 2013, which increased our direct-to-consumer ringback tones revenue. Partially offsetting these increases was a loss in revenue due to termination of carrier contracts.

Over the past several quarters we have developed a growth plan, implemented strategic initiatives, and executed certain restructuring efforts, all in an effort to grow our businesses, move towards profitability, and streamline our operations. In line with our growth plan, we continue to invest in each of our three business units. During the first half of 2014, we released RealPlayer Cloud worldwide. This global roll out allows us to reach our base of millions of active RealPlayer users around the world. In our Mobile Entertainment business we continue our efforts to roll out our new LISTEN product. LISTEN leverages our pioneering leadership in ringback tones, and our large, global installed base of over 18 million active ringback tone subscribers with more than 20 carriers worldwide, to create a hybrid distribution model that combines partnership with carriers with direct-to-consumer marketing. In our Games business we announced our plans to release Slingo Adventure on Facebook, iOS, and Android. We expect to continue to invest heavily in our growth initiatives, including further development and marketing efforts around our products, while also building on our efforts to streamline our operations and make our businesses more efficient.

During the quarter ended March 31, 2014 certain accrued royalty liabilities of $10.6 million associated with our historical music business, which had originally been recorded based on statutory rates, were extinguished.

Condensed consolidated results of operations were as follows (dollars in thousands):

	Quarters Ended June 30,											Six months ended June 30,
	2014			2013			$ Change			% Change		2014			2013			$ Change			% Change
Total revenue	$	40,825		$	49,850		$	(9,025	)	(18	)%	$	86,549		$	106,643		$	(20,094	)	(19	)%
Cost of revenue	20,786			19,519			1,267			6	%	39,572			40,025			(453		)	(1	)%
Extinguishment of liability	—			—			—			—	%	(10,580		)	—			(10,580		)	(100	)%
Gross profit	20,039			30,331			(10,292		)	(34	)%	57,557			66,618			(9,061		)	(14	)%
Gross margin	49		%	61		%						67		%	62		%
Operating expenses	38,871			46,835			(7,964		)	(17	)%	85,265			94,548			(9,283		)	(10	)%
Operating income (loss)	$	(18,832	)	$	(16,504	)	$	(2,328	)	(14	)%	$	(27,708	)	$	(27,930	)	$	222		(1	)%

In the second quarter of 2014, our total consolidated revenue declined by $9.0 million, compared with the year-earlier period. The reduction in revenue resulted from a decline of $9.8 million in our RealPlayer Group segment and a decline of $3.8 million in our Games segment, due to the factors described above. These declines were partially offset by an increase of $4.6 million in our Mobile Entertainment segment. Gross margin decreased to 49% from 61% during the quarter ended June 30, 2014, due primarily to a decline in higher margin revenues. Operating expenses decreased by $8.0 million in the quarter ended June 30, 2014, compared with the prior year, primarily due to $2.6 million of higher lease exit and related charges in 2013, related to our Seattle headquarters move, reduced marketing costs in 2014 of $2.6 million and reductions in personnel and related costs of $2.7 million.

For the six months endedJune 30, 2014, our total consolidated revenue declined by $20.1 million, compared with the year-earlier period. The reduction in revenue primarily resulted from a decline of $17.0 million in our RealPlayer Group and a

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decline of $7.1 million in our Games segment, due to the factors described above, partially offset by an increase in Mobile Entertainment revenue of $4.0 million primarily due to an increase in music on demand services in Korea. Gross margin increased to 67% from 62% for the year earlier period primarily due to the extinguishment of the liability in the first quarter of 2014 described above.Operating expenses decreased by $9.3 million in the six months endedJune 30, 2014, compared with the prior year primarily due to reductions in personnel and related costs of $4.2 million and to reduced charges for restructuring and lease exit activities of $3.0 million, which resulted from our ongoing expense alignment efforts.

Segment Operating Results

RealPlayer Group

RealPlayer Group segment results of operations were as follows (dollars in thousands):

	Quarters Ended June 30,											Six months ended June 30,
	2014			2013			$ Change			% Change		2014			2013			$ Change			% Change
Revenue	$	8,556		$	18,383		$	(9,827	)	(53	)%	$	23,771		$	40,766		$	(16,995	)	(42	)%
Cost of revenue	3,620			4,409			(789		)	(18	)%	7,138			9,720			(2,582		)	(27	)%
Gross profit	4,936			13,974			(9,038		)	(65	)%	16,633			31,046			(14,413		)	(46	)%
Gross margin	58		%	76		%						70		%	76		%
Operating expenses	12,489			14,001			(1,512		)	(11	)%	30,276			30,207			69			—	%
Operating income (loss)	$	(7,553	)	$	(27	)	$	(7,526	)	NA		$	(13,643	)	$	839		$	(14,482	)	NA

Total RealPlayer Group revenue decreased by $9.8 million in the quarter ended June 30, 2014, compared with the year-earlier period. This decrease was primarily a result of reduced rates that caused a decrease in our third party distribution revenue by $4.3 million and lower subscriptions revenue of $1.7 million due to fewer subscribers, primarily attributable to our SuperPass product. Further contributing to the decline was a decrease in RealPlayer Plus license revenue of $2.1 million due to our focus on RealPlayer Cloud, and due to lower distribution of intellectual property licenses of $1.4 million.

Total RealPlayer Group revenue decreased by $17.0 million in the six months ended June 30, 2014, compared with the year-earlier period. This decrease was primarily a result of reduced rates that caused a decrease in our third party distribution revenue by $5.8 million and lower subscriptions revenue of $3.9 million due to fewer subscribers, primarily attributable to our SuperPass product. Further contributing to the decline was a decrease in RealPlayer license revenue of $4.2 million due to our focus on RealPlayer Cloud and a decrease of $2.6 million in distribution of intellectual property licenses.

Cost of revenue decreased by $0.8 million during the quarter ended June 30, 2014, compared with the year-earlier period. Costs related to our RealPlayer Plus licensing business decreased by $0.7 million due to lower royalties. Costs related to our subscription business declined $0.1 million in connection with lower subscription revenue.

Cost of revenue decreased by $2.6 million during the six months ended June 30, 2014, compared with the year-earlier period. Costs related to our RealPlayer Plus licensing business decreased by $1.0 million due to lower royalties. Costs related to our subscription business declined $1.0 million in connection with lower subscription revenue.

Gross margin during the quarter and six months endedJune 30, 2014 declined as a result of the reduced rates from our third party distribution business.

Operating expenses decreased by $1.5 million in the quarter ended June 30, 2014, compared with the year-earlier period primarily due to decreased marketing spend of $1.8 million in line with the decrease in our third party distribution revenue.

Mobile Entertainment

Mobile Entertainment segment results of operations were as follows (dollars in thousands):

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	Quarters Ended June 30,										Six months ended June 30,
	2014			2013			$ Change		% Change		2014			2013			$ Change			% Change
Revenue	$	23,182		$	18,592		$	4,590	25	%	$	43,095		$	39,087		$	4,008		10	%
Cost of revenue	14,298			11,170			3,128		28	%	26,248			22,002			4,246			19	%
Gross profit	8,884			7,422			1,462		20	%	16,847			17,085			(238		)	(1	)%
Gross margin	38		%	40		%					39		%	44		%
Operating expenses	9,424			8,412			1,012		12	%	19,040			17,523			1,517			9	%
Operating income (loss)	$	(540	)	$	(990	)	$	450	45	%	$	(2,193	)	$	(438	)	$	(1,755	)	(401	)%

Total Mobile Entertainment revenue increased by $4.6 million in the quarter ended June 30, 2014, compared with the year-earlier period. The increase was primarily due to an increase in music on demand revenue in Korea of $3.1 million and increased revenue of $1.4 million for systems integration services in Japan, and our acquisition of Muzicall in the third quarter of 2013, which increased our direct-to-consumer ringback tones revenue by $0.9 million. Partially offsetting these increases was a loss in revenue due to termination of carrier contracts of $0.9 million.

Total Mobile Entertainment revenue increased by $4.0 million in the six months ended June 30, 2014, compared with the year-earlier period. The increase was primarily due to an increase in music on demand revenue in Korea of $6.0 million and increased revenue of $1.2 million for systems integration services in Japan, and our acquisition of Muzicall, which increased our direct-to-consumer ringback tones revenue by $2.0 million. Partially offsetting these increases was a loss in revenue due to termination of carrier contracts of $4.4 million.

Cost of revenue increased by $3.1 million and $4.2 million in the quarter and six months endedJune 30, 2014, respectively, compared with the year-earlier period due to an increase in label royalties related to our in music on demand services.

Gross margin for the six months ended June 30, 2014 declined to 39% from 44% due to a decline in higher margin revenues.

Operating expenses increased by $1.0 million and $1.5 million for the quarter and six months endedJune 30, 2014, respectively, compared with the year-earlier periods, primarily due to $0.6 million of marketing expenses related to Muzicall and LISTEN, and $0.5 million in people-related expenses related to Muzicall.

Games

Games segment results of operations were as follows (dollars in thousands):

	Quarters Ended June 30,											Six months ended June 30,
	2014			2013			$ Change			% Change		2014			2013			$ Change			% Change
Revenue	$	9,087		$	12,875		$	(3,788	)	(29	)%	$	19,683		$	26,790		$	(7,107	)	(27	)%
Cost of revenue	2,717			3,381			(664		)	(20	)%	5,846			7,181			(1,335		)	(19	)%
Gross profit	6,370			9,494			(3,124		)	(33	)%	13,837			19,609			(5,772		)	(29	)%
Gross margin	70		%	74		%						70		%	73		%
Operating expenses	8,769			11,755			(2,986		)	(25	)%	18,535			23,607			(5,072		)	(21	)%
Operating income (loss)	$	(2,399	)	$	(2,261	)	$	(138	)	(6	)%	$	(4,698	)	$	(3,998	)	$	(700	)	(18	)%

Total Games revenue decreased by $3.8 million in the quarter ended June 30, 2014, compared with the year-earlier period. Lower revenue from our subscription products, licensing and advertising due to continued declines in our storefront and subscription businesses contributed $1.5 million, $0.7 million and $1.3 million, respectively, to the overall decrease.

Total Games revenue decreased by $7.1 million in the six months ended June 30, 2014, compared with the year-earlier period. Lower revenue from our subscription products, licensing and advertising due to continued declines in our storefront and subscription businesses contributed $2.6 million, $2.1 million and $1.9 million, respectively, to the overall decrease.

Cost of revenue decreased by $0.7 million and $1.3 million in the quarter and six months endedJune 30, 2014, respectively, compared with the year-earlier period. The decreases were due to the decrease in partner royalties expense, which has a direct correlation with the decrease in Games revenue. The decrease in cost of revenue was also due to a decline in our advertising business. Gross margin declined during the quarter and six months endedJune 30, 2014 to 70% from 74% and to 70% from 73%, respectively, due primarily to a higher proportion of lower margin revenue in the current year.

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Operating expenses declined by $3.0 million in the quarter ended June 30, 2014, compared with the year-earlier period. The decrease was due to reductions in personnel and related costs of $1.9 million and reduced marketing spend of $1.3 million.

Operating expenses declined by $5.1 million in the six months ended June 30, 2014, compared with the year-earlier period. The decrease was due to reductions in personnel and related costs of $2.4 million and reduced marketing spend of $2.3 million.

Corporate

We allocate certain corporate expenses which are directly attributable to supporting the business to our reportable segments. These allocated 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, and lease exit and related charges, are included in the corporate segment.

Corporate segment results of operations were as follows (dollars in thousands):

	Quarters Ended June 30,											Six months ended June 30,
	2014			2013			$ Change			% Change		2014			2013			$ Change			% Change
Cost of revenue	$	151		$	559		$	(408	)	(73	)%	$	340		$	1,122		$	(782	)	(70	)%
Extinguishment of liability	—			—			—			—	%	(10,580		)	—			(10,580		)	(100	)%
Operating expenses	8,189			12,667			(4,478		)	(35	)%	17,414			23,211			(5,797		)	(25	)%
Operating income (loss)	$	(8,340	)	$	(13,226	)	$	4,886		37	%	$	(7,174	)	$	(24,333	)	$	17,159		71	%

During the quarter ended March 31, 2014 certain accrued royalty liabilities of $10.6 million associated with our historical music business, which had originally been recorded based on statutory rates, were extinguished.

Operating expenses decreased by $4.5 million in the quarter ended June 30, 2014 , compared with the year-earlier period. The decrease during the quarter was primarily due to a reduction of $2.9 million for restructuring and lease exit charges, $1.9 million in savings resulting from with the relocation of our Seattle headquarters and $1.1 million in reduced personnel and related costs due to our ongoing expense alignment efforts. These decreases were partially offset by the impact of a benefit in 2013 of $1.4 million from the reduction to our liability for estimated sales taxes that reduced operating expenses in 2013.

Operating expenses decreased by $5.8 million in the six months ended June 30, 2014, compared with the year-earlier period. The decrease was primarily due to a reduction of $3.0 million for restructuring and lease exit charges, $2.5 million in savings resulting from with the relocation of our Seattle headquarters and $1.9 million in reduced personnel and related costs due to our ongoing expense alignment efforts. These decreases were partially offset by the impact of a benefit in 2013 of $1.7 million from the reduction to our liability for estimated sales taxes that reduced operating expenses in 2013.

Consolidated Operating Expenses

Our operating expenses consist primarily of salaries and related personnel costs including stock based compensation, consulting fees associated with product development, sales commissions, amortization of certain intangible assets capitalized in our acquisitions, professional service fees, advertising costs, and restructuring charges. Operating expenses were as follows (dollars in thousands):

	Quarters Ended June 30,									Six months ended June 30,
	2014		2013		$ Change			% Change		2014		2013		$ Change			% Change
Research and development	$	13,267	$	14,993	$	(1,726	)	(12	)%	$	27,326	$	30,244	$	(2,918	)	(10	)%
Sales and marketing	16,016		19,269		(3,253		)	(17	)%	37,739		40,403		(2,664		)	(7	)%
General and administrative	8,577		8,691		(114		)	(1	)%	17,894		18,637		(743		)	(4	)%
Restructuring and other charges	541		816		(275		)	(34	)%	1,757		2,198		(441		)	(20	)%
Lease exit and related charges	470		3,066		(2,596		)	(85	)%	549		3,066		(2,517		)	(82	)%
Total consolidated operating expenses	$	38,871	$	46,835	$	(7,964	)	(17	)%	$	85,265	$	94,548	$	(9,283	)	(10	)%

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Research and development expenses decreased by $1.7 million and $2.9 million, respectively, in the quarter and six months endedJune 30, 2014, compared with the year-earlier period. The decrease was primarily due to savings resulting from the relocation of our Seattle headquarters of $1.4 million and $2.3 million, respectively.

Sales and marketing expenses decreased by $3.3 million and $2.7 million, respectively, in the quarter and six months endedJune 30, 2014, compared with the year-earlier period. The decrease was primarily due to reduced marketing spend of $2.7 million and $2.0 million, respectively.

General and administrative expenses decreased by $0.7 million in the six months ended June 30, 2014, compared with the year-earlier period. The decrease was due to $2.5 million in reduced personnel and related costs due to our ongoing expense alignment efforts, partially offset by the impact of a benefit in 2013 of $1.7 million from the reduction to our liability for estimated sales taxes that reduced operating expenses in 2013.

Restructuring and other charges and Lease exit and related charges consist of costs associated with the ongoing reorganization of our business operations and our ongoing expense alignment efforts. The restructuring expense amounts in both years primarily relate to severance costs due to workforce reductions. For additional details on these charges see Note 11, Restructuring Charges and Note 12, Lease Exit and Related Charges.

Other Income (Expenses)

Other income (expenses), net was as follows (dollars in thousands):

	Quarters Ended June 30,											Six months ended June 30,
	2014			2013			$ Change			% Change		2014			2013			$ Change			% Change
Interest income, net	$	180		$	179		$	1		1	%	$	316		$	826		$	(510	)	(62	)%
Gain (loss) on sale of available for sale securities, net	—			—			—			—		2,371			—			2,371			100	%
Equity in net loss of Rhapsody	(1,802		)	(1,347		)	(455		)	(34	)%	(2,640		)	(3,580		)	940			26	%
Other income (expense), net	(95		)	(137		)	42			31	%	(172		)	(28		)	(144		)	(514	)%
Total other income (expense), net	$	(1,717	)	$	(1,305	)	$	(412	)	(32	)%	$	(125	)	$	(2,782	)	$	2,657		96	%

As described further in Note 5, Rhapsody Joint Venture, we account for our investment in Rhapsody under the equity method of accounting. The net carrying value of our investment in Rhapsody is not necessarily indicative of the underlying fair value of our investment.

The increase in Other income (expense), net, of $2.7 million for the six months ended June 30, 2014 was primarily due to the gain on sale of a portion of our shares held in J-Stream, as discussed further in Note 6, Fair Value Measurements.

Income Taxes

During the quarters endedJune 30, 2014 and 2013, we recognized income tax expense of $0.5 million and $0.7 million, respectively, related to U.S. and foreign income taxes.

During the six months ended June 30, 2014 and 2013, we recognized income tax expense of $1.0 million and an income tax benefit of $0.6 million, respectively, related to U.S. and foreign income taxes. The change in income tax expense during the quarter and six months endedJune 30, 2014 was largely the result of an income tax benefit related to unrealized gains on investment securities recognized in other comprehensive income in the first quarter ending March 31, 2013 and changes in our jurisdictional income.

As of June 30, 2014, there have been no material changes to RealNetworks’ uncertain tax positions disclosures as provided in Note 14 of the 2013 10-K. We currently anticipate the expiration of the statute of limitations within the next twelve months that may decrease the Company's total unrecognized tax benefit by an amount up to $0.9 million.

The majority of our tax expense is due to income in our foreign jurisdictions and we have not benefitted from losses in the U.S. and certain foreign jurisdictions in the second quarter of 2014. We generate income in a number of foreign jurisdictions, some of which have higher or lower tax rates relative to the U.S. federal statutory rate. Our tax expense could fluctuate significantly on a quarterly basis to the extent income is less than anticipated in countries with lower statutory tax rates and more than anticipated in countries with higher statutory tax rates. For the six months ended June 30, 2014, decreases in tax

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expense from income generated in foreign jurisdictions with lower tax rates in comparison to the U.S. federal statutory rate was offset by increases in tax expense from income generated in foreign jurisdictions having comparable, or higher tax rates in comparison to the U.S. federal statutory rate. As such, the effect of differences in foreign tax rates on the Company's tax expense for the second quarter of 2014 is minimal.

As of June 30, 2014, we have not provided for U.S. federal and state income taxes on certain undistributed earnings of our foreign subsidiaries, since such earnings are considered indefinitely reinvested outside the U.S. or may be remitted tax-free to the U.S. If these amounts were distributed to the U.S., in the future in the form of dividends or otherwise, we could be subject to additional U.S. income and foreign withholding taxes. It is not practicable to determine the foreign withholding and U.S. income tax liability or benefit on such earnings due to the timing of such future distributions, the availability of foreign tax credits, and the complexity of the computation if such earnings were not deemed to be permanently reinvested. If future events, including material changes in estimates of cash, working capital, and long-term investment requirements necessitate that these earnings be distributed, an additional provision for U.S. income and foreign withholding taxes, net of foreign tax credits, may be necessary.

We file numerous consolidated and separate income tax returns in the U.S., including federal, state and local returns, as well as in foreign jurisdictions. With few exceptions, we are no longer subject to United States federal income tax examinations for tax years prior to 2008 or state, local or foreign income tax examinations for years prior to 1993. We are currently under audit by various states and foreign jurisdictions for certain tax years subsequent to 1993. We are currently under United States federal audit for the consolidated group (RealNetworks, Inc. and Subsidiaries) for the year ended December 31, 2012.

Geographic Revenue

Revenue by geographic region was as follows (dollars in thousands):

	Quarters Ended June 30,									Six months ended June 30,
	2014		2013		$ Change			% Change		2014		2013		$ Change			% Change
United States	$	15,092	$	21,463	$	(6,371	)	(30	)%	$	35,520	$	49,486	$	(13,966	)	(28	)%
Europe	6,968		9,272		(2,304		)	(25	)%	15,380		20,528		(5,148		)	(25	)%
Republic of Korea	11,092		11,259		(167		)	(1	)%	21,386		20,223		1,163			6	%
Rest of world	7,673		7,856		(183		)	(2	)%	14,263		16,406		(2,143		)	(13	)%
Total net revenue	$	40,825	$	49,850	$	(9,025	)	(18	)%	$	86,549	$	106,643	$	(20,094	)	(19	)%

Revenue in the United States declined by $6.4 million in the quarter ended June 30, 2014, compared with the year-earlier period. The decline was due primarily to lower revenue generated from the distribution of third party software products of $4.0 million, lower sales of our subscriptions products of $2.0 million and a decline in our RealPlayer Plus license revenue of $0.8 million which was partially offset by an increase in our ringback tones revenue of $0.7 million.

Revenue in the United States declined by $14.0 million in the six months ended June 30, 2014, compared with the year-ago period. The decline was due primarily to lower revenue generated from the distribution of third party software products of $5.7 million, a decline in our subscription revenue of $4.1 million, a decrease in our RealPlayer Plus license revenue of $1.5 million and a decline in SaaS revenue of $1.1 million.

Revenue in Europe declined by $2.3 million in the quarter ended June 30, 2014, compared with the year-earlier period. The decrease was primarily due to lower revenue from our Games business of $2.2 million, lower revenue from RealPlayer Plus licenses of $0.6 million as well as a decline in third party software distribution revenue of $0.3 million, offset in part by an increase in SaaS revenue of $1.0 million.

Revenue in Europe declined by $5.1 million in the six months ended June 30, 2014, compared with the year-ago period. The decline was due primarily to a decrease in revenue from our Games business of $4.4 million, a decrease in RealPlayer Plus license revenue of $1.2 million, offset in part by an increase in SaaS revenue of $1.1 million.

Revenue in Korea increased $1.2 million in the six months ended June 30, 2014, compared with the year-ago period. The increase was mainly due to higher music on demand revenue of $6.0 million partially offset by lower intellectual property license revenue of $2.7 million and lower revenue from our SaaS offerings (excluding music on demand) of $1.8 million, including ringback tones revenue.

Revenue in the rest of world decreased by $2.1 million in the six months ended June 30, 2014, compared with the year-ago period. The decrease was due to lower revenue from our RealPlayer Plus licenses of $1.5 million, $1.2 million from SaaS

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revenue, and $0.9 million from our subscription revenue. These decreases were partially offset by an increase in system integration services in Japan of $1.2 million.

New Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements.

Liquidity and Capital Resources

The following summarizes working capital, cash, cash equivalents, short-term investments, and restricted cash (in thousands):

	June 30, 2014		December 31, 2013
Working capital	$	171,843	$	191,522
Cash, cash equivalents, and short-term investments	195,033		226,155
Restricted cash equivalents and investments	3,000		3,000

The decrease in 2014 of cash, cash equivalents, and short-term investments from December 31, 2013 was primarily due to cash used in operating activities of $(30.8) million in the first half of 2014.

The following summarizes cash flow activity (in thousands):

	Six Months Ended June 30,
	2014			2013
Cash provided by (used in) operating activities	$	(30,778	)	$	(12,885	)
Cash provided by (used in) investing activities	4,202			(18,608		)
Cash provided by (used in) financing activities	(423		)	(1,236		)

Cash used in operating activities consisted of net income (loss) adjusted for certain non-cash items such as depreciation and amortization, and the effect of changes in certain operating assets and liabilities.

Cash used in operating activities was $17.9 million more in the six months ended June 30, 2014, as compared to the same period in 2013. This increase was primarily due to the decline in revenue of $20.1 million for the six months ended June 30, 2014 compared with the prior year, which was only partially offset by a decline in cost of revenue and operating expenses of $9.7 million.

For the six months ended June 30, 2014, cash provided by investing activities of $4.2 million was primarily due to sales and maturities, net of purchases, of short-term investments of $4.3 million and cash proceeds received from the sale of available for sale securities during the first quarter of $2.8 million, partially offset by purchases of equipment, software and leasehold improvements of $1.7 million.

For the six months endedJune 30, 2013, cash used for investing activities of $18.6 million was primarily due to amounts paid for business acquisitions, net of cash acquired, totaling $16.1 million, in addition to purchases of equipment, software and leasehold improvements of $3.2 million.

Financing activities for the six months ended June 30, 2014 used cash totaling $0.4 million primarily from the payment of the principal amount of contingent consideration of $0.7 million related to an earlier period business acquisition.

Financing activities for the six months endedJune 30, 2013 used cash totaling $1.2 million primarily from the payment of the principal amount of contingent consideration of $0.8 million related to an earlier period business acquisition.

We currently have no planned significant capital expenditures for the remainder of 2014 other than those in the ordinary course of business.

Our principal future cash commitments include office leases. We believe that our current cash, cash equivalents, and short-term investments will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months.

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In the future, we may seek to raise additional funds through public or private equity financing, or through other sources such as credit facilities. The sale of additional equity securities could result in dilution to our shareholders. In addition, in the future, we may enter into cash or stock acquisition transactions or other strategic transactions that could reduce cash available to fund our operations or result in dilution to shareholders.

Our cash equivalents and short-term investments consist of investment grade securities, as specified in our investment policy guidelines. The policy limits the amount of credit exposure to any one non-U.S. Government or non-U.S. Agency issue or issuer to a maximum of 5% of the total portfolio. These securities are subject to interest rate risk and will decrease in value if interest rates increase. Because we have historically had the ability to hold our fixed income investments until maturity, we do not expect our operating results or cash flows to be significantly affected by a sudden change in market interest rates in our securities portfolio.

We conduct our operations primarily in five functional currencies: the U.S. dollar, the Korean won, the Japanese yen, the British pound and the euro. We currently do not hedge the majority of our foreign currency exposures and are therefore subject to the risk of exchange rate fluctuations. We invoice our international customers primarily in U.S. dollars, except for certain countries where we invoice our customers primarily in the respective foreign currencies. We are exposed to foreign exchange rate fluctuations as the financial results of foreign subsidiaries are translated into U.S. dollars in consolidation. Our exposure to foreign exchange rate fluctuations also arises from intercompany payables and receivables to and from our foreign subsidiaries.

As of June 30, 2014, approximately $26.8 million of the $195.0 million of cash, cash equivalents, and short-term investments was held by our foreign subsidiaries. If these funds are needed for our operations in the U.S., we may be required to accrue and pay U.S. income and foreign withholding taxes to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations. Additionally, the Company currently has significant net operating losses and other tax attributes that could be used to offset most potential U.S. income tax that could result if these amounts were distributed to the U.S. We utilize a variety of tax planning and financing strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. We do not expect restrictions or potential taxes on repatriation of amounts held outside of the U.S to have a material effect on our overall liquidity, financial condition or results of operations.

As of June 30, 2014, we have not provided for U.S. federal and state income taxes on certain undistributed earnings of our foreign subsidiaries, since such earnings are considered indefinitely reinvested outside the U.S. or may be remitted tax-free to the U.S. If these amounts were distributed to the U.S., in the future in the form of dividends or otherwise, we could be subject to additional U.S. income and foreign withholding taxes. It is not practicable to determine the foreign withholding and U.S. income tax liability or benefit on such earnings due to the timing of such future distributions, the availability of foreign tax credits, other tax attributes, and the complexity of the computation if such earnings were not deemed to be permanently reinvested. If future events, including material changes in estimates of cash, working capital, and long-term investment requirements necessitate that these earnings be repatriated, an additional provision for U.S. income and foreign withholding taxes, net of foreign tax credits, may be necessary.

Off-Balance Sheet Arrangements

We have operating lease obligations for office facility leases with future cash commitments that are not required to be recorded on our consolidated balance sheet. Accordingly, these operating lease obligations constitute off-balance sheet arrangements. In addition, since we do not maintain accruals associated with certain guarantees, as discussed in Note 17, Guarantees, those guarantee obligations also constitute off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Our critical accounting policies and estimates are as follows:

• Revenue recognition;

• Estimating music publishing rights and music royalty accruals;

• Estimating recoverability of deferred costs;

• Estimating allowances for doubtful accounts and sales returns;

• Valuation of equity method investments;

• Valuation of definite-lived assets;

• Valuation of goodwill and indefinite-lived intangible assets;

• Stock-based compensation; and

24

• Accounting for income taxes.

Revenue Recognition. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. Physical products are considered delivered to the customer once they have been shipped and title and risk of loss have been transferred. For online sales, the products or services are considered delivered at the time the product or services are made available, digitally, to the end user.

We recognize revenue on a gross or net basis. In most arrangements, we contract directly with end user customers, and are the primary obligor. In such arrangements, we recognize revenue on a gross basis. In some cases, we utilize third-party distributors who are the primary obligor to sell products or services directly to end user customers. In such instances, we recognize revenue on a net basis.

In our direct to consumer business segments, we derive revenue primarily through (1) subscriptions of SuperPass within our RealPlayer Group segment and subscriptions sold by our Games segment, (2) sales of content downloads, software and licenses offered by our RealPlayer Group, Mobile Entertainment, and Games segments and (3) the sale of advertising and the distribution of third-party products on our websites and in our games.

Consumer subscription products are paid in advance, typically for monthly, quarterly or annual duration. Subscription revenue is recognized ratably over the related subscription time period. Revenue from sales of content downloads, software and licenses is recognized at the time the product is made available, digitally, to the end user. Revenue generated from advertising on our websites and from advertising and the distribution of third-party products included in our products is recognized as revenue at the time of delivery.

We also generate revenue through business-to-business channels by providing services within our Mobile Entertainment segment enabling mobile carriers to deliver audio and video content to their customers and by selling software licenses and products and related support and other services. Revenue generated from services provided to mobile carriers that enable the delivery of audio and video content to their customers is recognized as the services are provided. Setup fees to build these services are recognized ratably upon launch of the service over the remaining expected term of the service.

Non-software revenue arrangements containing multiple elements are divided into separate units of accounting, after being evaluated for specific criteria. If the criteria for separation are met, revenue is allocated to the individual units using the relative price method. If the criteria are not met, the elements are treated as one unit of accounting and revenue recognition is delayed until all elements have been delivered. In the case of revenue arrangements containing software, elements are divided into separate units of accounting only when vendor-specific objective evidence has been established. In cases where vendor-specific objective evidence has not been established, undelivered elements are combined into one unit of accounting and are not recognized in revenue until all elements have been delivered.

Estimating Music Publishing Rights and Music Royalty Accruals. We must make estimates of amounts that may be owed related to music royalties for our domestic and international music services, primarily the Rhapsody music service which was separated from our operating results beginning April 1, 2010. Material differences may impact the amount and timing of our expense for any period if management made different judgments or utilized different estimates. Under copyright law, we may be required to pay licensing fees for digital sound recordings and compositions we deliver. Copyright law generally does not specify the rate and terms of the licenses, which are determined by voluntary negotiations among the parties or, for certain compulsory licenses where voluntary negotiations are unsuccessful, by arbitration. There are certain geographies and agencies for which we have not completed negotiations with regard to the royalty rate to be applied to the historic sales of our digital music offerings. Our estimates are based on contracted or statutory rates, when established, or management’s best estimates based on facts and circumstances regarding the specific music services and agreements in similar geographies or with similar agencies. While we base our estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, actual results may differ materially from these estimates under different assumptions or conditions.

Estimating Recoverability of Deferred Costs. We defer costs on projects for service revenue and system sales. Deferred costs consist primarily of direct and incremental costs to customize and install systems, as defined in individual customer contracts, including costs to acquire hardware and software from third parties and payroll costs for our employees and other third parties. We recognize such costs as a component of cost of revenue, the timing of which is dependent upon the revenue recognition policy by contract. For revenue recognized under the completed contract method, costs are deferred until the products are delivered, or upon completion of services or, where applicable, customer acceptance. For revenue recognized under the percentage of completion method, costs are recognized as products are delivered or services are provided in accordance with the percentage of completion calculation. For revenue recognized ratably over the term of the contract, costs are recognized ratably over the term of the contract, commencing on the date of revenue recognition. At each balance sheet date, we review deferred costs to ensure they are ultimately recoverable. Any anticipated losses on uncompleted contracts are recognized when evidence indicates the estimated total cost of a contract exceeds its estimated total revenue.

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Assessing the recoverability of deferred project costs is based on significant assumptions and estimates, including future revenue and cost of sales. Significant or sustained decreases in revenue or increases in cost of sales in future periods could result in impairments of deferred project costs. We cannot accurately predict the amount and timing of any such impairments. Should the value of deferred project costs become impaired, we would record the appropriate charge, which could have a material adverse effect on our financial condition or results of operations.

Estimating Allowances for Doubtful Accounts and Sales Returns. We make estimates of the uncollectible portion of our accounts receivable. We specifically analyze the age of accounts receivable and historical bad debts, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Similarly, we make estimates of potential future product returns related to current period revenue. We analyze historical returns, current economic trends, and changes in customer demand and acceptance of our products when evaluating the adequacy of the sales returns allowance. Significant judgments and estimates are made and used in connection with establishing allowances for doubtful accounts and sales returns. Material differences may result in the amount and timing of our revenue for any period if we were to make different judgments or utilize different estimates or actual future experience was different from the judgments and estimates.

Valuation of Equity Method Investments. We use the equity method of accounting for investments in circumstances where we have the ability to exert significant influence, but not control, over an investee or joint venture. We initially record our investment based on a fair value analysis of the investment.

We record our percentage interest in the investee's recorded income or loss and changes in the investee's capital under this method, which will increase or decrease the reported value of our investment. We record investee losses up to the aggregate amount of the investment. See Note 5 Rhapsody Joint Venture for a discussion of the $10.0 million preference on the convertible preferred stock we hold in Rhapsody and its impact on our equity method of accounting for this investment,

We evaluate impairment of an investment valued under the equity method if events and circumstances warrant. An impairment charge would be recorded if a decline in value of an equity investment below its carrying amount were determined to be other than temporary. In determining if a decline is other than temporary, we consider factors such as the length of time and extent to which the fair value of the investment has been less than the carrying amount of the investee or joint venture, the near-term and longer-term operating and financial prospects of the investee or joint venture and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery.

Valuation of Definite-Lived Assets. Definite-lived assets consist primarily of property, plant and equipment, as well as amortizable intangible assets acquired in business combinations. Definite-lived assets are depreciated or amortized on a straight line basis over their estimated useful lives. We review definite-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amount to future undiscounted cash flows the assets are expected to generate. If definite-lived assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds their fair market value.

The impairment analysis of definite-lived assets is based upon estimates and assumptions relating to our future revenue, cash flows, operating expenses, costs of capital and capital purchases. These estimates and assumptions are complex and subject to a significant degree of judgment with respect to certain factors including, but not limited to, the estimation of the related future revenues, the cash flows of our long-term operating plans, valuation multiples, market and interest rate risk, and risk-commensurate discount rates and cost of capital. Significant or sustained declines in future revenue or cash flows, or adverse changes in our business climate, among other factors, and their resulting impact on the estimates and assumptions relating to the value of our definite-lived assets could result in the need to perform an impairment analysis in future periods which could result in a significant impairment. While we believe our estimates and assumptions are reasonable, due to their complexity and subjectivity, these estimates and assumptions could vary from period to period. Changes in these estimates and assumptions could materially affect the estimate of future undiscounted cash flows and related fair market values of these assets and result in significant impairments, which could have a material adverse effect on our financial condition or results of operations.

Valuation of Goodwill and Indefinite-Lived Intangible Assets.  We test goodwill for impairment on an annual basis, in our fourth quarter, or more frequently if circumstances indicate reporting unit carrying values may exceed their fair values. Circumstances that may indicate a reporting unit's carrying value exceeds its fair value include, but are not limited to: poor economic performance relative to historical or projected future operating results; significant negative industry, economic or company specific trends; changes in the manner of our use of the assets or the plans for our business; and loss of key personnel. Due to the ongoing difficult economic environment and the decline in revenues in our businesses, we continue to monitor whether there could be potential impairment of goodwill.

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When evaluating goodwill for impairment, based upon our annual test or due to changes in circumstances described above, we first perform a qualitative assessment to determine if the fair value of a reporting unit is more likely than not less than the reporting unit's carrying amount including goodwill. If this assessment indicates it is more likely than not, we then compare the carrying value of the reporting unit to the estimated fair value of the reporting unit. If the carrying value of the reporting unit exceeds the estimated fair value, we then calculate the implied estimated fair value of goodwill for the reporting unit and compare it to the carrying amount of goodwill for the reporting unit. If the carrying amount of goodwill exceeds the implied estimated fair value, an impairment charge to current operations is recorded to reduce the carrying value to implied estimated value.

Significant judgments and estimates are required in determining the reporting units and assessing the fair value of the reporting units. These estimates and assumptions are complex and subject to a significant degree of judgment with respect to certain factors including, but not limited to, the estimation of the related future revenues, the cash flows of long-term operating plans, valuation multiples, market and interest rate risk, and risk-commensurate discount rates and cost of capital. While we believe our estimates and assumptions are reasonable, due to their complexity and subjectivity, these estimates and assumptions could vary from period to period. Changes in these estimates and assumptions could materially affect the estimated fair market values of the reporting units and result in significant impairments, which could have a material adverse effect on our financial condition or results of operations.

We evaluate indefinite-lived intangible assets (primarily tradenames and trademarks) for impairment on an annual basis, in the fourth quarter, or more frequently if an event occurs or changes in circumstances indicate that impairment may exist. When evaluating indefinite-lived intangible assets for impairment, we may first perform a qualitative assessment to determine if the fair value of the intangible assets is more likely than not greater than its carrying amount. If we do not perform a qualitative assessment or if the fair value of the intangible assets is not more likely than not greater than its carrying amount, we calculate the implied estimated fair value of the intangible assets. If the carrying amount of the intangible assets exceeds the implied estimated fair value, an impairment charge is recorded to reduce the carrying value to the implied estimated fair value.

Significant judgments and estimates are required in assessing the fair value of the indefinite-lived intangible assets. These estimates and assumptions are complex and subject to a significant degree of judgment with respect to certain factors including, but not limited to, the estimation of the related future revenues, the cash flows of long-term operating plans, valuation multiples, market and interest rate risk, and risk-commensurate discount rates and cost of capital. While we believe our estimates and assumptions are reasonable, due to their complexity and subjectivity, these estimates and assumptions could vary from period to period. Changes in these estimates and assumptions could materially affect the estimated fair market values of these assets and result in significant impairments, which could have a material adverse effect on our financial condition or results of operations.

Stock-Based Compensation. Stock-based compensation cost is estimated at the grant date based on the award’s fair value and is recognized as expense over the requisite service period, which is the vesting period. For stock options, the fair value is calculated by the Black-Scholes option-pricing model or other appropriate valuation models. The valuation models require various highly judgmental assumptions including volatility in our common stock price and expected option life. If any of the assumptions used in the valuation models change significantly, stock-based compensation expense may differ materially in the future from the amounts recorded in our consolidated statement of operations. For all awards, we are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate pre-vesting forfeitures and record stock-based compensation expense only for those awards that are expected to vest.

Accounting for Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities and operating loss and tax credit carryforwards are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and operating loss and tax credit carryforwards are expected to be recovered or settled. We must make assumptions, judgments and estimates to determine current provision for income taxes, deferred tax assets and liabilities and any valuation allowance to be recorded against deferred tax assets. Our judgments, assumptions, and estimates relative to the current provision for income tax take into account current tax laws, our interpretation of current tax laws and possible outcomes of future audits conducted by foreign and domestic tax authorities. Changes in tax law or our interpretation of tax laws and future tax audits could significantly impact the amounts provided for income taxes in our consolidated financial statements.

Each reporting period we must periodically assess the likelihood that our deferred tax assets will be recovered from future sources of taxable income, and to the extent that recovery is not more likely than not, a valuation allowance must be established. The establishment of a valuation allowance and increases to such an allowance result in either increases to income

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tax expense or reduction of income tax benefit in the statement of operations and comprehensive income. In certain instances, changes in the valuation allowance may be allocated directly to the related components of shareholders' equity on the consolidated balance sheet. Factors we consider in making such an assessment include, but are not limited to, past performance and our expectation of future taxable income, macroeconomic conditions and issues facing our industry, existing contracts, our ability to project future results and any appreciation of our investments and other assets.

As of June 30, 2014, $26.8 million of the $195.0 million of cash, cash equivalents, and short-term investments was held by our foreign subsidiaries.

As of June 30, 2014, we have not provided for U.S. federal and state income taxes on certain undistributed earnings of our foreign subsidiaries, since such earnings are considered indefinitely reinvested outside the U.S. or may be remitted tax-free to the U.S. If these amounts were distributed to the U.S., in the form of dividends or otherwise, RealNetworks could be subject to additional U.S. income and foreign withholding taxes. It is not practicable to determine the foreign withholding and U.S. income tax liability or benefit on such earnings due to the timing of such future distributions, the availability of foreign tax credits, and the complexity of the computation if such earnings were not deemed to be permanently reinvested. If future events, including material changes in estimates of cash, working capital, and long-term investment requirements necessitate that these earnings be distributed, an additional provision for U.S. income and foreign withholding taxes, net of foreign tax credits, may be necessary.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following discussion about our market risk involves forward-looking statements. All statements that do not relate to matters of historical fact should be considered forward-looking statements. Actual results could differ materially from those projected in any forward-looking statements.

Interest Rate Risk. Our exposure to interest rate risk from changes in market interest rates relates primarily to our short-term investment portfolio. Our short-term investments consist of investment grade debt securities as specified in our investment policy. Investments in both fixed and floating rate instruments carry a degree of interest rate risk. The fair value of fixed rate securities may be adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Additionally, a declining rate environment creates reinvestment risk because as securities mature the proceeds are reinvested at a lower rate, generating less interest income. See Note 6, Fair Value Measurements for additional information. Due in part to these factors, our future interest income may be adversely impacted due to changes in interest rates. In addition, we may incur losses in principal if we are forced to sell securities that have declined in market value due to changes in interest rates. Because we have historically had the ability to hold our short-term investments until maturity, we would not expect our operating results or cash flows to be significantly impacted by a sudden change in market interest rates. There have been no material changes in our investment methodology regarding our cash equivalents and short-term investments during the quarter ended June 30, 2014. Based on our cash, cash equivalents, short-term investments, and restricted cash equivalents as of June 30, 2014, a hypothetical 10% increase/decrease in interest rates would not increase/decrease our annual interest income or cash flows by more than a nominal amount.

Investment Risk. As of June 30, 2014, we had investments in voting capital stock of both publicly traded and privately held technology companies for business and strategic purposes. See Note 1, Description of Business and Summary of Significant Accounting Policies - Valuation of Equity Method Investments, and Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates (Valuation of equity method investments) in the 10-K for details on our accounting treatment for these investments, including the analysis of other-than-temporary impairments.

Foreign Currency Risk. We conduct business internationally in several currencies and thus are exposed to adverse movements in foreign currency exchange rates.

Our exposure to foreign exchange rate fluctuations arise in part from: (1) translation of the financial results of foreign subsidiaries into U.S. dollars in consolidation; (2) the remeasurement of non-functional currency assets, liabilities and intercompany balances into U.S. dollars for financial reporting purposes; and (3) non-U.S. dollar denominated sales to foreign customers. We manage a portion of these risks through the use of financial derivatives, but fluctuations could impact our results of operations and financial position.

Generally, our practice is to manage foreign currency risk for the majority of material short-term intercompany balances through the use of foreign currency forward contracts. These contracts require us to exchange currencies at rates agreed upon at the contract’s inception. Because the impact of movements in currency exchange rates on forward contracts offsets the related impact on the short-term intercompany balances, these financial instruments help alleviate the risk that might otherwise result from certain changes in currency exchange rates. We do not designate our foreign exchange forward contracts related to short-term intercompany accounts as hedges and, accordingly, we adjust these instruments to fair value through results of operations.

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However, we may periodically hedge a portion of our foreign exchange exposures associated with material firmly committed transactions, long-term investments, highly predictable anticipated exposures and net investments in foreign subsidiaries. Some of our unhedged exposures are recorded in our statement of operations on a mark-to-market basis each quarter, so to the extent we continue to experience adverse economic conditions, we may record losses related to such unhedged exposures in future periods that may have a material adverse effect on our financial condition and results of operations.

Our foreign currency risk management program reduces, but does not entirely eliminate, the impact of currency exchange rate movements.

We have cash balances denominated in foreign currencies which are subject to foreign currency fluctuation risk. The majority of our foreign currency denominated cash is held in Korean won and euros. A hypothetical 10% increase or decrease in the Korean won and euro relative to the U.S. dollar as of June 30, 2014 would not result in more than a nominal amount of unrealized gain or loss.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2014. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based upon that evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2014, our disclosure controls and procedures were effective.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the second quarter of 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We have in the past and could in the future become subject to legal proceedings, governmental investigations and claims in the ordinary course of business, including employment claims, contract-related claims, and claims of alleged infringement of third-party patents, trademarks and other intellectual property rights. Such claims, even if not meritorious, could force us to expend significant financial and managerial resources. In addition, given the broad distribution of some of our consumer products, any individual claim related to those products could give rise to liabilities that may be material to us. In the event of a determination adverse to us, we may incur substantial monetary liability, and/or be required to change our business practices. Either of these could have a material adverse effect on our consolidated financial statements.

Item 1A. Risk Factors

You should carefully consider the risks described below together with all of the other information included in this Form 10-Q. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. If any of the following risks actually occurs, our business, financial condition or operating results, and the trading price of our common stock, could be materially harmed.

Our business and financial results will be materially adversely impacted if we are unable to successfully implement our growth plan, strategic initiatives, and restructuring efforts.

Beginning in mid-2012, we have developed a growth plan that involves the launch of at least one major new product in each of our three business units. In tandem with our growth plan, we have embarked upon strategic initiatives intended to simplify and accelerate our operations, and restructuring efforts intended to streamline costs and bring more focus to our businesses. The simultaneous execution of all of these measures is ambitious and we have not attempted to pursue this level of transition in our history. We can provide no assurance that we will be successful in implementing our growth plan, strategic initiatives, and restructuring efforts, and our failure to do so would have a material adverse impact on our business and financial results.

We need to successfully introduce and monetize new products and services to sustain and grow our businesses.

In order to sustain our current business and to implement our growth plan, we must successfully introduce and monetize new products and services. The process of developing new, and enhancing existing, products and services is complex, costly and uncertain, and is subject to a number of risks. Providing products and services that are attractive and useful to subscribers and consumers is in part subject to unpredictable and volatile factors beyond our control, including end-user preferences and competing products and services. Any failure by us to timely respond to or accurately anticipate consumers’ changing needs, emerging technological trends or important changes in the market or competition for products and services that we introduce, or that we plan to introduce, could significantly harm our current market share or result in the loss of market opportunities. In addition, we must make long-term investments, develop or obtain appropriate intellectual property and commit significant resources before knowing whether the products and services that we are developing will meet the needs of a large enough group of consumers, which may result in no return or a loss on our investments.

During 2013, each of our businesses introduced at least one new product or service. In November 2013, our Mobile Entertainment business completed its European launch of LISTEN, an application and service for smartphone users featuring ringback tones and other services. LISTEN was launched with T-Mobile in the U.S. in April 2014. In September 2013, our RealPlayer business completed the U.S. launch of RealPlayer Cloud, an integrated video player and cloud service. RealPlayer Cloud was launched globally in February 2014. In August 2013, our Games business launched GameHouse Casino Plus with the Golden Dreams Sweepstakes feature. To date, we have not generated significant revenue from these recently launched products and services. Over the past several quarters, we have invested heavily in the development of these and other new products and enhanced features for such products, and we expect to continue to invest heavily in sales and marketing efforts aimed at monetizing these products and related services. There can be no assurance, however, that such efforts will generate significant revenue. If we are unable to generate sustained interest in these products and services, and therefore drive revenue growth, our financial results will be materially negatively impacted.

Furthermore, new products and services may be subject to legal challenge. Responding to these potential claims may require us to enter into royalty and licensing agreements on unfavorable terms, require us to stop distributing or selling, or to redesign our products or services, or to pay damages, any of which could materially harm our operating results.

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Our legacy products and services face new and continuing challenges, causing our revenues to suffer.

Our legacy products and services have historically been provided through desktop computers and feature phones, but the number of people who access similar products and services through smartphones and tablets has increased dramatically in the past few years. There are many challenges involved in developing and marketing products and services for users of smartphones and tablets, and there is no guarantee that we will be able to transition our legacy products and services to these devices or to effectively monetize popular and successful versions of these products and services for smartphones and tablets.

In addition, our consumer-based products and services have historically been distributed through desktop operating platforms. As new operating systems are introduced or updated for these platforms, we have faced, and could continue to face, difficulties reaching our traditional customer base and other unknown distribution challenges. If we have difficulty transitioning product and version releases that can easily be distributed through these new or updated operating systems and devices, then our business could be significantly harmed.

As we increasingly focus our development and sales and marketing efforts on our newly launched products and services, sales of our legacy products and services have suffered and will continue to suffer. For instance, while the efforts of our RealPlayer team are targeted more exclusively towards enhanced development and monetization of our new RealPlayer Cloud product, we have significantly reduced our marketing of SuperPass and have redirected our development resources away from RealPlayer Plus, both of which have resulted in declines in the number of subscribers of those legacy products.

Our restructuring efforts may not yield the anticipated benefits to our shareholders.

During 2012, we took steps to restructure and simplify our business and operations. In September 2012, we announced plans to divisionalize our business, which we implemented during the first quarter of 2013, and to significantly reduce operating expenses, in part through a reduction in our workforce that was substantially concluded by the end of the second quarter of 2013. We continue to assess opportunities to further streamline our operations and make our businesses more efficient. There can be no assurance, however, that our past or future restructuring efforts will be successful. Our business and operations may be harmed to the extent there is customer or employee uncertainty surrounding the future direction of our product and service offerings and strategy for our businesses. Our restructuring activities have included implementing cost-cutting initiatives, which may not lead to future profitability and which could materially impact our ability to compete in future periods. If we are unable to effectively re-align the cost structure of our businesses or streamline and simplify our operations, our stock price may be adversely affected, and we and our shareholders will not realize the anticipated financial, operational and other benefits from such initiatives.

Our businesses face substantial competitive challenges that may prevent us from being successful in those businesses, and may negatively impact future growth in those businesses.

Many of our current and potential competitors in our businesses have longer operating histories, greater name recognition, more employees and significantly greater resources than we do. To effectively compete in the markets for our products and services, we may experience the following consequences, any of which would adversely affect our operating results and the trading price of our stock:

• reduced prices or margins,

• loss of current and potential customers, or partners and potential partners who provide content we distribute to our customers,

• changes to our products, services, technologies, licenses or business practices or strategies,

• lengthened sales cycles,

• industry-wide changes in content distribution to customers or in trends in consumer consumption of digital media products and services,

• pressure to prematurely release products or product enhancements, or

• degradation in our stature or reputation in the market.

The market for mobile entertainment services, including our ringback tones and music on demand solutions, is highly competitive and evolving rapidly, particularly with the growth in the use of smartphones. Increased use of smartphones has resulted in a proliferation of applications and services that compete with our SaaS services and, in many cases, are not dependent upon our carrier customers to make them available to subscribers. To maintain or enhance our competitive position, we need to develop new SaaS services that enable our carrier customers to compete with the broad range of applications and other services available in the market. We face competition, and may face future competition, from major media companies, Internet portal companies, content aggregators, wireless software providers and other pure-play wireless entertainment publishers, some of which have greater financial resources than we do. Furthermore, while most of our carrier customers do not offer internally developed services that compete with ours, if our carrier customers begin developing these services internally, we could be forced to lower our prices or increase the amount of service we provide in order to maintain our business with

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those carrier customers. Increased competition has in the past resulted in pricing pressure, forcing us to lower the selling price of our services. If we are unable to develop or provide services that compete effectively in the mobile entertainment market, our operating results and financial condition may be materially harmed.

Our legacy RealPlayer software services compete with alternative streaming media playback technologies and audio and video formats including Microsoft Windows Media Player and Adobe Flash and their related file formats, each of which has obtained very broad market penetration. In addition, our overall ability to sell subscription services depends in part on the use of our formats on the Internet, and declines in the use of our formats have negatively affected, and are expected to continue to negatively affect, our subscription revenue and increase costs of obtaining new subscribers. Our SuperPass subscription service, within our RealPlayer business unit, continues to face increasingly intense competition from a broad variety of entertainment sources, including traditional media outlets and Internet media sources. If we are unable to compete successfully, including through the development, marketing and monetization of new or recently launched products and services, our RealPlayer business could continue to decline.

The branded services in our Games business compete with other online aggregators and distributors of online, downloadable and social casual PC games. Some of these competitors have high volume distribution channels and greater financial resources than we do. Our Games business also competes with many other smaller companies that may be able to adjust to market conditions, including responding effectively to the growing popularity of casual games on social networks, faster than us. We also face significant price competition in the casual games market, and some of our competitors may be able to lower prices more aggressively than us. We expect competition to continue to intensify in this market from these and other competitors. We cannot provide assurance that we will be able to slow recent revenue declines or achieve future growth in our revenue, particularly as we continue to invest in social and mobile games as the market for these games continues to rapidly evolve. Our games development studios compete primarily with other developers of online, downloadable, mobile and social casual PC games and must continue to develop popular and high-quality game titles. Our Games business must also continue to execute on opportunities to expand the play of our games on a variety of non-PC platforms, including social networks, in order to maintain our competitive position and to grow the business.

Contracts with our carrier customers subject us to significant risks that could negatively impact our revenue or otherwise harm our operating results.

We derive a material portion of our revenue from the SaaS offerings we provide to carriers. Many of our SaaS contracts with carriers provide for revenue sharing arrangements, but we have little control over the pricing decisions of our carrier customers. Furthermore, most of these contracts do not provide for guaranteed minimum payments or usage levels. Because most of our carrier customer contracts are nonexclusive, it is possible that our mobile carrier customers could purchase similar services from third parties and cease to use our services in the future. As a result, our revenue derived under these agreements could be substantially reduced depending on the pricing and usage decisions of our carrier customers. In addition, some of our SaaS contracts require us to incur significant set-up costs prior to the launch of services with a carrier customer. For example, in the fourth quarter of 2011, we reduced our forecast for profitability associated with certain carrier customer contracts for which the total costs exceeded the total revenue we expect to recognize from these contracts, and as a result, we recorded impairment of deferred costs totaling $20.0 million. There can be no assurance that we will not record additional impairments or other charges in future periods related to our carrier customer contracts, which would negatively impact our results of operations.

In addition, none of our SaaS contracts with carriers obligates our carrier customers to market or distribute any of our SaaS offerings. Despite the lack of marketing commitments, revenue related to our SaaS offerings is, to a large extent, dependent upon the marketing and promotion activities of our carrier customers. In addition, many of our carrier contracts are short term and allow for early termination by the carrier with or without cause. These contracts are therefore subject to renegotiation of pricing or other key terms that could be adverse to our interests and leave us vulnerable to non-renewal by the carriers. The loss of carrier customers, a reduction in marketing or promotion of our SaaS offerings, or the termination, non-renewal or renegotiation of contract terms that are less favorable to us would likely result in the loss of future revenues from our SaaS offerings.

Finally, nearly all of our carrier contracts obligate us to indemnify the carrier customer for certain liabilities and losses incurred by them, including liabilities resulting from third party claims for damages that arise out of the use of our technology. These indemnification terms provide us with certain procedural safeguards, including the right to control the defense of the indemnified party. Pursuant to these indemnifications obligations, we have in the past agreed to control the defense on behalf of certain of our carrier customers related to patent infringement proceedings. We have recently settled two such litigation matters. Future claims against which we may be obligated to defend our carrier customers could result in payments that could materially harm our business or our consolidated financial statements.

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A majority of the revenue that we generate in our Mobile Entertainment business segment is dependent upon our relationships with a few customers, and any deterioration of these relationships could materially harm our revenue.

We generate a significant portion of our revenue from sales of our mobile entertainment services to a few of our mobile carrier customers, including SK Telecom, a leading wireless carrier in South Korea, and its affiliates. In the near term, we expect that we will continue to generate a significant portion of our total revenue from these customers. If these customers fail to market or distribute our services or terminate or fail to renew their business contracts with us, or if our relationships with these customers deteriorate in any significant way, we may be unable to replace the affected business arrangements with acceptable alternatives. Failure to maintain our relationships with these customers could have a material negative impact on our revenue.

We may not be successful in maintaining and growing our distribution of digital media products, and a significant portion of our distribution revenue is derived from a single customer.

Maintaining and growing the distribution of digital media products through our websites and our other distribution channels is important to our future prospects, including future growth through the introduction of new products and services distributed through these channels. We cannot predict whether consumers will continue to download and use our digital media products consistent with past usage, which may reduce our ability to generate revenue from those products as well as result in lower than expected adoption of newly introduced products and services. Our inability to maintain continued high volume distribution of our digital media products could also hold back the growth and development of related revenue streams from these market segments, including the distribution of third-party products and sales of our subscription services, and therefore could harm our business and our prospects. Our revenue from the distribution of third-party products will also be negatively impacted if those products are not widely downloaded by consumers, including due to the relative market saturation of such products. In addition, most of our revenue from the distribution of third-party products is currently derived from a single customer, Google. We have experienced significant pricing pressure in the marketplace and, in particular, with regard to our contract with Google. During the third quarter of 2014, we implemented a plan providing for a new distribution partner of our third-party products, however, we anticipate that our distribution revenue will be materially negatively impacted.

Our operating results are difficult to predict and may fluctuate, which may contribute to continued weakness in our stock price.

The trading price for our common stock has a history of volatility, although our recent stock price history shows more stability, with a range from $6.94 to $8.85 per share during the 52-week period ended June 30, 2014, but continued weakness. As a result of the rapidly changing markets in which we compete, our operating results may fluctuate from period to period, which may contribute to volatility of our stock price.

In past periods, our operating results have been affected by personnel reductions and related restructuring charges, lease exit and related charges, and impairment charges for certain of our equity investments, goodwill and other long-lived assets. Our operating results may be adversely affected by similar or other charges or events in future periods, including, but not limited to:

• impairments of long-lived assets,

• integrating and operating newly acquired businesses and assets, and

• the general difficulty in forecasting our operating results and metrics, which could result in actual results that differ significantly from expected results.

For example, in accordance with accounting principles generally accepted in the United States, we are required to test goodwill and certain long-lived assets for possible impairment on an annual basis based upon a fair value approach, or more frequently in the event of certain indications of possible impairment. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in a reporting unit’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of our business, a significant sustained decline in our market capitalization and other factors. If we were to determine that an impairment had occurred, we would be required to record an impairment charge, which could have a significant negative, and unpredicted, impact on our financial results.

Certain of our product and service investment decisions (for example, research and development and sales and marketing efforts) are based on predictions regarding business and the markets in which we compete. Fluctuations in our operating results, particularly when experienced beyond what we expected, could cause the trading price of our stock to fluctuate. Weakness in our operating performance, is likely to cause continued weakness in our stock price.

Continued loss of revenue from some of our subscription services may continue to harm our operating results.

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Our operating results have been and could continue to be adversely impacted by the loss of subscription revenue related to our legacy services and by the failure to generate revenue related to our new services. Subscribers may cancel their subscriptions to our services for many reasons, including a perception that they do not use the services sufficiently or that the service does not provide enough value, a lack of attractive or exclusive content generally or as compared with competitive service offerings, or because customer service issues are not satisfactorily resolved. Revenue from our SuperPass subscription service, for example, has declined in recent periods due in part to our focus on other products and services we offer, and we expect this trend to continue. For the subscription services we offer, we must continue to obtain compelling digital media content for our video and games services in order to maintain and increase usage and overall customer satisfaction for these products. Our operating results may be negatively impacted if we cannot obtain content for our subscription services on commercially reasonable terms.

Government regulation of the Internet is evolving, and unfavorable developments could have an adverse affect on our operating results.

We are subject to regulations and laws specific to the marketing, sale and delivery of goods and services over the Internet. These laws and regulations, which continue to evolve, cover taxation, user privacy, data collection and protection, copyrights, electronic contracts, sales procedures, automatic subscription renewals, credit card processing procedures, consumer protections, digital games distribution, broadband Internet access and content restrictions. We cannot guarantee that we have been or will be fully compliant in every jurisdiction, as it is not entirely clear how existing laws and regulations governing issues such as privacy, taxation and consumer protection apply or will be enforced with respect to the products and services we sell through the Internet. Moreover, as Internet commerce continues to evolve, increasing regulation and/or enforcement efforts by federal, state and foreign agencies and the prospects for private litigation claims related to our data collection, privacy policies or other e-commerce practices become more likely. In addition, the adoption of any laws or regulations or the imposition of other legal requirements that adversely affect our ability to market, sell, and deliver our products and services could decrease our ability to offer or customer demand for our service offerings, resulting in lower revenue. Future regulations, or changes in laws and regulations or their existing interpretations or applications, could also require us to change our business practices, raise compliance costs or other costs of doing business and result in additional historical or future liabilities for us, resulting in adverse impacts on our business and our operating results.

As a consumer-facing business, we receive complaints from our customers regarding our consumer marketing efforts and our customer service practices. Some of these customers may also complain to government agencies, and from time to time, those agencies have made inquiries to us about these practices. In addition, we may receive complaints or inquiries directly from governmental agencies that have not been prompted by consumers. In May of 2012, we resolved an investigation and complaint filed against us by the Washington State Office of the Attorney General, or Washington AG, relating to our consumer marketing practices through the entry of a consent decree filed in King County, Washington Superior Court. While we resolved that matter, we cannot provide assurance that the Washington AG or other governmental agencies will not bring future claims regarding our marketing, or consumer services or other practices.

Uncertainty and adverse conditions in the economy could have a material adverse impact on our business, financial condition and results of operations.

The ongoing weakness in the national and global economy has resulted in declines in overall consumer and corporate spending, declines in consumer and corporate access to credit, fluctuations in foreign exchange rates, declines in the value of assets and increased liquidity risks, all of which could materially impact our business, financial condition and results of operations. We provide digital entertainment services to consumers directly and indirectly through our carrier customers. Consumers may consider the purchase of our products and services to be a discretionary expenditure. As a result, consumers considering whether to purchase our products or services may be influenced by macroeconomic factors that affect consumer spending such as unemployment, conditions in the residential real estate and mortgage markets and access to credit when making a determination whether to commence, continue, or stop subscribing to or otherwise purchasing our products and services. In addition, businesses may reduce their advertising spending during adverse macroeconomic conditions, which would negatively impact the revenue we generate through sales of advertising on our websites and other properties. We have recorded material asset impairment charges in recent years due in part to weakness in the global economy, and if the ongoing significant weakness and uncertainty in the global economy continues, we may need to record additional impairments to our assets in future periods. If any of these risks are realized, we may experience a material adverse impact on our financial condition and results of operations.

Rhapsody could continue to recognize losses, which would negatively impact our results of operations and financial condition.

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On March 31, 2010, we completed the restructuring of our digital audio music service joint venture, Rhapsody America LLC. As a result of the restructuring, we no longer have operational control over Rhapsody and Rhapsody’s operating performance is no longer consolidated with our consolidated financial statements. Rhapsody has generated accounting losses since its inception and we have recognized losses on our investment in Rhapsody since the restructuring. If Rhapsody continues to incur losses, or if it otherwise experiences a significant decline in its business, we may incur further losses on our investment, which could have an adverse effect on our financial condition and results of operations.

Given the current proportion of the outstanding equity of Rhapsody that we hold, we need to receive Rhapsody’s unaudited quarterly financial statements and related information in order to timely prepare our quarterly consolidated financial statements and also to report certain of Rhapsody’s financial results, as may be required, in our quarterly reports on Form 10-Q. In addition, we may be required to include Rhapsody’s annual audited financial statements in our annual report on Form 10-K in future periods. As we no longer exert operational control over Rhapsody, we cannot guarantee that Rhapsody will deliver its financial statements and related information to us in a timely manner, or at all, or that the unaudited financial statement information provided by Rhapsody will not contain inaccuracies that are material to our reported results. Any failure to timely obtain Rhapsody’s quarterly financial statements or to include its audited financial statements in our future annual reports on Form 10-K, if required, could cause our reports to be filed in an untimely manner, which would preclude us from utilizing certain registration statements and could negatively impact our stock price.

The loss of key personnel, or difficulty recruiting and retaining them, could significantly harm our business or jeopardize our ability to meet our growth objectives.

Our success depends substantially on the contributions and abilities of certain key executives and employees. We have experienced a significant amount of executive-level turnover in the past several years, which has had and could continue to have a negative impact on our ability to retain key employees. In July 2012, Rob Glaser, our founder, Chairman and initial chief executive officer, resigned as chief executive officer in 2010, was appointed as interim chief executive officer in July 2012, and was named permanent chief executive officer effective July 28, 2014. In addition, each member of our executive team is either new to RealNetworks or new to his executive position as of 2012, 2013 or 2014. We cannot provide assurance that we will effectively manage these executive-level transitions, which may impact our ability to retain key executives and employees and which could harm our business and operations to the extent there is customer or employee uncertainty arising from such transitions.

Our success is also substantially dependent upon our ability to identify, attract and retain highly skilled management, technical and sales personnel. Qualified individuals are in high demand and competition for such qualified personnel in our industry, particularly engineering talent, is intense, and we may incur significant costs to attract or retain them. Our ability to attract and retain personnel may also be made more difficult by the uncertainty created by our recent executive-level turnover and by our restructuring efforts, which have involved reductions in our workforce. There can be no assurance that we will be able to attract and retain the key personnel necessary to sustain our business or support future growth.

Acquisitions and divestitures involve costs and risks that could harm our business and impair our ability to realize potential benefits from these transactions.

As part of our business strategy, we have acquired and sold technologies and businesses in the past and expect that we will continue to do so in the future. The failure to adequately manage transaction costs and address the financial, legal and operational risks raised by acquisitions and divestitures of technology and businesses could harm our business and prevent us from realizing the benefits of these transactions. In addition, we may identify and acquire target companies, but those companies may not be complementary to our current operations and may not leverage our existing infrastructure or operational experience, which may increase the risks associated with completing acquisitions.

Transaction-related costs and financial risks related to completed and potential future purchase or sale transactions may harm our financial position, reported operating results, or stock price. Previous acquisitions have resulted in significant expenses, including amortization of purchased technology, amortization of acquired identifiable intangible assets and the incurrence of charges for the impairment of goodwill and other intangible assets, which are reflected in our operating expenses. New acquisitions and any potential additional future impairment of the value of purchased assets, including goodwill, could have a significant negative impact on our future operating results. For example, in 2013 we acquired Slingo, Inc. pursuant to which we recorded $8.0 million of intangible assets and $9.9 million in goodwill, and Muzicall Limited pursuant to which we recorded $5.4 million of intangible assets and $1.3 million in goodwill. In compliance with accounting principles generally accepted in the United States, we evaluate these assets for impairment at least annually. If we were to conclude that any of these assets were impaired, we would have to recognize an impairment charge that could significantly impact our financial results.

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Purchase and sale transactions also involve operational risks that could harm our existing operations or prevent realization of anticipated benefits from a transaction. These operational risks include:

• difficulties and expenses in assimilating the operations, products, technology, information systems, and/or personnel of the acquired company;

• retaining key management or employees of the acquired company;

• entrance into unfamiliar markets, industry segments, or types of businesses;

• operating, managing and integrating acquired businesses in remote locations or in countries in which we have little or no prior experience;

• diversion of management time and other resources from existing operations;

• impairment of relationships with employees, affiliates, advertisers or content providers of our business or acquired business; and

• assumption of known and unknown liabilities of the acquired company, including intellectual property claims.

We may be unable to adequately protect our proprietary rights or leverage our technology assets, and may face risks associated with third-party claims relating to intellectual property rights associated with our products and services.

Our ability to compete across our businesses partly depends on the superiority, uniqueness and value of our technology, including both internally developed technology and technology licensed from third parties. To protect our proprietary rights, we rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions. Our efforts to protect our intellectual property rights may not assure our ownership rights in our intellectual property, protect or enhance the competitive position of our products and services or effectively prevent misappropriation of our technology. We also routinely receive challenges to our trademarks and other proprietary intellectual property that we are using in our business activities in China. Disputes regarding the validity and scope of patents or the ownership of technologies and rights associated with streaming media, digital distribution, and online businesses are common and likely to arise in the future. While we sold to Intel Corporation in 2012 most of our patents, including patents that covered streaming media, we agreed to indemnify Intel for certain third-party infringement claims against these patents up to the purchase price we received in the sale. We may also be forced to litigate to enforce or defend our patents and other intellectual property rights or to determine the validity and scope of other parties’ proprietary rights, enter into royalty or licensing agreements on unfavorable terms or redesign our product features and services. Any such dispute would likely be costly and distract our management, and the outcome of any such dispute could fail to improve our business prospects or otherwise harm our business.

From time to time we receive claims and inquiries from third parties alleging that our technology may infringe the third parties’ proprietary rights, especially patents. Third parties have also asserted and most likely will continue to assert claims against us alleging contract breaches, infringement of copyrights, trademark rights, trade secret rights or other proprietary rights, or alleging unfair competition or violations of privacy rights. These claims, even if not meritorious, could force us to spend significant financial and managerial resources. Given the broad distribution of some of our consumer products, any individual claim related to those products could give rise to liabilities that may be material to us. For example, in July 2012, VoiceAge Corporation brought a lawsuit against us alleging breach of our obligation to pay them licensing fees under our patent license agreement with VoiceAge and seeking a material amount in damages. While we settled the dispute with VoiceAge in the fourth quarter of 2013, similar future lawsuits could result in significant legal expenses, monetary damages, penalties or injunctive relief against us that could have a material adverse impact on our future consolidated financial statements. In addition, in 2012 we sold substantially all of our patent assets to Intel. We believe that our patent portfolio may have in the past discouraged third parties from bringing infringement or other claims against us relating to the use of our technologies in our business. Accordingly, we cannot predict whether the sale of these patent assets to Intel will result in additional infringement or other claims against us from third parties.

Our business and operating results will suffer if our systems or networks fail, become unavailable, unsecured or perform poorly so that current or potential users do not have adequate access to our products, services and websites.

Our ability to provide our products and services to our customers and operate our business depends on the continued operation and security of our information systems and networks. A significant or repeated reduction in the performance, reliability, security or availability of our information systems and network infrastructure could harm our ability to conduct our business, and harm our reputation and ability to attract and retain users, customers, advertisers and content providers. We have on occasion experienced system errors and failures that caused interruption in availability of products or content or an increase in response time. Problems with our systems and networks could result from our failure to adequately maintain and enhance these systems and networks, natural disasters and similar events, power failures, HVAC failures, intentional actions to disrupt our systems and networks and many other causes. The vulnerability of a large portion of our computer and communications infrastructure is enhanced because much of it is located at two leased facilities in Seattle, Washington, an area that is at heightened risk of earthquake, flood, and volcanic events. Many of our services do not currently have fully redundant systems

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or a formal disaster recovery plan, and we may not have adequate business interruption insurance to compensate us for losses that may occur from a system outage.

The growth of our business is dependent in part on successfully managing our international operations.

Our international operations involve risks inherent in doing business globally, including difficulties in managing operations due to distance, language, and cultural differences, local economic conditions, different or conflicting laws and regulations, taxes, and exchange rate fluctuations. The functional currency of our foreign subsidiaries is the local currency of the country in which each subsidiary operates. We translate our subsidiaries’ revenues into U.S. dollars in our financial statements, and continued volatility in foreign exchange rates, particularly if the U.S. dollar strengthens against the euro or the Korean won, may result in lower reported revenue or net assets in future periods. Our foreign currency exchange risk management program reduces, but does not eliminate, the impact of currency exchange rate movements. If we do not effectively manage any of the risks inherent in running our international businesses, our operating results and financial condition could be harmed.

We may be subject to market risk and legal liability in connection with our data collection and data security capabilities.

Many of our products are interactive Internet applications that by their very nature require communication between a client and server to operate. For example, to provide better consumer experiences and to operate effectively, our products send information, including personally identifiable information, to our servers. In addition, we sell many of our products and services through online sales transactions directly with consumers, through which we collect and store credit card information. In connection with our direct sales to consumers, we may be the victim of fraudulent transactions, including credit card fraud, which presents a risk to our revenue and potentially disrupts service to our consumers. While we take measures to protect our consumer data, we have experienced unauthorized access to our consumer data in the past, and it is possible that our security controls over consumer data may not prevent future improper access or disclosure of credit card information or personally identifiable information. We have an extensive privacy policy concerning the collection, use and disclosure of user data involved in interactions between our client and server products. A security breach that leads to disclosure of consumer account information (including personally identifiable information) or any failure by us to comply with our posted privacy policy or existing or new legislation regarding privacy issues could harm our reputation, impact the market for our products and services, subject us to litigation, and require us to expend significant resources to mitigate the breach of security, comply with breach notification laws or address related matters. In addition, we will also need to maintain compliance with the Payment Card Industry, or PCI, compliance standard for data security, which we recently achieved, in connection with our use of credit card services for payment. If we fail to maintain the PCI compliance standards we may be subject to substantial monetary penalties and we could lose the ability to accept credit card payments for transactions with our customers. Any of these consequences could materially harm our business or our consolidated financial statements.

Changes in regulations applicable to the Internet and e-commerce that increase the taxes on the services we provide could materially harm our business and operating results.

As Internet commerce continues to evolve, increasing taxation by state, local or foreign tax authorities becomes more likely. For example, taxation of electronically delivered products and services or other charges imposed by government agencies may also be imposed. We believe we collect transactional taxes and are compliant and current in all jurisdictions where we believe we have a collection obligation for transaction taxes. Any regulation imposing greater taxes or other fees for products and services could result in a decline in the sale of products and services and the viability of those products and services, harming our business and operating results. A successful assertion by one or more states or foreign tax authorities that we should collect and remit sales or other taxes on the sale of our products or services could result in substantial liability for past sales.

In those countries where we have taxable presence, we collect value added tax, or VAT, on sales of “electronically supplied services” provided to European Union residents. The collection and remittance of VAT subjects us to additional currency fluctuation risks.

We may be subject to additional income tax assessments.

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes, income taxes payable, and net deferred tax assets. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different than that which is reflected in our historical financial statements. An audit or litigation can result in significant additional income taxes payable in the U.S. or foreign jurisdictions which could have a material adverse effect on our financial condition and results of operations.

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Our Chairman of the Board and Chief Executive Officer beneficially owns approximately 36% of our stock, which gives him significant control over certain major decisions on which our shareholders may vote or may discourage an acquisition of us.

Robert Glaser, our Chairman of the Board and Chief Executive Officer, beneficially owns approximately 36% of our common stock. As a result, Mr. Glaser and his affiliates will have significant influence to:

• elect or defeat the election of our directors;

• amend or prevent amendment of our articles of incorporation or bylaws;

• effect or prevent a merger, sale of assets or other corporate transaction; and

• control the outcome of any other matter submitted to the shareholders for vote.

The stock ownership of Mr. Glaser and his affiliates may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of RealNetworks, which in turn could reduce our stock price or prevent our shareholders from realizing a premium over our stock price.

Provisions of our charter documents, shareholder rights plan, and Washington law could discourage our acquisition by a third party.

Our articles of incorporation provide for a strategic transactions committee of the board of directors. Without the prior approval of this committee, and subject to certain limited exceptions, the board of directors does not have the authority to:

• adopt a plan of merger;

• authorize the sale, lease, exchange or mortgage of assets representing more than 50% of the book value of our assets prior to the transaction or on which our long-term business strategy is substantially dependent;

• authorize our voluntary dissolution; or

• take any action that has the effect of any of the above.

Mr. Glaser has special rights under our articles of incorporation to appoint or remove members of the strategic transactions committee at his discretion that could make it more difficult for RealNetworks to be sold or to complete another change of control transaction without Mr. Glaser’s consent. RealNetworks has also entered into an agreement providing Mr. Glaser with certain contractual rights relating to the enforcement of our charter documents and Mr. Glaser’s roles and authority within RealNetworks. These rights and his role as Chairman of the Board of Directors, together with Mr. Glaser’s significant beneficial ownership, create unique potential for concentrated influence of Mr. Glaser over potentially material transactions involving RealNetworks and decisions regarding the future strategy and leadership of RealNetworks.

We have adopted a shareholder rights plan, which was amended and restated in December 2008, which provides that shares of our common stock have associated preferred stock purchase rights. The exercise of these rights would make the acquisition of RealNetworks by a third party more expensive to that party and has the effect of discouraging third parties from acquiring RealNetworks without the approval of our board of directors, which has the power to redeem these rights and prevent their exercise.

Washington law imposes restrictions on some transactions between a corporation and certain significant shareholders. The foregoing provisions of our charter documents, shareholder rights plan, our agreement with Mr. Glaser, and Washington law, as well as our charter provisions that provide for a classified board of directors and the availability of “blank check” preferred stock, could have the effect of making it more difficult or more expensive for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us. These provisions may therefore have the effect of limiting the price that investors might be willing to pay in the future for our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable

(b) Not applicable

(c) Not applicable

Item 3. Default Upon Senior Securities

None

Item 4. Mine Safety Disclosures

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Not applicable

Item 5. Other Information

None

Item 6. Exhibits

See Index to Exhibits below.

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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, thereunto duly authorized, on August 7, 2014.

REALNETWORKS, INC.
By:	/s/    Tim M. Wan
	Tim M. Wan
Title:	Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS

Exhibit Number	Description
10.1	Offer Letter dated May 31, 2014 between RealNetworks, Inc. and Mike Mulica
31.1	Certification of Robert Glaser, Chairman and Chief Executive Officer of RealNetworks, Inc., pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Tim M. Wan, Chief Financial Officer and Treasurer of RealNetworks, Inc., pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Robert Glaser, Chairman and Chief Executive Officer of RealNetworks, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Tim M. Wan, Chief Financial Officer and Treasurer of RealNetworks, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

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EX-10.1

Exhibit 10.1

May 31, 2014

Mike Mulica

Via e-mail

Dear Mike,

I am extremely pleased to offer you employment at RealNetworks, Inc. (“ Real”, the “Company” or “us”) as President, Worldwide Sales & Business Development, reporting directly to me. Your start date will be mutually determined between us but in no case later thanJune 16, 2014.

This offer is for a full-time, exempt, regular position with RealNetworks. Your responsibilities will be as directed by RealNetworks commensurate with your title. You will be paid a salary, which is equivalent on an annualized basis to $400,000 (subject to normal withholdings), payable semi-monthly in accordance with our normal payroll procedures. You are eligible to participate in the Executive MBO Plan with an annual target bonus equivalent to 75% of your base salary, or $300,000, for an annual target total cash compensation of $700,000. You will have an opportunity to earn more than your target bonus (at least 100% of base salary) if you overattain the targets set forth in your Executive MBO Plan. Specific targets will be established by the Compensation Committee of our Board of Directors annually. For the 2014 plan year, your eligibility in the Executive MBO Plan will be pro-rated based on full months’ eligibility. Eligible employees hired after the first of the month will not begin pro-ration of their target bonus until the first day of the next month.

You will be eligible to receive equity awards subject to the terms of the RealNetworks 2005 Stock Incentive Plan (the “Plan”). Subject to and effective upon the commencement of your employment and the approval of the Compensation Committee, you will receive a grant of stock options for the purchase of 500,000 shares of RealNetworks common stock, which will begin vesting on the first day of your employment and will be subject to all other provisions contained in the Plan and your stock option award agreement. These stock options will fully vest after four years of continuous employment in accordance with Real’s standard vesting practices for new employees (i.e. vesting of 25% after the first 12 months of employment and vesting of 12.5% at the expiration of each successive six months of employment). Your stock options will be granted by the Compensation Committee no later than 10 business days after your employment start date (the “Grant Date”). The exercise price of the stock options granted to you shall be equal to the fair market value of RealNetworks common stock on the Grant Date. Fair market value shall equal the closing price for a share of RealNetworks common stock on the Grant Date as reported by The NASDAQ Stock Market. Please be aware that unvested stock options are forfeited upon termination of employment, except as otherwise provided.

Also, you will be eligible to receive a grant of performance contingent restricted stock options for the purchase of 300,000 shares of RealNetworks common stock, subject to the approval of the Compensation Committee and the terms of the Plan and your stock option award agreement. These options will be subject to performance objectives to be set within 90 days of your start date by the Compensation Committee. You and I will discuss proposed objectives and I will discuss our thoughts with the Compensation Committee before it sets the final objectives. Once the objectives have been set, the options will be granted, with performance-contingent vesting adjusted so that you will be eligible to exercise up to 25% of the options on the one year anniversary of your start date, with annual performance-contingent vesting of up to an additional 25% on each of the next 3 years thereafter,

May 31, 2014

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in each case subject to attainment of the performance objectives and you remaining continuously employed with RealNetworks through the relevant vesting date. If you underperform the performance objectives for one year (thereby vesting fewer than 25% of the option grant) and over perform in a subsequent year (up through the 4^th anniversary of your start date), the plan will be designed to enable you to “catch up” and vest the options that you did not earn in the underperforming year(s). If you complete the year 4 criteria by the end of the 3^rd year, you will be able to vest the 4^th year’s 25% at the end of the 3^rd year. Note that a given level of overattainment in the 3^rd year can not be used to both “catch up” on underattainment in the 2^nd and/or 1^st year AND to cause the 4^th year’s stock to vest that year.

You will receive a sign-on bonus of $200,000 no later than 30 days from your start date. The sign-on bonus is subject to repayment by you in full if you voluntarily leave RealNetworks within 18 months of your start date other than for “good reason” (as hereinafter defined).

RealNetworks offers a comprehensive array of employee benefit programs. You will receive paid time off of at least 4 weeks annually and, upon satisfying plan applicable eligibility or waiting periods, medical/ dental/vision coverage, 401(k) participation, disability and life insurance coverage, employee stock purchase plan participation and other benefits (“Benefits”) as described in the RealNetworks Employee Handbook, Benefit Plan descriptions, and RealNetworks policies. All of the Benefits are subject to change upon notice from RealNetworks.

RealNetworks recognized that you will continue to maintain your primary residence in Chicago, IL. Real will cover your reasonable travel between Chicago and Seattle and housing/hotel expenses in Seattle.

You will be regarded as a key employee under certain federal regulations governing family and medical leave. This status will require that you work closely with us in planning should you develop a need for family or medical leave.

In the event that RealNetworks terminates your employment without “cause” or if you terminate your employment for “good reason”, and in consideration for your signing (and not revoking) a customary separation and release agreement to be provided by RealNetworks at the time of termination, RealNetworks will provide you, at its option, with either (a) a lump sum payment equal to 12 months of your then current base salary, or (b) 12 monthly payments of your then current base salary. RealNetworks will also provide you with a pro-rated bonus as described in the paragraph below. Also, RealNetworks will cover your COBRA costs for up to 12 months (until you have another employer covering your health care costs).

With respect to the pro-rated bonus referenced in the preceding paragraph, it shall be deemed that your bonus for the year in question will be the greater of 37.5% of base salary or what you have actually earned under the bonus plan, in both cases, pro-rated based on the number of days in the year through your termination date. In addition, you will be paid your full bonus for the year prior to termination even if the termination occurs before the payment date(s) for such bonus.

Further, in the event that RealNetworks terminates your employment without “cause” before your initial grant of 500,000 stock options described above is fully vested, the vesting of all or a portion of the unvested options may be accelerated following your termination of employment.

For the first year of your employment, if you are terminated without “cause,” you will receive 1 year acceleration of your unvested options.

The portion (if any) that accelerates will be determined based the Average Share Price (ASP) during the Measuring Period (as such capitalized terms are hereinafter defined). The term “Average Share Price” shall mean the higher average closing price of Real’s publicly-traded stock during the following 2 Measuring Periods. The term “Measuring Periods” shall mean (a) the period of time beginning thirty (30) days preceding your date of termination up to your termination, and (ii) the period of time beginning the day of your termination and ending thirty days after your date of termination.

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If the Average Share Price is at least 200% above the per share exercise price of the stock option, 100% of any remaining unvested portion of your initial grant of 500K stock options will accelerate. If the Average Share Price is at least 150% above the per share exercise price of the stock option (but is less than twice the exercise price), the greater of (a) 50% of any remaining unvested portion of your initial grant of 500K stock options, or (b) 1 years’ worth of unvested options, will accelerate. If the Average Share Price is lower than 150% of the per share exercise price of the stock option, you will receive 1 year acceleration of your unvested options. Any stock options that do not accelerate will be forfeited immediately upon termination. The stock options will be subject to the terms of our standard option agreement.

Also, with regards to your initial grant of 300,000 performance contingent restricted stock options, you are eligible for accelerated vesting of such unvested options in accordance with your successful attainment (as determined by RealNetworks) of the specific criteria established for such options, and with the same share price criteria (150% ASP yielding 50% of attained performance contingent options, 200% ASP yielding 100% of attained performance contingent options).

In order to receive any accelerated vesting as discussed in the preceding paragraphs, you must sign and not revoke a customary separation and release agreement in the form provided by RealNetworks at the time of your termination.

Such severance benefits are subject to the terms set forth on Exhibit A under the section titled “Release and Section 409A.”

You agree that in the event you wish to terminate your employment at RealNetworks other than for “good reason,” you will provide us with 90 days written notice and will continue to work fulltime for RealNetworks during that 90 day period unless RealNetworks determines that it does not need your services. You will be paid for any time actually worked.

In addition to the severance benefits offered above, in the event of a “Change in Control” (“CIC”), the Company agrees to provide you certain benefits as set forth in its Change of Control and Severance Agreement to be effective as of your start date, which agreement will be provided under separate cover (the “CIC Agreement”). In the event that your employment terminates in a qualifying termination and subject to the other conditions in the CIC Agreement, you will receive 1.5 times your regular severance plus 1 year accelerated vesting of any unvested, non-performance based stock options.

We acknowledge that you are currently a member of Rhapsody’s Board of Directors, and that Realnetworks waives any objections to and will be supportive of your current (1%) option grant in Rhapsody continuing to vest in accordance with its terms. The continuing vesting of the option remains subject to the Rhapsody’s Board approval.

If RealNetworks pays a dividend to its shareholders, then RealNetworks will make a good faith effort to treat you and other senior executives who have unexercised equity fairly. Any specific program will be subject to the approval of RealNetworks Board and/or Compensation Committee.

It is our policy that employees may not use or disclose confidential information or trade secrets obtained from any source or during any prior employment. RealNetworks requires employees to abide by all contractual and legal obligations they may have to prior employers or others, such as limits on disclosure of information or competition. Prior to signing this letter, you must inform us if you are subject to any such obligations that would prevent you from working at RealNetworks in your intended capacity or that would otherwise restrict you in the performance of your services to RealNetworks. Violation of this requirement may result in termination of your employment with RealNetworks. By signing this letter, you further agree that you will not bring to RealNetworks any confidential documents of another, nor disclose any confidential information of another, and that you will comply fully with these requirements.

Our employment relationship will be terminable at will, which means that either you or RealNetworks may terminate your employment at any time and for any reason or no reason, subject only to our respective obligations set forth in this letter agreement. Your right to receive payments described herein are subject to and conditioned upon your signing a valid general and complete release of all claims (except those

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relating to RealNetworks compensation obligations described under this letter agreement) against RealNetworks (and its related entities and persons) in a form provided by RealNetworks. Notwithstanding anything in the preceding sentence or elsewhere in this letter agreement to the contrary, the release will preserve and not release (1) your rights to indemnification from RealNetworks or its insurers with respect to any claims against you and (2) your rights pursuant to the CIC Agreement in the event it is later determined that your termination occurred during a Change in Control Period (as defined in the CIC Agreement).

You represent that the execution of this letter agreement, your employment with RealNetworks, and the performance of your proposed duties to RealNetworks will not violate any agreements or obligations you may have to any former employer or third party and you are not subject to any restrictions that would prevent or limit you from carrying out your duties for RealNetworks.

This offer is contingent on: (i) you providing evidence of employability as required by federal law (which includes providing RealNetworks, within three days after your employment commences, with acceptable evidence of your identity and US employment eligibility), (ii) RealNetworks receiving acceptable results from any background check or reference check and (iii) you signing the RealNetworks Development, Confidentiality and Noncompetition Agreement attached hereto.

REALNETWORKS PROVIDES EQUAL OPPORTUNITY IN EMPLOYMENT AND WILL ADMINISTER ITS POLICIES WITH REGARD TO RECRUITMENT, TRAINING, PROMOTION, TRANSFER, DEMOTION, LAYOFF, TERMINATION, COMPENSATION AND BENEFITS WITHOUT REGARD TO RACE, RELIGION, COLOR, NATIONAL ORIGIN, CITIZENSHIP, MARITAL STATUS, SEX, SEXUAL ORIENTATION, AGE, DISABILITY OR STATUS AS A DISABLED VETERAN OR VETERAN OF THE VIETNAM ERA OR ANY OTHER CHARACTERISTIC OR STATUS PROTECTED BY APPLICABLE LAW.

This letter agreement, the Development, Confidentiality and Noncompetition Agreement, the 2005 Stock Incentive Plan, the Change of Control and Severance Agreement, and your stock option award agreements contain the entire agreement between you and RealNetworks relating to your employment and supersede all prior oral and written discussion, agreements and understandings. This letter agreement may not be modified except in writing signed by both you and RealNetworks. Any disputes regarding this letter agreement or your employment with RealNetworks shall be governed by and construed in accordance with the laws of the State of Washington. If any provision of this letter agreement is deemed to be invalid or unenforceable, at RealNetworks option, the remaining terms shall continue in full force and effect.

This offer is valid until June 5, 2014, and subject to final approval of Real’s Compensation Committee.

We are excited about the prospect of you joining RealNetworks and look forward to working with you. Please let me know if you have questions about this offer.

Sincerely,

Rob Glaser

Interim Chief Executive Officer

RealNetworks, Inc.

May 31, 2014

Page 5 of 5

I have read and agree to the terms of employment contained in this letter agreement and the attached Development, Confidentiality and Noncompetition Agreement, which represent a full, complete and fair statement of the offer of employment made to me by RealNetworks, Inc.

Mike Mulica:

Date: __June 1, 2014

May 31, 2014

Page 6 of 6

Exhibit A

Definition of “Cause”

For purposes of this Agreement, “cause” will mean the occurrence of any of the following: 1) your conviction of, or plea of nolo contendere to, a felony involving moral turpitude (including under Federal securities laws), resulting in material harm to RealNetworks; (2) your substantial and continuing failure after written notice thereof to render services to RealNetworks in accordance with the terms or requirements of your employment for reasons other than illness or incapacity; (3) your willful misconduct, gross negligence, fraud, embezzlement, theft, willful misrepresentation or dishonesty involving RealNetworks or any of its subsidiaries, resulting in any case in material harm to RealNetworks; or (4) your violation of any confidentiality or non-competition agreements with RealNetworks or its subsidiaries, resulting in material harm to RealNetworks.

Definition of “Good Reason”

For purposes of this Agreement,“good reason” means your resignation within thirty (30) days following the expiration of any Company cure period following the occurrence of one or more of the following, without your written consent:

(1) A material reduction in your duties, authorities or responsibilities relative to your duties, authorities or responsibilities (provided that the Company ceasing to be a publicly held corporation shall not alone be considered a material reduction); and, for the avoidance of doubt, the sale, spin-off or other divestiture of the Company’s Mobile Entertainment, RealPlayer, ICM and/or Rhapsody businesses, or of either or both of the Company’s social games business or the Company’s casual games business, will not be considered to be a material reduction in your duties, authorities or responsibilities provided that, in the case of a sale of all or a substantial portion of the business in which you were principally engaged, the Company shall offer you a senior executive position within its reasonable judgment consistent with your experience and abilities and without a diminution in your compensation;

(2) A material reduction in your annual base compensation, provided that one or more reductions totaling ten percent (10%) or less in any two-year period will not constitute a material reduction under this clause (2), and provided further that one or more reductions totaling more than ten percent (10%) in any two-year period, whether or not applied to 100% of the senior executive team, will constitute a material reduction under this clause (ii);

(3) A material reduction in your annual target bonus opportunity, provided that one or more reductions totaling twenty five percent (25%) or less in any two-year period, will not constitute a material reduction under this clause (3), and provided further that one or more reductions totaling more than twenty five percent (25%) in any two-year period will constitute a material reduction under this clause (3); and

(4) A material change in the geographic location at which you must perform services; provided, however, that any requirement of the Company that you be based anywhere within fifty (50) miles from your primary office location as of the date of this Agreement or within fifty (50) miles from your principal residence will not constitute a material change under this clause (4).

You will not resign for “good reason” without first providing the Company with written notice within ninety (90) days of the event that you believe constitutes “good reason” specifically identifying the acts or omissions constituting the grounds for “good reason” and a reasonable cure period of not less than thirty (30) days following the date of such notice.

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Release and Section 409A

The receipt of any severance benefits pursuant to this letter agreement will be subject to your signing and not revoking a release of any and all claims, in a reasonable form prescribed by RealNetworks (the “Release”) and provided that the Release becomes effective and irrevocable no later than 60 days following the termination date (the “Release Deadline Date”). If the Release does not become effective and irrevocable by the Release Deadline Date, you will forfeit any rights to severance benefits under this letter agreement. No severance benefits will be paid or provided until the Release becomes effective and irrevocable. Upon the Release becoming effective, the salary severance benefit described in this letter agreement will be payable to you in a lump sum without interest on the first payroll date after the Release Deadline Date, but not later than March 15th of the year following the year of your termination of employment, subject to the terms set forth below.

(i)    Notwithstanding anything to the contrary in this letter agreement, no severance pay or benefits to be paid or provided to you, if any, pursuant to this letter agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended, and the final regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Payments”) will be paid or otherwise provided until you have a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to you, if any, pursuant to this letter agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A 1(b)(9) will be payable until you have a “separation from service” within the meaning of Section 409A.

(ii)    It is intended that none of the severance payments under this letter agreement will constitute Deferred Payments but rather will be exempt from Section 409A as a payment that would fall within the “short-term deferral period” as set forth in Section 1.409A-1(b)(4) of the Treasury Regulations or resulting from an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below). In no event will you have discretion to determine the taxable year of payment of any Deferred Payment. Any severance payments under this letter agreement that would be considered Deferred Payments will be paid on the Release Deadline Date, or if later, such time as required by clause (iii) below. For purposes of this letter agreement, “Section 409A Limit” means two times the lesser of: (A) your annualized compensation based upon the annual rate of pay paid to you during your taxable year preceding your taxable year of your termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (B) the maximum amount that may be taken into account under a qualified plan pursuant to Internal Revenue Code Section 401(a)(17) for the year in which your employment is terminated.

(iii)    Notwithstanding anything to the contrary in this letter agreement, if you are a “specified employee” within the meaning of Section 409A at the time of your separation from service (other than due to death), then the Deferred Payments, if any, that are payable within the first six months following your separation from service, will become payable on the date that is six months and one day following the date of your separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, in the event of your death following your separation from service, but before the six month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of your death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this letter agreement is

May 31, 2014

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intended to constitute a separate payment under Section 1.409A-2(b)(2) of the Treasury Regulations.

(iv) The foregoing provisions are intended to comply with or be exempt from the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply or be exempt. RealNetworks and you agree to work together in good faith to consider amendments to this letter agreement and to take such reasonable actions that are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition before actual payment to you under Section 409A. In no event will RealNetworks reimburse you for any taxes that may be imposed on you as result of Section 409A.

 

 

May 31, 2014

Page 9 of 9

REALNETWORKS, INC.

DEVELOPMENT, CONFIDENTIALITY AND NONCOMPETITION AGREEMENT

THIS AGREEMENT is made and entered into May ___, 2014, by and between RealNetworks, Inc. ("RealNetworks") and Mike Mulica ("You"). “RealNetworks” means RealNetworks, Inc. and all of its present and future subsidiaries and related entities including partnerships in which RealNetworks is a member.

In consideration of your employment, compensation, benefits, access to RealNetworks training, Trade Secrets and Confidential Information, and the mutual promises made herein, you and RealNetworks agree as follows:

1. Company Property.“Company Property” means all records, files, notebooks, manuals, objects, devices, supplies, materials, recordings, drawings, models, computer programs, prototypes, equipment, inventory and other materials, or copies thereof, in electronic or paper form, that have been created, used or obtained by RealNetworks, as well as Trade Secrets, Confidential Information and Employee Developments and all business revenues and fees produced or transacted through your efforts. You agree that all Company Property is and shall remain the property of RealNetworks. You will preserve and use the Company Property only for the benefit of RealNetworks and the RealNetworks business, and you will return all Company Property to RealNetworks upon RealNetworks request or upon termination of your employment (whether voluntary or involuntary).

2. Confidential Information and Employee Developments.

As used in this Agreement, the following terms shall have the meanings shown.

"Employee Development" means all technological, financial and operating ideas, processes, and materials, including all inventions, discoveries, concepts, ideas, enhancements to existing technology or business processes, computer program ideas and expressions, computer circuit designs, computer hardware concepts and implementations, formulae, algorithms, techniques, written materials, graphics, photographs, literary works, and any other ideas or original works of authorship relating to software or hardware development that you may develop or conceive of while employed by RealNetworks, alone or with others and which (i) relate directly to RealNetworks actual or demonstrably anticipated business or (ii) incorporate or are developed using Trade Secrets or Confidential Information or (iii) are conceived or developed with use of any RealNetworks equipment, supplies or facilities including RealNetworks personnel (the term “RealNetworks personnel” does not include You) or (iv) result from work performed by you for RealNetworks, regardless of whether it is technically eligible for protection under patent, copyright, or trade secret law.

"Trade Secret" means the whole or any portion of any scientific or technical information that is valuable and not generally known to competitors of RealNetworks. Trade Secrets include without limitation the specialized information and technology that RealNetworks may develop or acquire with respect to program materials (including without limitation program and project ideas, source and object code, Codecs, program listings, programming notes and documentation, flow-charts, and system and user documentation), system designs, operating processes, know-how, equipment designs, blue prints and product specifications.

"Confidential Information" means any data or information, other than Trade Secrets, which has been discovered, developed (including information conceived or developed by you) or has otherwise become known to RealNetworks, including any parent, subsidiary, predecessor, successor or otherwise affiliated company (“RealNetworks Company”), that is material to RealNetworks Company and not generally known to the public. Confidential Information includes without limitation:

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i.    Sales records, profits and performance reports, pricing manuals and lists, sales manuals and lists, training materials, selling and pricing procedures, and financing methods of RealNetworks Company.

ii.    Customer lists or accounts, special requirements of particular customers, and current and anticipated requirements of customers generally for the products of RealNetworks Company;

iii.    Research and development and specifications of any new products or lines of business under development or consideration;

iv.    Sources of supply of integrated components and materials used for production, assembly, and packaging by RealNetworks Company, and the quality, price, and usage of such components and materials;

v.    Marketing plans, strategies, sales and product development data, and inventions;

vi.    Business plans and internal financial statements and projections of RealNetworks Company; and

vii.    Personnel related information such as employees’ compensation, performance reviews, or other individually identifiable information.

You recognize and acknowledge that RealNetworks Company is engaged in a continuous program of research, development and production respecting its software products, its other business opportunities and for its customers. Important assets of RealNetworks Company are its Confidential Information, Trade Secrets and Employee Developments. You recognize that RealNetworks Company has a vital and substantial interest in maintaining confidentiality of Trade Secrets and Confidential Information to maintain a stable work force, continuing positive business relationships and minimizing damage to or interference with business. You also recognize and acknowledge that your employment exposes you to programming, concepts, designs and other information proprietary to RealNetworks Company and third parties with whom RealNetworks does business, and creates a relationship of trust and confidence between you and RealNetworks with respect to any such information.

Obligations with Respect to Employee Developments. All Employee Developments shall be considered works made for hire by you for RealNetworks and prepared within the scope of your employment. Under U.S. Copyright Law, all such materials shall, upon creation, be owned exclusively by RealNetworks. To the extent that any such material, under applicable law, shall be deemed not to be works made for hire, you hereby assign to RealNetworks all right, title and interest in and to such materials, in the United States and foreign countries, without further consideration, and RealNetworks shall be entitled to register and hold in its own name all copyrights, patents and trademarks in respect to such materials. You agree to promptly and completely disclose in writing to RealNetworks details of all original works of your authorship, discoveries, concepts, or ideas that are Employee Developments as defined by this Agreement. You agree to apply, at RealNetworks request and expense, for any patent or other legal protection of Employee Developments and to sign and deliver any applications, assignments or other documents as RealNetworks may reasonably require. RealNetworks shall have the exclusive right to all Employee Developments without additional consideration to you, including but not limited to the right to own, make, use, sell, have made, rent, lease, lend, copy, prepare derivative works of, perform or display publicly.

You Own Personal Inventions. You shall not be required to assign to RealNetworks any of your rights in any personal invention you developed entirely on your own time without using RealNetworks equipment, supplies, facilities, Trade Secrets or Confidential Information, except for those inventions that during your employment with RealNetworks either: (1) relate at the time of conception or reduction to practice of the invention directly to RealNetworks actual or demonstrably anticipated business or (2) result from any work performed by you for RealNetworks. You acknowledge notice by RealNetworks that the prior paragraph does not apply to any personal invention as described in this paragraph. You agree that this satisfies the requirements of Washington state law.

Restrictions on Use and Disclosure of Trade Secrets and Confidential Information. During your employment with RealNetworks and for so long thereafter as the information remains a Trade Secret or Confidential Information, you shall not use, reproduce, disclose, or permit any person to obtain or use any Trade Secret or Confidential Information of RealNetworks (whether or not it is in written or tangible form), except as specifically authorized in writing by RealNetworks or as required by a legal

May 31, 2014

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proceeding. You shall use the highest degree of care in safeguarding Trade Secrets and Confidential Information against loss, theft, or other inadvertent disclosure. You further agree that any Trade Secrets, Confidential Information, copyrightable works or materials or copies of them that enter into your possession, by reason of employment, are the sole property of RealNetworks and shall not be used in any manner adverse to RealNetworks best interests. You agree not to remove any Confidential Information or Trade Secret from RealNetworks premises except in pursuit of RealNetworks business.

Upon RealNetworks request at any time, or upon your termination of employment (whether voluntary or involuntary), you shall deliver to RealNetworks, and shall not retain for your own or another's use, any and all originals or copies of Employee Developments, Trade Secrets, Confidential Information and Company Property. Your obligations under this Agreement supplement and do not supersede or limit other obligations you have to RealNetworks or rights or remedies of RealNetworks including without limitation those under the Washington Uniform Trade Secrets Act.

3. Your Warranties. You agree to perform at all times faithfully, industriously and to the best of your ability all duties and functions consistent with your position and to abide by any general employment guidelines or policies adopted by RealNetworks. You acknowledge that your employment is in no way conditioned upon your disclosure to RealNetworks of confidential information or trade secrets of others, and you agree not to improperly obtain, disclose to RealNetworks, or induce RealNetworks to use, any confidential information or trade secrets belonging to any third party. You represent that the execution of this Agreement, your employment with RealNetworks, and the performance of your proposed duties to RealNetworks will not violate any agreements or obligations you may have to any former employer or third party and you are not subject to any restrictions which would prevent or limit you from carrying out your duties for RealNetworks.

4. Non-Competition. You acknowledge that RealNetworks is engaged in a highly competitive business and that by virtue of the position in which you are employed, you will perform services that are of competitive value to RealNetworks and which if used in competition with RealNetworks could cause it serious harm. Therefore, you agree not to work for any Competitor during your employment with RealNetworks (including after work hours, weekends and vacation time), even if only organizational assistance or limited consultation is involved. During your employment with RealNetworks, you agree not to publish, design or develop computer software that competes with RealNetworks software products (either existing or under development). Further, you agree that for a period of one year after the termination of your employment with RealNetworks, whether voluntary or not, you will not directly or indirectly be employed by, own, manage, consult with or join any business or entity that is in competition with RealNetworks or with products or services produced, sold or in development by RealNetworks during the term of your employment. Ownership of 1% or less of the stock (publicly or privately held) of a competitor of RealNetworks shall not be a breach of this paragraph. You acknowledge that RealNetworks competes in a global marketplace and that the duration and scope of this noncompetition provision is reasonable and necessary to protect RealNetworks interests. You authorize a court to restrict you to the maximum extent allowed.

5. Nonsolicitation. You recognize that RealNetworks workforce is a vital part of its business. You agree that for a period of one year after your employment ends, whether voluntarily or not, you will not induce or attempt to influence, directly or indirectly, any employee of RealNetworks to terminate his/her employment with RealNetworks or to work for you or any other entity. You agree that this means you will not identify to a third party RealNetworks employees as potential candidates for employment. You further agree not to, directly or indirectly, solicit or assist in soliciting orders from any current or known prospective customers or to encourage them to terminate their business relationship or negotiations with RealNetworks.

6. Return of Property. You represent that you will return to RealNetworks all company-owned property in your possession or control, including but not limited to credit cards, keys, access cards, company-owned equipment, computers and related equipment, customer lists, files, memoranda, documents, price lists, and all other trade secrets and/or confidential RealNetworks information, and all copies thereof, whether in electronic or other form.

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7. Deductions from Pay. You authorize RealNetworks to deduct from your compensation the value of any Company Property not returned or the amount of any sums owed to RealNetworks by you, and you release RealNetworks from any claims based upon such withholding.

8. Miscellaneous. This Agreement together with the terms of your offer letter (and the other documents referred to therein) constitute the complete and entire agreement between us, and supersedes and cancels all prior understandings, correspondence and agreements, oral and written, express or implied, between us relating to the subject matter hereof. This Agreement can only be amended or waived by a written document signed by RealNetworks and you. The waiver of any breach of this Agreement or the failure to enforce any provision shall not waive any later breach. RealNetworks and you both consent to the other giving third parties notification of the existence and terms of this Agreement. This Agreement shall become effective only when executed by RealNetworks and then shall be binding upon and inure to the benefit of RealNetworks and you, and each of our successors, assigns, heirs or legal representatives, except that you may not assign or delegate any rights or duties under this Agreement. This Agreement will be interpreted and enforced in accordance with the laws of the State of Washington as applied to agreements made and performed in Washington, without regard to the State's conflict of laws provisions. Jurisdiction and venue in any proceeding either at law or in equity, of or relating to this Agreement shall be in King County, Washington. You agree that RealNetworks may be irreparably harmed by a breach by you of this Agreement, that adequate remedies may not exist in law, and that RealNetworks shall be entitled to bring an action for a preliminary or permanent injunction or restraining order to enforce this Agreement. You acknowledge that your experience and capabilities are such that an injunction to enforce this Agreement will not prevent you from earning a reasonable livelihood. Your claims against RealNetworks shall not be a defense to RealNetworks enforcement of this Agreement. In case any term in this Agreement shall be held invalid, illegal or unenforceable in whole or in part, the validity of the remaining terms of the Agreement shall not be affected.

You acknowledge that you have read this Agreement, have had an opportunity to have it explained to you, understand its provisions and have received an exact copy of it for your records. You further understand that your employment relationship with RealNetworks is at will and nothing in this Agreement suggests or signifies otherwise.

IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first written above.

REALNETWORKS, INC.    Mike Mulica

By:

Name: Rob Glaser

Title: Interim Chief Executive Officer

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Glaser, certify that:

1. I have reviewed this report on Form 10-Q of RealNetworks, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 7, 2014
/s/ Robert Glaser
Robert Glaser
Title:	Chairman and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Tim M. Wan, certify that:

1. I have reviewed this report on Form 10-Q of RealNetworks, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 7, 2014
/s/ Tim M. Wan
Tim M. Wan
Title:	Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Robert Glaser, Chairman of the Board of Directors and Chief Executive Officer of RealNetworks, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of RealNetworks, Inc. on Form 10-Q for the fiscal quarter ended June 30, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of RealNetworks, Inc.

Date:	August 7, 2014
By:	/s/ Robert Glaser
	Name:	Robert Glaser
	Title:	Chairman and Chief Executive Officer
		(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to RealNetworks, Inc. and will be retained by RealNetworks, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Tim M. Wan, Chief Financial Officer and Treasurer of RealNetworks, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of RealNetworks, Inc. on Form 10-Q for the fiscal quarter ended June 30, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of RealNetworks, Inc.

Date:	August 7, 2014
By:	/s/ Tim M. Wan
	Name:	Tim M. Wan
	Title:	Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to RealNetworks, Inc. and will be retained by RealNetworks, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Acquisitions (Details) (USD $)			3 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013 Slingo, Inc	Sep. 30, 2013 Muzicall Ltd [Member]	Jun. 30, 2014 Tradenames and Trademarks	Dec. 31, 2013 Tradenames and Trademarks	Jun. 30, 2013 Tradenames and Trademarks Slingo, Inc	Sep. 30, 2013 Developed Technology, tradenames and trademarks and customer relationships [Member] Muzicall Ltd [Member]	Jun. 30, 2013 Developed Technology and Customer Relationships Slingo, Inc
Business Acquisition [Line Items]
Percentage of voting interests acquired			100.00%	100.00%
Payments to acquire businesses			$ 15,600,000	$ 6,700,000
Intangible assets acquired			8,000,000
Indefinite-Lived Intangible Assets (Excluding Goodwill)					4,500,000	4,500,000	4,500,000
Finite-lived intangibles acquired								5,400,000	3,500,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Deferred Tax Assets Noncurrent				3,400,000
Deferred tax liability			2,700,000
Goodwill	$ 18,005,000	$ 17,476,000	$ 9,900,000	$ 1,300,000

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Restructuring Charges Restructuring Charges (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended				3 Months Ended	6 Months Ended
	Sep. 30, 2012 position	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Asset Related and Other Costs [Member]	Jun. 30, 2013 Asset Related and Other Costs [Member]	Jun. 30, 2014 Employee Separation Costs	Jun. 30, 2014 Employee Separation Costs	Jun. 30, 2013 Employee Separation Costs
Restructuring Cost and Reserve [Line Items]
Number of positions eliminated	160
Costs incurred and charged to expense		$ 1,757	$ 2,198	$ 0	$ 380		$ 1,757	$ 1,818
Restructuring Reserve [Roll Forward]
Accrued liability beginning balance							756
Costs incurred and charged to expense, excluding non-cash charges						1,757
Cash payments						(2,263)
Accrued liability ending balance						$ 250	$ 250

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Allowance for Doubtful Accounts Receivable and Sales Returns (Activity in Allowance for Doubtful Accounts Receivable and Sales Returns) (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Allowance for Doubtful Accounts Receivable
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	$ 966
Addition (reduction) to allowance	341
Amounts written off	(25)
Foreign currency translation	4
Ending Balance	1,286
Allowance for Sales Returns
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	569
Addition (reduction) to allowance	(101)
Amounts written off	(4)
Foreign currency translation	(1)
Ending Balance	$ 463

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Lease Exit and Related Charges (Changes to Accrued Loss on Excess Office Facilities) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Disclosure Changes To Accrued Loss On Excess Office Facilities [Abstract]
Accrued loss as of December 31, 2013		$ 254
Additions and adjustments to the lease exit charges accrual, including sublease income estimate revision	400
Less amounts paid, net of sublease amounts	(124)
Accrued loss as of June 30, 2014 (included in Accrued and other current liabilities)	$ 530	$ 254

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Fair Value Measurements (Short-term Investments) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	$ 201,215	$ 236,336
Short-term Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	70,583	74,920
Short-term Investments | Estimate of Fair Value Measurement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	70,583
Short-term Investments | Within one year | Estimate of Fair Value Measurement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	48,399
Short-term Investments | Between one year and five years | Estimate of Fair Value Measurement
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	$ 22,184

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Accrued and Other Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Payables and Accruals [Abstract]

Accrued and Other Liabilities

Accrued and other current liabilities (in thousands):

	June 30, 2014		December 31, 2013
Royalties and other fulfillment costs	$	5,033	$	16,467
Employee compensation, commissions and benefits	7,037		10,060
Sales, VAT and other taxes payable	6,862		7,237
Other	7,942		8,129
Total accrued and other current liabilities	$	26,874	$	41,893

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Income Tax Disclosure [Abstract]
Increase (decrease) in unrecognized tax benefits	$ (0.9)

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Related Party Transactions

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Transactions with Rhapsody. See Note 5, Rhapsody Joint Venture, for details on the 2010 restructuring transaction involving Rhapsody. Subsequent to the restructuring transaction, we were obligated to provide Rhapsody with certain support services. These support services, which included information technology and limited operational support provided directly to Rhapsody, were completed in 2013. RealNetworks has no further obligations or liabilities pursuant to the support services agreement.

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Other Intangible Assets (Detail) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets and Indefinite-Lived Assets [Line Items]
Gross Amount	$ 76,852,000	$ 73,953,000
Accumulated Amortization	69,424,000	65,460,000
Net	7,428,000	8,493,000
Intangible Assets, Gross (Excluding Goodwill)	81,352,000	78,453,000
Other intangible assets, net	11,928,000	12,993,000
Customer relationships
Finite-Lived Intangible Assets and Indefinite-Lived Assets [Line Items]
Gross Amount	36,350,000	35,156,000
Accumulated Amortization	33,512,000	31,262,000
Net	2,838,000	3,894,000
Developed technology
Finite-Lived Intangible Assets and Indefinite-Lived Assets [Line Items]
Gross Amount	29,738,000	29,097,000
Accumulated Amortization	26,365,000	25,039,000
Net	3,373,000	4,058,000
Patents, trademarks and tradenames
Finite-Lived Intangible Assets and Indefinite-Lived Assets [Line Items]
Gross Amount	4,145,000	4,021,000
Accumulated Amortization	3,784,000	3,627,000
Net	361,000	394,000
Servicing contracts and other
Finite-Lived Intangible Assets and Indefinite-Lived Assets [Line Items]
Gross Amount	6,619,000	5,679,000
Accumulated Amortization	5,763,000	5,532,000
Net	856,000	147,000
Tradenames and Trademarks
Finite-Lived Intangible Assets and Indefinite-Lived Assets [Line Items]
Indefinite-Lived Intangible Assets (Excluding Goodwill)	4,500,000	4,500,000
RealPlayer Group
Finite-Lived Intangible Assets and Indefinite-Lived Assets [Line Items]
Intangible assets acquired	$ 800,000

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Stock-Based Compensation (Additional Information) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Total unrecognized compensation cost	$ 11.5
Total unrecognized compensation cost, expected recognition period (in years)	3 years

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Calculation of Basic and Diluted Earnings Per Share

Basic and diluted EPS (in thousands, except per share amounts):

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net income (loss)	$	(21,029	)	$	(18,471	)	$	(28,799	)	$	(30,145	)
Weighted average common shares outstanding used to compute basic EPS	35,890			35,455			35,865			35,399
Dilutive effect of stock based awards	—			—			—			—
Weighted average common shares outstanding used to compute diluted EPS	35,890			35,455			35,865			35,399
Basic EPS	$	(0.59	)	$	(0.52	)	$	(0.80	)	$	(0.85	)
Diluted EPS	$	(0.59	)	$	(0.52	)	$	(0.80	)	$	(0.85	)

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Goodwill (Goodwill by Segments) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Goodwill [Line Items]
Goodwill	$ 18,005	$ 17,476
RealPlayer Group
Goodwill [Line Items]
Goodwill	1,043
Mobile Entertainment
Goodwill [Line Items]
Goodwill	2,202
Games
Goodwill [Line Items]
Goodwill	14,760
RealPlayer Group
Goodwill [Line Items]
Goodwill	$ 500

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Segment Information (Segment Results) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended					6 Months Ended
	Jun. 30, 2014		Mar. 31, 2014	Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Segment Reporting Information [Line Items]
Revenue	$ 40,825	[1]		$ 49,850	[1]	$ 86,549	[1]	$ 106,643	[1]
Cost of revenue (B)	20,786	[2]		19,519	[2]	39,572	[2]	40,025	[2]
Extinguishment of liability	0		(10,600)	0		(10,580)		0
Gross profit	20,039			30,331		57,557		66,618
Operating expenses	38,871			46,835		85,265		94,548
Operating income (loss)	(18,832)			(16,504)		(27,708)		(27,930)
RealPlayer Group
Segment Reporting Information [Line Items]
Revenue	8,556			18,383		23,771		40,766
Cost of revenue (B)	3,620			4,409		7,138		9,720
Gross profit	4,936			13,974		16,633		31,046
Operating expenses	12,489			14,001		30,276		30,207
Operating income (loss)	(7,553)			(27)		(13,643)		839
Mobile Entertainment
Segment Reporting Information [Line Items]
Revenue	23,182			18,592		43,095		39,087
Cost of revenue (B)	14,298			11,170		26,248		22,002
Gross profit	8,884			7,422		16,847		17,085
Operating expenses	9,424			8,412		19,040		17,523
Operating income (loss)	(540)			(990)		(2,193)		(438)
Games
Segment Reporting Information [Line Items]
Revenue	9,087			12,875		19,683		26,790
Cost of revenue (B)	2,717			3,381		5,846		7,181
Gross profit	6,370			9,494		13,837		19,609
Operating expenses	8,769			11,755		18,535		23,607
Operating income (loss)	(2,399)			(2,261)		(4,698)		(3,998)
Corporate
Segment Reporting Information [Line Items]
Cost of revenue (B)	151			559		340		1,122
Extinguishment of liability				0
Operating expenses	8,189			12,667		17,414		23,211
Operating income (loss)	$ (8,340)			$ (13,226)		$ (7,174)		$ (24,333)

[1] quarters June 30, 2014 June 30, 2013Components of Revenue License Fees6,664 10,162Service Revenue34,161 39,688Net Revenue40,825 49,850 6 months ended 6 months ended June 30, 2014 June 2013Components of Revenue License Fees$15,243 $22,991Service Revenue71,306 83,652Net Revenue$86,549 $106,643

[2] Components of Cost of RevenueJune 30, 2014 June 30, 2013 License Fees2,170 2,161 Service Revenue18,616 17,358 Net Revenue Costs20,786 19,519 6 months ended 6 months ended June 30, 2014 June 2013Components of Cost of Revenue License Fees$4,382 $4,315Service Revenue35,190 35,710Net Revenue Costs$39,572 $40,025

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Fair Value Measurements - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Proceeds from sale of investment			$ (2,754)	$ 0
Gain (loss) on sale of investment	0	0	2,371	0
J-Stream [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Proceeds from sale of investment			$ (2,800)

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Acquisitions Acquisitions

6 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Acquisitions

Acquisitions

In the quarter ended June 30, 2013, we acquired 100% of the voting interests in Slingo, Inc., a social casino games company based in the U.S., for total cash consideration of $15.6 million. The tangible and intangible assets and liabilities recognized are reported within the Games segment. The identifiable intangible assets associated with the acquisition totaled $8.0 million. Of this total, $4.5 million was related to tradenames and trademarks determined to have indefinite useful lives and will be evaluated annually in our fourth quarter for impairment, or more frequently, if circumstances indicate an impairment may exist. The remaining $3.5 million includes developed game technology and existing customer relationships with finite lives, and is being amortized over their useful lives. We recorded a net deferred tax liability of $2.7 million related to the intangible assets acquired. Goodwill totaling $9.9 million was recorded, representing the excess of purchase consideration over the fair value of net acquired assets, and was primarily related to the assembled workforce and expected synergies in the rapidly growing social casino games market. The goodwill is not deductible for income tax purposes. We expect this acquisition to enhance our footprint in the social casino games arena.

In the quarter ended September 30, 2013, we acquired 100% of the voting interests in Muzicall Limited, a ringback tone company based in London, for total cash consideration of $6.7 million. The tangible and intangible assets and liabilities recognized are reported in the Mobile Entertainment segment. The identifiable intangible assets associated with the acquisition totaled $5.4 million, and include tradenames and trademarks, developed technology, user base and carrier relationships. All identifiable intangible assets from this acquisition have finite lives, and are being amortized over their useful lives. We recorded a net deferred tax asset of $3.4 million related to the assets acquired, and a full valuation allowance. Goodwill totaling $1.3 million was recorded, representing the excess of purchase consideration over the fair value of net acquired assets acquired, and was primarily related to the assembled workforce and expected synergies in the ringback tone industry. The goodwill is not deductible for income tax purposes. This acquisition is intended to accelerate our growth initiatives within the Mobile Entertainment segment.

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Segment Information (Revenue by Geographic Region) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Geographic Reporting Disclosure [Line Items]
Revenue	$ 40,825	[1]	$ 49,850	[1]	$ 86,549	[1]	$ 106,643	[1]
United States
Geographic Reporting Disclosure [Line Items]
Revenue	15,092		21,463		35,520		49,486
Europe
Geographic Reporting Disclosure [Line Items]
Revenue	6,968		9,272		15,380		20,528
KOREA, REPUBLIC OF
Geographic Reporting Disclosure [Line Items]
Revenue	11,092		11,259		21,386		20,223
Rest of World
Geographic Reporting Disclosure [Line Items]
Revenue	$ 7,673		$ 7,856		$ 14,263		$ 16,406

[1] quarters June 30, 2014 June 30, 2013Components of Revenue License Fees6,664 10,162Service Revenue34,161 39,688Net Revenue40,825 49,850 6 months ended 6 months ended June 30, 2014 June 2013Components of Revenue License Fees$15,243 $22,991Service Revenue71,306 83,652Net Revenue$86,549 $106,643

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Rhapsody Joint Venture (Additional Information) (Detail) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Mar. 31, 2010	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Schedule of Equity Method Investments [Line Items]
Losses recorded in the operations of Rhapsody	$ 1,802,000	$ 1,347,000		$ 2,640,000	$ 3,580,000
Carrying value of Rhapsody investment	10,000,000			10,000,000		12,473,000
Rhapsody America LLC
Schedule of Equity Method Investments [Line Items]
Percentage of ownership interest in Rhapsody	45.00%		47.00%	45.00%
Payments for Restructuring			18,000,000
Equity Method Investment, Preferred Stock, Liquidation Preference, Value	10,000,000			10,000,000
Losses recorded in the operations of Rhapsody	1,800,000	1,300,000		2,600,000	3,600,000
Carrying value of Rhapsody investment	$ 10,000,000			$ 10,000,000		$ 12,500,000
Before Capital Restructuring | Rhapsody America LLC
Schedule of Equity Method Investments [Line Items]
Percentage of ownership interest in Rhapsody			51.00%
MTV Networks | Before Capital Restructuring | Rhapsody America LLC
Schedule of Equity Method Investments [Line Items]
Percentage of ownership interest in Rhapsody			49.00%

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Financial Assets Measured at Fair Value on a Recurring Basis

The following table presents information about our financial assets that have been measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013, and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands).

	Fair Value Measurements as of								Amortized Cost as of
	June 30, 2014								June 30, 2014
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash	$	33,836	$	—	$	—	$	33,836	$	33,836
Money market funds	—		15,437		—		15,437		15,437
Corporate notes and bonds	—		75,177		—		75,177		75,178
Total cash and cash equivalents	33,836		90,614		—		124,450		124,451
Short-term investments:
Corporate notes and bonds	—		57,874		—		57,874		57,803
U.S. government agency securities	12,459		250		—		12,709		12,709
Total short-term investments	12,459		58,124		—		70,583		70,512
Restricted cash equivalents and investments	—		3,000		—		3,000		3,000
Equity investment in publicly traded securities	3,182		—		—		3,182		428
Total	$	49,477	$	151,738	$	—	$	201,215	$	198,391

	Fair Value Measurements as of								Amortized Cost as of
	December 31, 2013								December 31, 2013
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash	$	46,978	$	—	$	—	$	46,978	$	46,978
Money market funds	1		26,913		—		26,914		26,914
Corporate notes and bonds	—		77,043		—		77,043		77,044
U.S. government agency securities	—		300		—		300		300
Total cash and cash equivalents	46,979		104,256		—		151,235		151,236
Short-term investments:
Corporate notes and bonds	—		59,766		—		59,766		59,713
U.S. government agency securities	14,077		1,077		—		15,154		15,159
Total short-term investments	14,077		60,843		—		74,920		74,872
Restricted cash equivalents and investments	—		3,000		—		3,000		3,000
Equity investment in publicly traded securities	7,181		—		—		7,181		842
Total	$	68,237	$	168,099	$	—	$	236,336	$	229,950

Schedule of Contractual Maturity Date

Contractual maturities of short-term investments as of June 30, 2014 (in thousands):

	Estimated Fair Value
Within one year	$	48,399
Between one year and five years	22,184
Total short-term investments	$	70,583

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Rhapsody Joint Venture (Tables)

6 Months Ended

Jun. 30, 2014

Equity Method Investments and Joint Ventures [Abstract]

Summarized Financial Operating Information for Rhapsody

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

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net revenue	$	42,427		$	34,679		$	84,430		$	68,641
Gross profit	7,870			8,767			16,991			16,612
Net loss	(4,717		)	(4,375		)	(6,347		)	(9,191		)

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Shareholders’ Equity (Accumulated Other Comprehensive Income (Loss)) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Accumulated other comprehensive income (loss), beginning of period			$ (47,695,000)
Unrealized gains (losses), net of tax effects of $0, $913, $0 and $(716)	(38,000)	(1,622,000)	(3,613,000)	1,015,000
Net current period other comprehensive income	178,000	(2,010,000)	(3,422,000)	(611,000)
Accumulated other comprehensive income (loss) balance, end of period	(51,117,000)	(27,151,000)	(51,117,000)	(27,151,000)
Accumulated Other Comprehensive Income (Loss), Tax [Abstract]
Unrealized gains (losses), tax effects	0	913	0	(716)
Reclassification adjustments for losses (gains) included in other income (expense), tax effects	0	0	(4)	0
Investments
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Accumulated other comprehensive income (loss), beginning of period	2,822,000	29,322,000	6,397,000	26,685,000
Unrealized gains (losses), net of tax effects of $0, $913, $0 and $(716)	(38,000)	(1,622,000)	(1,242,000)	1,015,000
Reclassification adjustments for losses (gains) included in other income (expense)	0	0	(2,371,000)	0
Net current period other comprehensive income	(38,000)	(1,622,000)	(3,613,000)	1,015,000
Accumulated other comprehensive income (loss) balance, end of period	2,784,000	27,700,000	2,784,000	27,700,000
Foreign currency translation
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Accumulated other comprehensive income (loss), beginning of period	(54,117,000)	(54,463,000)	(54,092,000)	(53,225,000)
Translation adjustments	216,000	(353,000)	239,000	(1,591,000)
Reclassification adjustments for losses (gains) included in other income (expense)	0	(35,000)	(48,000)	(35,000)
Net current period other comprehensive income	216,000	(388,000)	191,000	(1,626,000)
Accumulated other comprehensive income (loss) balance, end of period	$ (53,901,000)	$ (54,851,000)	$ (53,901,000)	$ (54,851,000)

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Rhapsody Joint Venture (Summarized Financial Operating Information for Rhapsody) (Detail) (Rhapsody America LLC, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Rhapsody America LLC
Schedule of Equity Method Investments [Line Items]
Net revenue	$ 42,427	$ 34,679	$ 84,430	$ 68,641
Gross profit	7,870	8,767	16,991	16,612
Net loss	$ (4,717)	$ (4,375)	$ (6,347)	$ (9,191)

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Allowance for Doubtful Accounts Receivable and Sales Returns (Tables)

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Activity in Allowance for Doubtful Accounts Receivable and Sales Returns

Activity in the allowance for doubtful accounts receivable and sales returns (in thousands):

	Allowance For
	Doubtful Accounts Receivable			Sales Returns
Balances, December 31, 2013	$	966		$	569
Addition (reduction) to allowance	341			(101		)
Amounts written off	(25		)	(4		)
Foreign currency translation	4			(1		)
Balances, June 30, 2014	$	1,286		$	463

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Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Other Intangible Assets

Other intangible assets (in thousands):

		As of June 30,						As of December 31,
		2014						2013
		Gross Amount		Accumulated Amortization		Net		Gross Amount		Accumulated Amortization		Net
Amortizing intangible assets:
	Customer relationships	$	36,350	$	33,512	$	2,838	$	35,156	$	31,262	$	3,894
	Developed technology	29,738		26,365		3,373		29,097		25,039		4,058
	Patents, trademarks and tradenames	4,145		3,784		361		4,021		3,627		394
	Service contracts	6,619		5,763		856		5,679		5,532		147
		76,852		69,424		7,428		73,953		65,460		8,493
Non-amortizing intangible assets:
	Trademarks and tradenames	4,500		—		4,500		4,500		—		4,500
	Total	$	81,352	$	69,424	$	11,928	$	78,453	$	65,460	$	12,993

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2014

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued new revenue recognition guidance. The guidance will require an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new guidance will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new guidance is effective for us on January 1, 2017. Early application is not permitted. The guidance permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that the guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor determined the effect of the standard on our ongoing financial reporting.

In April 2014, the FASB issued new guidance related to discontinued operations. The guidance changes the criteria for reporting discontinued operations and modifies the related disclosure requirements. Under the new guidance, a discontinued operation is defined as a disposal of a component or group of components that represents a strategic shift that has, or will have, a major effect on an entity's operations and financial results.  The new guidance is effective for us on January 1, 2016. We are evaluating the impact that this guidance may have on our consolidated financial statements and related disclosures.

There have been no other recent accounting pronouncements or changes in accounting pronouncements to be implemented that are of significance or potential significance to RealNetworks.

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Goodwill (Tables)

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in Goodwill

Changes in goodwill (in thousands):

Balance, December 31, 2013	$	17,476
Increases due to current year acquisitions	460
Effects of foreign currency translation	69
Balance, June 30, 2014	$	18,005

Goodwill Assigned by Segments

Goodwill by segment (in thousands):

	June 30, 2014
RealPlayer Group	$	1,043
Mobile Entertainment	2,202
Games	14,760
Total goodwill	$	18,005

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Stock-Based Compensation (Recognized Stock-Based Compensation Expense) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Total stock-based compensation expense	$ 1,673	$ 2,020	$ 3,010	$ 4,058

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Accrued and Other Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended			6 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Payables and Accruals [Abstract]
Royalties and other fulfillment costs	$ 5,033			$ 5,033		$ 16,467
Employee compensation, commissions and benefits	7,037			7,037		10,060
Sales, VAT and other taxes payable	6,862			6,862		7,237
Other	7,942			7,942		8,129
Total accrued and other liabilities	26,874			26,874		41,893
Extinguishment of liability	$ 0	$ 10,600	$ 0	$ 10,580	$ 0

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 124,450	$ 151,235
Short-term investments	70,583	74,920
Trade accounts receivable, net of allowances	21,580	24,613
Deferred costs, current portion	992	1,601
Deferred tax assets, current	311	306
Prepaid expenses and other current assets	9,910	9,124
Total current assets	227,826	261,799
Equipment, software, and leasehold improvements, at cost:
Equipment and software	86,755	86,721
Leasehold improvements	3,915	3,482
Total equipment, software, and leasehold improvements, at cost	90,670	90,203
Less accumulated depreciation and amortization	70,212	67,031
Net equipment, software, and leasehold improvements	20,458	23,172
Restricted cash equivalents and investments	3,000	3,000
Equity method investment	10,000	12,473
Available for sale securities	3,182	7,181
Other assets	3,073	2,332
Deferred costs, non-current portion	1,062	946
Deferred tax assets, net, non-current portion	1,405	1,409
Other intangible assets, net	11,928	12,993
Goodwill	18,005	17,476
Total assets	299,939	342,781
Current liabilities:
Accounts payable	20,363	19,987
Accrued and other current liabilities	26,874	41,893
Deferred tax liabilities, net, current portion	911	899
Deferred revenue, current portion	7,835	7,498
Total current liabilities	55,983	70,277
Deferred revenue, non-current portion	145	166
Deferred rent	1,269	1,318
Deferred tax liabilities, net, non-current portion	1,725	1,556
Other long-term liabilities	607	483
Total liabilities	59,729	73,800
Commitments and contingencies
Preferred stock, $0.001 par value, no shares issued and outstanding:
Common stock, $0.001 par value authorized 250,000 shares; issued and outstanding 35,992 shares in 2014 and 35,833 shares in 2013	36	36
Additional paid-in capital	613,617	610,167
Accumulated other comprehensive loss	(51,117)	(47,695)
Retained deficit	(322,326)	(293,527)
Total shareholders’ equity	240,210	268,981
Total liabilities and shareholders’ equity	299,939	342,781
Preferred stock, Series A
Preferred stock, $0.001 par value, no shares issued and outstanding:
Preferred stock	0	0
Preferred stock, Undesignated series
Preferred stock, $0.001 par value, no shares issued and outstanding:
Preferred stock	$ 0	$ 0

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Fair Value Measurements (Financial Assets Measured at Fair Value on a Recurring Basis) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	$ 201,215	$ 236,336
Amortized Cost	198,391	229,950
Cash and Cash Equivalents
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	124,450	151,235
Amortized Cost	124,451	151,236
Cash and Cash Equivalents | Cash
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	33,836	46,978
Amortized Cost	33,836	46,978
Cash and Cash Equivalents | Money market funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	15,437	26,914
Amortized Cost	15,437	26,914
Cash and Cash Equivalents | Corporate notes and bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	75,177	77,043
Amortized Cost	75,178	77,044
Cash and Cash Equivalents | U.S. government agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value		300
Amortized Cost		300
Short-term Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	70,583	74,920
Amortized Cost	70,512	74,872
Short-term Investments | Corporate notes and bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	57,874	59,766
Amortized Cost	57,803	59,713
Short-term Investments | U.S. government agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	12,709	15,154
Amortized Cost	12,709	15,159
Restricted cash equivalents and investments | Restricted cash equivalents and investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	3,000	3,000
Amortized Cost	3,000	3,000
Equity Investment in Publicly Traded Securities | Publicly Traded Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	3,182	7,181
Amortized Cost	428	842
Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	49,477	68,237
Level 1 | Cash and Cash Equivalents
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	33,836	46,979
Level 1 | Cash and Cash Equivalents | Cash
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	33,836	46,978
Level 1 | Cash and Cash Equivalents | Money market funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	1
Level 1 | Cash and Cash Equivalents | Corporate notes and bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 1 | Cash and Cash Equivalents | U.S. government agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value		0
Level 1 | Short-term Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	12,459	14,077
Level 1 | Short-term Investments | Corporate notes and bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 1 | Short-term Investments | U.S. government agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	12,459	14,077
Level 1 | Restricted cash equivalents and investments | Restricted cash equivalents and investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 1 | Equity Investment in Publicly Traded Securities | Publicly Traded Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	3,182	7,181
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	151,738	168,099
Level 2 | Cash and Cash Equivalents
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	90,614	104,256
Level 2 | Cash and Cash Equivalents | Cash
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 2 | Cash and Cash Equivalents | Money market funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	15,437	26,913
Level 2 | Cash and Cash Equivalents | Corporate notes and bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	75,177	77,043
Level 2 | Cash and Cash Equivalents | U.S. government agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value		300
Level 2 | Short-term Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	58,124	60,843
Level 2 | Short-term Investments | Corporate notes and bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	57,874	59,766
Level 2 | Short-term Investments | U.S. government agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	250	1,077
Level 2 | Restricted cash equivalents and investments | Restricted cash equivalents and investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	3,000	3,000
Level 2 | Equity Investment in Publicly Traded Securities | Publicly Traded Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 3 | Cash and Cash Equivalents
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 3 | Cash and Cash Equivalents | Cash
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 3 | Cash and Cash Equivalents | Money market funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 3 | Cash and Cash Equivalents | Corporate notes and bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 3 | Cash and Cash Equivalents | U.S. government agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value		0
Level 3 | Short-term Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 3 | Short-term Investments | Corporate notes and bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 3 | Short-term Investments | U.S. government agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 3 | Restricted cash equivalents and investments | Restricted cash equivalents and investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	0
Level 3 | Equity Investment in Publicly Traded Securities | Publicly Traded Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	$ 0	$ 0

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net income (loss)	$ (28,799)	$ (30,145)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	6,145	9,874
Stock-based compensation	3,010	4,058
Equity in net loss of Rhapsody	2,640	3,580
Deferred income taxes, net	10	(1,668)
Gain on sale of available for sale securities	(2,371)	0
Realized translation gain	(48)	(35)
Extinguishment of liability	(10,580)	0
Other	0	51
Net change in certain operating assets and liabilities:
Trade accounts receivable	3,346	5,355
Prepaid expenses and other assets	94	6,749
Accounts payable	(114)	(92)
Accrued and other liabilities	(4,111)	(10,612)
Net cash provided by (used in) operating activities	(30,778)	(12,885)
Cash flows from investing activities:
Purchases of equipment, software, and leasehold improvements	(1,689)	(3,181)
Proceeds from sale of available for sale securities	2,754	0
Purchases of short-term investments	(48,326)	(70,647)
Proceeds from sales and maturities of short-term investments	52,663	71,327
Acquisitions of businesses, net of cash acquired	(733)	(16,107)
Other	(467)	0
Net cash provided by (used in) investing activities	4,202	(18,608)
Cash flows from financing activities:
Proceeds from issuance of common stock (stock options and stock purchase plan)	580	392
Tax payments from shares withheld upon vesting of restricted stock	(307)	(800)
Payment of contingent consideration	(696)	(828)
Net cash provided by (used in) financing activities	(423)	(1,236)
Effect of exchange rate changes on cash and cash equivalents	214	(1,259)
Net increase (decrease) in cash and cash equivalents	(26,785)	(33,988)
Cash and cash equivalents, beginning of period	151,235	163,198
Cash and cash equivalents, end of period	124,450	129,210
Supplemental disclosure of cash flow information:
Cash received from income tax refunds	97	8,100
Cash paid for income taxes	1,074	2,147
Non-cash investing activities:
Increase (decrease) in accrued purchases of equipment, software, and leasehold improvements	$ (321)	$ 483

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Earnings Per Share - Additional Information (Detail) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Shares of common stock excluded from the calculation of diluted net income per share because of antidilutive effect	6.3	4.3	6.2	4.3

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Lease Exit and Related Charges (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure Changes To Accrued Loss On Excess Office Facilities [Abstract]

Changes to Accrued Loss on Excess Office Facilities

Changes to accrued lease exit and related charges (in thousands):

Accrued loss as of December 31, 2013	$	254
Additions and adjustments to the lease exit charges accrual, including sublease income estimate revision	400
Less amounts paid, net of sublease amounts	(124		)
Accrued loss as of June 30, 2014 (included in Accrued and other current liabilities)	$	530

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

We may become subject to legal proceedings, governmental investigations and claims in the ordinary course of business, including employment claims, contract-related claims, and claims of alleged infringement of third-party patents, trademarks and other intellectual property rights. Such claims, even if not meritorious, could force us to expend significant financial and managerial resources. In addition, given the broad distribution of some of our consumer products, any individual claim related to those products could give rise to liabilities that may be material to us. In the event of a determination adverse to us, we may incur substantial monetary liability, and/or be required to change our business practices. Either of these could have a material adverse effect on our consolidated financial statements.

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Shareholders’ Equity (Tables)

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

Changes in components of accumulated other comprehensive income (in thousands):

		Quarters Ended June 30,						Six Months Ended June 30,
		2014			2013			2014			2013
Investments
	Accumulated other comprehensive income (loss), beginning of period	$	2,822		$	29,322		$	6,397		26,685
	Unrealized gains (losses), net of tax effects of $0, $913, $0 and $(716)	(38		)	(1,622		)	(1,242		)	1,015
	Reclassification adjustments for losses (gains) included in other income (expense), net of tax effects of $0, $0, $(4) and $0	—			—			(2,371		)	—
	Net current period other comprehensive income	(38		)	(1,622		)	(3,613		)	1,015
	Accumulated other comprehensive income (loss) balance, end of period	$	2,784		$	27,700		$	2,784		$	27,700
Foreign currency translation
	Accumulated other comprehensive income (loss), beginning of period	$	(54,117	)	$	(54,463	)	$	(54,092	)	$	(53,225	)
	Translation adjustments	216			(353		)	239			(1,591		)
	Reclassification adjustments for losses (gains) included in other income (expense)	—			(35		)	(48		)	(35		)
	Net current period other comprehensive income	216			(388		)	191			(1,626		)
	Accumulated other comprehensive income (loss) balance, end of period	$	(53,901	)	$	(54,851	)	$	(53,901	)	$	(54,851	)
Total accumulated other comprehensive income (loss), end of period		$	(51,117	)	$	(27,151	)	$	(51,117	)	$	(27,151	)

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Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Information

ote 18. Segment Information

We have three reportable 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, our recently launched LISTEN product, 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.

We allocate certain corporate expenses which are directly attributable to supporting the business to our reportable segments. 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 loss on litigation settlements are included in the corporate segment.

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 Chief Executive Officer, Chief Financial Officer, our Presidents, 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, in the 10-K.

Segment results for the quarters and six months endedJune 30, 2014 and 2013 (in thousands):

RealPlayer Group

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue	$	8,556		$	18,383		$	23,771		$	40,766
Cost of revenue	3,620			4,409			7,138			9,720
Gross profit	4,936			13,974			16,633			31,046
Operating expenses	12,489			14,001			30,276			30,207
Operating income (loss)	$	(7,553	)	$	(27	)	$	(13,643	)	$	839

Mobile Entertainment

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue	$	23,182		$	18,592		$	43,095		$	39,087
Cost of revenue	14,298			11,170			26,248			22,002
Gross profit	8,884			7,422			16,847			17,085
Operating expenses	9,424			8,412			19,040			17,523
Operating income (loss)	$	(540	)	$	(990	)	$	(2,193	)	$	(438	)

Games

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue	$	9,087		$	12,875		$	19,683		$	26,790
Cost of revenue	2,717			3,381			5,846			7,181
Gross profit	6,370			9,494			13,837			19,609
Operating expenses	8,769			11,755			18,535			23,607
Operating income (loss)	$	(2,399	)	$	(2,261	)	$	(4,698	)	$	(3,998	)

Corporate

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Cost of revenue	$	151		$	559		$	340		$	1,122
Extinguishment of liability	—			—			(10,580		)	—
Operating expenses	8,189			12,667			17,414			23,211
Operating income (loss)	$	(8,340	)	$	(13,226	)	$	(7,174	)	$	(24,333	)

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):

	Quarters Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
United States	$	15,092	$	21,463	$	35,520	$	49,486
Europe	6,968		9,272		15,380		20,528
Republic of Korea	11,092		11,259		21,386		20,223
Rest of the world	7,673		7,856		14,263		16,406
Total net revenue	$	40,825	$	49,850	$	86,549	$	106,643

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

	June 30, 2014		December 31, 2013
United States	$	37,107	$	40,347
Europe	8,348		8,280
Republic of Korea	763		936
Rest of the world	4,173		4,078
Total long-lived assets	$	50,391	$	53,641

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Description of Business and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Description of Business and Summary of Significant Accounting Policies

Description of Business and Summary of Significant Accounting Policies

Description of Business. RealNetworks, Inc. and subsidiaries is a leading global provider of network-delivered digital media applications and services that make it easy to manage, play and share digital media. The Company also develops and markets software products and services that enable the creation, distribution and consumption of digital media, including audio and video.

Inherent in our business are various risks and uncertainties, including a limited history of certain of our product and service offerings. RealNetworks' success will depend on the acceptance of our technology, products and services and the ability to generate related revenue.

In this Quarterly Report on Form 10-Q (10-Q or Report), RealNetworks, Inc. and Subsidiaries is referred to as “RealNetworks”, the “Company”, “we”, “us”, or “our”. “RealPlayer”, “LISTEN” and other trademarks of ours appearing in this report are our property.       

Basis of Presentation. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

The unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal, recurring adjustments that, in the opinion of the Company’s management, are necessary for a fair presentation of the results of operations for the periods presented. Operating results for the quarter and six months endedJune 30, 2014 are not necessarily indicative of the results that may be expected for any subsequent period or for the year ending December 31, 2014. Certain information and disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2013 (the 10-K).

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In addition, current economic conditions may require the use of additional estimates, and certain estimates we make are subject to a greater degree of uncertainty as a result of the current economic conditions.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Preferred stock, par value (USD per share)	$ 0.001	$ 0.001
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (USD per share)	$ 0.001	$ 0.001
Common stock, authorized	250,000	250,000
Common stock, issued	35,992	35,833
Common stock, outstanding	35,992	35,833
Preferred stock, Series A
Preferred stock, authorized	200	200
Preferred stock, Undesignated series
Preferred stock, authorized	59,800	59,800

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Restructuring Charges

6 Months Ended

Jun. 30, 2014

Restructuring and Related Activities [Abstract]

Restructuring Charges

Restructuring Charges

Restructuring and other charges in 2014 and 2013 consist of costs associated with the ongoing reorganization of our business operations and our ongoing expense alignment efforts. The expense amounts in both years relate primarily to severance costs due to workforce reductions.

In the latter half of 2012, we announced the elimination of approximately 160 positions worldwide, which was concluded as of the second quarter of 2013. During 2013 and 2014, we have incurred restructuring charges consisting of costs associated with the reorganization of our business operations and our ongoing expense alignment efforts. These costs are reflected in the table below.

Restructuring charges by type of cost (in thousands):

	Employee Separation Costs		Asset Related and Other Costs	Total
Costs incurred and charged to expense for the six months ended June 30, 2014	$	1,757	—	$	1,757
Costs incurred and charged to expense for the six months ended June 30, 2013	$	1,818	380	$	2,198

Changes to the accrued restructuring cost liability (in thousands):

	Employee Separation Costs
Accrued liability as of December 31, 2013	$	756
Costs incurred and charged to expense for the six months ended June 30, 2014	1,757
Cash payments	(2,263		)
Accrued liability as of June 30, 2014 (included in Accrued and other current liabilities)	$	250

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Trading Symbol	RNWK
Entity Registrant Name	REALNETWORKS INC
Entity Central Index Key	0001046327
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		35,995,569

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Lease Exit and Related Charges

6 Months Ended

Jun. 30, 2014

Disclosure Changes To Accrued Loss On Excess Office Facilities [Abstract]

Lease Exit and Related Charges

Lease Exit and Related Charges

As a result of the reduction in use of RealNetworks' office space, losses have been recognized representing rent and contractual operating expenses over the remaining life of the leases.

Changes to accrued lease exit and related charges (in thousands):

Accrued loss as of December 31, 2013	$	254
Additions and adjustments to the lease exit charges accrual, including sublease income estimate revision	400
Less amounts paid, net of sublease amounts	(124		)
Accrued loss as of June 30, 2014 (included in Accrued and other current liabilities)	$	530

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Net revenue (A)	$ 40,825	[1]	$ 49,850	[1]	$ 86,549	[1]	$ 106,643	[1]
Cost of revenue (B)	20,786	[2]	19,519	[2]	39,572	[2]	40,025	[2]
Extinguishment of liability (See Note 10)	0		0		(10,580)		0
Gross profit	20,039		30,331		57,557		66,618
Operating expenses:
Research and development	13,267		14,993		27,326		30,244
Sales and marketing	16,016		19,269		37,739		40,403
General and administrative	8,577		8,691		17,894		18,637
Restructuring and other charges	541		816		1,757		2,198
Lease exit and related charges	470		3,066		549		3,066
Total operating expenses	38,871		46,835		85,265		94,548
Operating income (loss)	(18,832)		(16,504)		(27,708)		(27,930)
Other income (expenses):
Interest income, net	180		179		316		826
Gain (loss) on sale of available for sale securities, net	0		0		2,371		0
Equity in net loss of Rhapsody investment	(1,802)		(1,347)		(2,640)		(3,580)
Other income (expense), net	(95)		(137)		(172)		(28)
Total other income (expenses), net	(1,717)		(1,305)		(125)		(2,782)
Income (loss) before income taxes	(20,549)		(17,809)		(27,833)		(30,712)
Income tax expense (benefit)	480		662		966		(567)
Net income (loss)	(21,029)		(18,471)		(28,799)		(30,145)
Basic net income (loss) per share (USD per share)	$ (0.59)		$ (0.52)		$ (0.80)		$ (0.85)
Diluted net income (loss) per share (USD per share)	$ (0.59)		$ (0.52)		$ (0.80)		$ (0.85)
Shares used to compute basic net income (loss) per share (shares)	35,890		35,455		35,865		35,399
Shares used to compute diluted net income (loss) per share (shares)	35,890		35,455		35,865		35,399
Comprehensive income (loss):
Unrealized investment holding gains (losses), net of reclassification adjustments	(38)		(1,622)		(3,613)		1,015
Foreign currency translation adjustments, net of reclassification adjustments	216		(388)		191		(1,626)
Total other comprehensive income (loss)	178		(2,010)		(3,422)		(611)
Net income (loss)	(21,029)		(18,471)		(28,799)		(30,145)
Comprehensive income (loss)	$ (20,851)		$ (20,481)		$ (32,221)		$ (30,756)

[1] quarters June 30, 2014 June 30, 2013Components of Revenue License Fees6,664 10,162Service Revenue34,161 39,688Net Revenue40,825 49,850 6 months ended 6 months ended June 30, 2014 June 2013Components of Revenue License Fees$15,243 $22,991Service Revenue71,306 83,652Net Revenue$86,549 $106,643

[2] Components of Cost of RevenueJune 30, 2014 June 30, 2013 License Fees2,170 2,161 Service Revenue18,616 17,358 Net Revenue Costs20,786 19,519 6 months ended 6 months ended June 30, 2014 June 2013Components of Cost of Revenue License Fees$4,382 $4,315Service Revenue35,190 35,710Net Revenue Costs$39,572 $40,025

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Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

The following table presents information about our financial assets that have been measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013, and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands).

	Fair Value Measurements as of								Amortized Cost as of
	June 30, 2014								June 30, 2014
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash	$	33,836	$	—	$	—	$	33,836	$	33,836
Money market funds	—		15,437		—		15,437		15,437
Corporate notes and bonds	—		75,177		—		75,177		75,178
Total cash and cash equivalents	33,836		90,614		—		124,450		124,451
Short-term investments:
Corporate notes and bonds	—		57,874		—		57,874		57,803
U.S. government agency securities	12,459		250		—		12,709		12,709
Total short-term investments	12,459		58,124		—		70,583		70,512
Restricted cash equivalents and investments	—		3,000		—		3,000		3,000
Equity investment in publicly traded securities	3,182		—		—		3,182		428
Total	$	49,477	$	151,738	$	—	$	201,215	$	198,391

	Fair Value Measurements as of								Amortized Cost as of
	December 31, 2013								December 31, 2013
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash	$	46,978	$	—	$	—	$	46,978	$	46,978
Money market funds	1		26,913		—		26,914		26,914
Corporate notes and bonds	—		77,043		—		77,043		77,044
U.S. government agency securities	—		300		—		300		300
Total cash and cash equivalents	46,979		104,256		—		151,235		151,236
Short-term investments:
Corporate notes and bonds	—		59,766		—		59,766		59,713
U.S. government agency securities	14,077		1,077		—		15,154		15,159
Total short-term investments	14,077		60,843		—		74,920		74,872
Restricted cash equivalents and investments	—		3,000		—		3,000		3,000
Equity investment in publicly traded securities	7,181		—		—		7,181		842
Total	$	68,237	$	168,099	$	—	$	236,336	$	229,950

Restricted cash equivalents and investments amounts as of June 30, 2014, and December 31, 2013 relate to cash pledged as collateral against a letter of credit in connection with a lease agreement.

Realized gains or losses on sales of short-term investment securities for the quarters and six months endedJune 30, 2014 and 2013 were not significant. Gross unrealized gains and gross unrealized losses on short-term investment securities as of June 30, 2014 and December 31, 2013 were not significant.

Investments with remaining contractual maturities of five years or less are classified as short-term because the investments are marketable and highly liquid, and we have the ability to utilize them for current operations. Contractual maturities of short-term investments as of June 30, 2014 (in thousands):

	Estimated Fair Value
Within one year	$	48,399
Between one year and five years	22,184
Total short-term investments	$	70,583

Our equity investment in a publicly traded company as of June 30, 2014 and December 31, 2013 consisted of J-Stream Inc., a Japanese media services company. This equity investment is accounted for as available for sale. In March 2014 we sold a portion of the J-Stream shares we held, resulting in cash proceeds of $2.8 million and a pre-tax gain of $2.4 million.

Items Measured at Fair Value on a Non-recurring Basis

Certain of our assets and liabilities are measured at estimated fair value on a non-recurring basis, using Level 3 inputs. These instruments are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). During the six months ended June 30, 2014 and 2013, we did not record any impairments on those assets required to be measured at fair value on a non-recurring basis.

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Rhapsody Joint Venture

6 Months Ended

Jun. 30, 2014

Equity Method Investments and Joint Ventures [Abstract]

Rhapsody Joint Venture

Rhapsody Joint Venture

As of June 30, 2014 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 2010 restructuring transactions, 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 2010 restructuring transactions, RealNetworks provided certain operational transition services to Rhapsody. These transition services were completed in 2013, and RealNetworks has no further obligations or liabilities pursuant to the support services agreement.

We recorded our share of losses of Rhapsody of $1.8 million and $2.6 million for the quarter and six months endedJune 30, 2014, respectively. Because of the $10.0 million liquidation preference on the preferred stock we hold in Rhapsody, under the equity method of accounting we do not record any share of Rhapsody losses that would reduce our carrying value of Rhapsody below $10.0 million, unless Rhapsody's book value is reduced below $10.0 million. The carrying value of our Rhapsody investment was $12.5 million as of December 31, 2013 and as of June 30, 2014 was $10.0 million.

Our share of the losses of Rhapsody for the quarter and six months endedJune 30, 2013 were $1.3 million and $3.6 million, respectively.

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

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net revenue	$	42,427		$	34,679		$	84,430		$	68,641
Gross profit	7,870			8,767			16,991			16,612
Net loss	(4,717		)	(4,375		)	(6,347		)	(9,191		)

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Guarantees

6 Months Ended

Jun. 30, 2014

Guarantees [Abstract]

Guarantees

Guarantees

In the ordinary course of business, RealNetworks is subject to potential obligations for standard warranty and indemnification provisions that are contained within many of our customer license and service agreements. Our warranty provisions are consistent with those prevalent in our industry, and we do not have a history of incurring losses on warranties; therefore, we do not maintain accruals for warranty-related obligations. With regard to indemnification provisions, nearly all of our carrier contracts obligate us to indemnify our carrier customers for certain liabilities that may be incurred by them. We have received in the past, and may receive in the future, claims for indemnification from carrier customers.

In relation to the patents and other technology assets we sold to Intel in the second quarter of 2012, we have specific obligations to indemnify Intel for breaches of the representations and warranties that we made and covenants that we agreed to in the asset purchase agreement for certain potential future intellectual property infringement claims brought by third parties against Intel. The amount of any potential liabilities related to our indemnification obligations to Intel will not be determined until a claim has been made, but we are obligated to indemnify Intel up to the amount of the gross purchase price that we received in the sale.

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Shareholders’ Equity

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Shareholders’ Equity

Note 13. Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss)

Changes in components of accumulated other comprehensive income (in thousands):

		Quarters Ended June 30,						Six Months Ended June 30,
		2014			2013			2014			2013
Investments
	Accumulated other comprehensive income (loss), beginning of period	$	2,822		$	29,322		$	6,397		26,685
	Unrealized gains (losses), net of tax effects of $0, $913, $0 and $(716)	(38		)	(1,622		)	(1,242		)	1,015
	Reclassification adjustments for losses (gains) included in other income (expense), net of tax effects of $0, $0, $(4) and $0	—			—			(2,371		)	—
	Net current period other comprehensive income	(38		)	(1,622		)	(3,613		)	1,015
	Accumulated other comprehensive income (loss) balance, end of period	$	2,784		$	27,700		$	2,784		$	27,700
Foreign currency translation
	Accumulated other comprehensive income (loss), beginning of period	$	(54,117	)	$	(54,463	)	$	(54,092	)	$	(53,225	)
	Translation adjustments	216			(353		)	239			(1,591		)
	Reclassification adjustments for losses (gains) included in other income (expense)	—			(35		)	(48		)	(35		)
	Net current period other comprehensive income	216			(388		)	191			(1,626		)
	Accumulated other comprehensive income (loss) balance, end of period	$	(53,901	)	$	(54,851	)	$	(53,901	)	$	(54,851	)
Total accumulated other comprehensive income (loss), end of period		$	(51,117	)	$	(27,151	)	$	(51,117	)	$	(27,151	)

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Goodwill

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

Changes in goodwill (in thousands):

Balance, December 31, 2013	$	17,476
Increases due to current year acquisitions	460
Effects of foreign currency translation	69
Balance, June 30, 2014	$	18,005

Goodwill by segment (in thousands):

	June 30, 2014
RealPlayer Group	$	1,043
Mobile Entertainment	2,202
Games	14,760
Total goodwill	$	18,005

In the second quarter of 2014 a small acquisition of a business related to our RealPlayer Group resulted in goodwill of $0.5 million being recorded.

No impairment of goodwill was recognized in either of the six months ended June 30, 2014 or 2013.

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Segment Information (Additional Information) (Detail)	3 Months Ended
	Jun. 30, 2014 Segment
Segment Reporting [Abstract]
Number of reporting segments	3

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Allowance for Doubtful Accounts Receivable and Sales Returns

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Allowance for Doubtful Accounts Receivable and Sales Returns

Allowance for Doubtful Accounts Receivable and Sales Returns

Activity in the allowance for doubtful accounts receivable and sales returns (in thousands):

	Allowance For
	Doubtful Accounts Receivable			Sales Returns
Balances, December 31, 2013	$	966		$	569
Addition (reduction) to allowance	341			(101		)
Amounts written off	(25		)	(4		)
Foreign currency translation	4			(1		)
Balances, June 30, 2014	$	1,286		$	463

One customer accounted for 17% of trade accounts receivable and one other customer accounted for 12% of trade accounts receivable, as of June 30, 2014. One customer accounted for 17% of trade accounts receivable as of December 31, 2013.

One customer accounted for 21% and 19% of consolidated revenue, or $8.6 million and $16.4 million, during the quarter and six months endedJune 30, 2014, and is reflected in our Mobile Entertainment segment. One additional customer accounted for 12% of consolidated revenue, or $10.5 million for the six months ended June 30, 2014, and is reflected in our RealPlayer Group and Games segments. One customer accounted for approximately 13% and 14% of consolidated revenue, or $6.5 million and $15.1 million, during the quarter and six months ended June 30, 2013, and is reflected in our RealPlayer Group and Games segments. One additional customer accounted for approximately 11% of consolidated revenue, or $5.6 million, during the quarter ended June 30, 2013, in our Mobile Entertainment segment.

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Other Intangible Assets

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Other Intangible Assets

Other Intangible Assets

Other intangible assets (in thousands):

		As of June 30,						As of December 31,
		2014						2013
		Gross Amount		Accumulated Amortization		Net		Gross Amount		Accumulated Amortization		Net
Amortizing intangible assets:
	Customer relationships	$	36,350	$	33,512	$	2,838	$	35,156	$	31,262	$	3,894
	Developed technology	29,738		26,365		3,373		29,097		25,039		4,058
	Patents, trademarks and tradenames	4,145		3,784		361		4,021		3,627		394
	Service contracts	6,619		5,763		856		5,679		5,532		147
		76,852		69,424		7,428		73,953		65,460		8,493
Non-amortizing intangible assets:
	Trademarks and tradenames	4,500		—		4,500		4,500		—		4,500
	Total	$	81,352	$	69,424	$	11,928	$	78,453	$	65,460	$	12,993

In the second quarter of 2014 a small acquisition of a business related to our RealPlayer Group resulted in an intangible asset of $0.8 million being recorded.

No impairments of other intangible assets were recognized in either of the six months ended June 30, 2014 or 2013.

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Accrued and Other Liabilities

6 Months Ended

Jun. 30, 2014

Payables and Accruals [Abstract]

Accrued and Other Liabilities

Accrued and Other Current Liabilities

Accrued and other current liabilities (in thousands):

	June 30, 2014		December 31, 2013
Royalties and other fulfillment costs	$	5,033	$	16,467
Employee compensation, commissions and benefits	7,037		10,060
Sales, VAT and other taxes payable	6,862		7,237
Other	7,942		8,129
Total accrued and other current liabilities	$	26,874	$	41,893

During the quarter ended March 31, 2014, certain accrued royalty liabilities of $10.6 million associated with our historical music business, which had originally been recorded based on statutory rates, were extinguished.

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Segment Information (Long-Lived Assets by Geographic Region) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	$ 50,391	$ 53,641
United States
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	37,107	40,347
Europe
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	8,348	8,280
KOREA, REPUBLIC OF
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	763	936
Rest of World
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	$ 4,173	$ 4,078

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Restructuring Charges (Tables)

6 Months Ended

Jun. 30, 2014

Restructuring and Related Activities [Abstract]

Schedule of Restructuring Charges by Type of Cost

Restructuring charges by type of cost (in thousands):

	Employee Separation Costs		Asset Related and Other Costs	Total
Costs incurred and charged to expense for the six months ended June 30, 2014	$	1,757	—	$	1,757
Costs incurred and charged to expense for the six months ended June 30, 2013	$	1,818	380	$	2,198

Changes to the accrued restructuring cost liability (in thousands):

	Employee Separation Costs
Accrued liability as of December 31, 2013	$	756
Costs incurred and charged to expense for the six months ended June 30, 2014	1,757
Cash payments	(2,263		)
Accrued liability as of June 30, 2014 (included in Accrued and other current liabilities)	$	250

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Goodwill (Changes in Goodwill) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Beginning Balance		$ 17,476
Increases due to current year acquisitions		460
Effects of foreign currency translation	69
Ending Balance	$ 18,005	$ 18,005

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Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Share

Earnings (Loss) Per Share

Basic net income (loss) per share (EPS) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income (loss) by the weighted average number of common and dilutive potential common shares outstanding during the period. Basic and diluted EPS (in thousands, except per share amounts):

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Net income (loss)	$	(21,029	)	$	(18,471	)	$	(28,799	)	$	(30,145	)
Weighted average common shares outstanding used to compute basic EPS	35,890			35,455			35,865			35,399
Dilutive effect of stock based awards	—			—			—			—
Weighted average common shares outstanding used to compute diluted EPS	35,890			35,455			35,865			35,399
Basic EPS	$	(0.59	)	$	(0.52	)	$	(0.80	)	$	(0.85	)
Diluted EPS	$	(0.59	)	$	(0.52	)	$	(0.80	)	$	(0.85	)

During the quarter and six months endedJune 30, 2014, 6.3 million and 6.2 million shares of common stock, respectively, of potentially issuable shares from stock awards were excluded from the calculation of diluted EPS because of their antidilutive effect.

During the quarter and six months endedJune 30, 2013, 4.3 million and 4.3 million shares of common stock, respectively, of potentially issuable shares from stock awards were excluded from the calculation of diluted EPS because of their antidilutive effect.

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Description of Business and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Description of Business

Description of Business. RealNetworks, Inc. and subsidiaries is a leading global provider of network-delivered digital media applications and services that make it easy to manage, play and share digital media. The Company also develops and markets software products and services that enable the creation, distribution and consumption of digital media, including audio and video.

Inherent in our business are various risks and uncertainties, including a limited history of certain of our product and service offerings. RealNetworks' success will depend on the acceptance of our technology, products and services and the ability to generate related revenue.

In this Quarterly Report on Form 10-Q (10-Q or Report), RealNetworks, Inc. and Subsidiaries is referred to as “RealNetworks”, the “Company”, “we”, “us”, or “our”.

Basis of Presentation

Basis of Presentation. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

The unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal, recurring adjustments that, in the opinion of the Company’s management, are necessary for a fair presentation of the results of operations for the periods presented. Operating results for the quarter and six months endedJune 30, 2014 are not necessarily indicative of the results that may be expected for any subsequent period or for the year ending December 31, 2014. Certain information and disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2013 (the 10-K).

Use of Estimates

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In addition, current economic conditions may require the use of additional estimates, and certain estimates we make are subject to a greater degree of uncertainty as a result of the current economic conditions.

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Allowance for Doubtful Accounts Receivable and Sales Returns (Additional Information) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended	6 Months Ended		3 Months Ended	6 Months Ended	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended	3 Months Ended		6 Months Ended
	Dec. 31, 2013 Accounts Receivable Customer	Jun. 30, 2014 Accounts Receivable Company A Customer	Jun. 30, 2014 Accounts Receivable Company B Customer	Jun. 30, 2013 RealPlayer Group	Jun. 30, 2013 RealPlayer Group	Jun. 30, 2014 RealPlayer Group Revenue by Segment Customer	Jun. 30, 2013 RealPlayer Group Revenue by Segment	Jun. 30, 2014 RealPlayer Group Revenue by Segment	Jun. 30, 2013 RealPlayer Group Revenue by Segment	Jun. 30, 2014 Mobile Entertainment	Jun. 30, 2013 Mobile Entertainment	Jun. 30, 2014 Mobile Entertainment	Jun. 30, 2014 Mobile Entertainment Revenue by Segment	Jun. 30, 2013 Mobile Entertainment Revenue by Segment Customer	Jun. 30, 2014 Mobile Entertainment Revenue by Segment
Concentration Risk [Line Items]
Number of major customers	1	1	1			1								1
Percentage by major customer	17.00%	17.00%	12.00%				13.00%	12.00%	14.00%				21.00%	11.00%	19.00%
Significant customer revenue				$ 6.5	$ 15.1			$ 10.5		$ 8.6	$ 5.6	$ 16.4

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Stock-Based Compensation (Weighted-Average Assumptions Used to Determine Fair Value of Options Granted) (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Risk-free interest rate	1.20%	0.52%	1.19%	0.55%
Expected life (years)	3 years 9 months	5 years 5 months	3 years 9 months	4 years 3 months
Volatility	40.00%	48.00%	40.00%	48.00%

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Components of net revenue:
License fees	$ 6,664		$ 10,162		$ 15,243		$ 22,991
Service revenue	34,161		39,688		71,306		83,652
Net revenue	40,825	[1]	49,850	[1]	86,549	[1]	106,643	[1]
Components of cost of revenue:
License fees	2,170		2,161		4,382		4,315
Service revenue	18,616		17,358		35,190		35,710
Cost of revenue	$ 20,786	[2]	$ 19,519	[2]	$ 39,572	[2]	$ 40,025	[2]

[1] quarters June 30, 2014 June 30, 2013Components of Revenue License Fees6,664 10,162Service Revenue34,161 39,688Net Revenue40,825 49,850 6 months ended 6 months ended June 30, 2014 June 2013Components of Revenue License Fees$15,243 $22,991Service Revenue71,306 83,652Net Revenue$86,549 $106,643

[2] Components of Cost of RevenueJune 30, 2014 June 30, 2013 License Fees2,170 2,161 Service Revenue18,616 17,358 Net Revenue Costs20,786 19,519 6 months ended 6 months ended June 30, 2014 June 2013Components of Cost of Revenue License Fees$4,382 $4,315Service Revenue35,190 35,710Net Revenue Costs$39,572 $40,025

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Total stock-based compensation expense recognized in our consolidated statements of operations includes amounts related to stock options, restricted stock units, and employee stock purchase plans and was as follows (in thousands):

	Quarters Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Total stock-based compensation expense	$	1,673	$	2,020	$	3,010	$	4,058

The fair value of options granted determined using the Black-Scholes model used the following weighted-average assumptions:

	Quarters Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Expected dividend yield	0	%	0	%	0	%	0	%
Risk-free interest rate	1.20	%	0.52	%	1.19	%	0.55	%
Expected life (years)	3.8		5.4		3.8		4.3
Volatility	40	%	48	%	40	%	48	%

The total stock-based compensation amounts for 2014 and 2013 disclosed above are recorded in their respective line items within operating expenses in the consolidated statement of operations. As of June 30, 2014, we had $11.5 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock awards. The unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 3 years.

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Earnings Per Share (Calculation of Basic and Diluted Earnings Per Share) (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Net income (loss) available to common shareholders	$ (21,029)	$ (18,471)	$ (28,799)	$ (30,145)
Weighted average common shares outstanding used to compute basic EPS	35,890	35,455	35,865	35,399
Dilutive effect of stock based awards	0	0	0	0
Weighted average common shares outstanding used to compute diluted EPS	35,890	35,455	35,865	35,399
Basic EPS	$ (0.59)	$ (0.52)	$ (0.80)	$ (0.85)
Diluted EPS	$ (0.59)	$ (0.52)	$ (0.80)	$ (0.85)

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Expense

Total stock-based compensation expense recognized in our consolidated statements of operations includes amounts related to stock options, restricted stock units, and employee stock purchase plans and was as follows (in thousands):

	Quarters Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Total stock-based compensation expense	$	1,673	$	2,020	$	3,010	$	4,058

Weighted-Average Assumptions Used to Determine Fair Value of Options Granted

The fair value of options granted determined using the Black-Scholes model used the following weighted-average assumptions:

	Quarters Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Expected dividend yield	0	%	0	%	0	%	0	%
Risk-free interest rate	1.20	%	0.52	%	1.19	%	0.55	%
Expected life (years)	3.8		5.4		3.8		4.3
Volatility	40	%	48	%	40	%	48	%

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Results

Segment results for the quarters and six months endedJune 30, 2014 and 2013 (in thousands):

RealPlayer Group

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue	$	8,556		$	18,383		$	23,771		$	40,766
Cost of revenue	3,620			4,409			7,138			9,720
Gross profit	4,936			13,974			16,633			31,046
Operating expenses	12,489			14,001			30,276			30,207
Operating income (loss)	$	(7,553	)	$	(27	)	$	(13,643	)	$	839

Mobile Entertainment

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue	$	23,182		$	18,592		$	43,095		$	39,087
Cost of revenue	14,298			11,170			26,248			22,002
Gross profit	8,884			7,422			16,847			17,085
Operating expenses	9,424			8,412			19,040			17,523
Operating income (loss)	$	(540	)	$	(990	)	$	(2,193	)	$	(438	)

Games

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Revenue	$	9,087		$	12,875		$	19,683		$	26,790
Cost of revenue	2,717			3,381			5,846			7,181
Gross profit	6,370			9,494			13,837			19,609
Operating expenses	8,769			11,755			18,535			23,607
Operating income (loss)	$	(2,399	)	$	(2,261	)	$	(4,698	)	$	(3,998	)

Corporate

	Quarters Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Cost of revenue	$	151		$	559		$	340		$	1,122
Extinguishment of liability	—			—			(10,580		)	—
Operating expenses	8,189			12,667			17,414			23,211
Operating income (loss)	$	(8,340	)	$	(13,226	)	$	(7,174	)	$	(24,333	)

Revenue by Geographic Region

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):

	Quarters Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
United States	$	15,092	$	21,463	$	35,520	$	49,486
Europe	6,968		9,272		15,380		20,528
Republic of Korea	11,092		11,259		21,386		20,223
Rest of the world	7,673		7,856		14,263		16,406
Total net revenue	$	40,825	$	49,850	$	86,549	$	106,643

Long-Lived Assets by Geographic Region

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

	June 30, 2014		December 31, 2013
United States	$	37,107	$	40,347
Europe	8,348		8,280
Republic of Korea	763		936
Rest of the world	4,173		4,078
Total long-lived assets	$	50,391	$	53,641

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

As of June 30, 2014, there have been no material changes to RealNetworks’ uncertain tax positions disclosures as provided in Note 14 of the 2013 10-K. We currently anticipate the expiration of the statute of limitations within the next twelve months that may decrease the Company's total unrecognized tax benefit by an amount up to $0.9 million.

We file numerous consolidated and separate income tax returns in the U.S including federal, state and local, as well as foreign jurisdictions. With few exceptions, we are no longer subject to U.S federal income tax examinations for tax years before 2008 or state, local, or foreign income tax examinations for years before 1993. We are currently under audit by various states and foreign jurisdictions for certain tax years subsequent to 1993. We are currently under United States federal audit for the consolidated group (RealNetworks, Inc. and Subsidiaries) for the year ended December 31, 2012.