10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

For the Fiscal Year Ended December 31, 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

(206) 674-2700

(Address of principal executive offices, zip code, telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, Par Value $0.001 per share Preferred Share Purchase Rights	The NASDAQ Stock Market The NASDAQ Stock Market

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act    Yes  ¨    No  þ

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  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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  þ    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   þ

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  þ	Non-accelerated filer  ¨	Smaller reporting company  ¨
	(Do not check if a 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  þ

The aggregate market value of the common stock held by non-affiliates of the registrant was $176 million on June 30, 2014, based on the closing price of the common stock on that date, as reported on the Nasdaq Global Select Market. Shares held by each executive officer and director have been excluded in that such persons may be deemed to be affiliates. In the case of 5% or greater shareholders, we have not deemed such shareholders to be affiliates unless there are facts and circumstances which would indicate that such shareholders exercise any control over our company, or unless they hold 10% or more of our outstanding common stock. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares of the registrant’s common stock outstanding as of January 30, 2015 was 36,102,915.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant has incorporated by reference the information required by Part III of this Annual Report from its Proxy Statement relating to its 2015 Annual Meeting of Shareholders or an amendment to this Form 10-K, to be filed within 120 days after the end of its fiscal year ended December 31, 2014.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Mine Safety Disclosures	16
PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	17
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 8.	Financial Statements and Supplementary Data	33
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	61
Item 9A.	Controls and Procedures	61
Item 9B.	Other Information	61
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	61
Item 11.	Executive Compensation	61
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	61
Item 13.	Certain Relationships and Related Transactions, and Director Independence	62
Item 14.	Principal Accountant Fees and Services	63
PART IV
Item 15.	Exhibits and Financial Statement Schedules	63
Signatures		64
Exhibit Index		65

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PART I.

This Annual Report on Form 10-K 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:

• 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 effects of our past strategic partnerships and joint ventures, and the prospects for creation and growth of strategic partnerships and the resulting financial benefits from such partnerships;

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

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

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

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

• expected challenges facing our legacy products;

• 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;

• 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 included or referred to in the section of Item 1 entitled “Competition,” in Item 1A entitled “Risk Factors” and in Item 3 entitled “Legal Proceedings.” 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.

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Item  1. Business

Overview

RealNetworks creates innovative applications 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 provide the digital media services and products we create to consumers, mobile carriers and other businesses.

Consumers use our services and software to store, organize, play and manage their digital media content. Our consumer products and services include our video sharing and storage application, our casual and casino games, our direct-to-consumer ringback tone and productivity tool, and RealPlayer, our widely distributed media player. Network service providers, such as mobile carriers, use our products and services to create and deliver digital media and messaging services, such as ringback tones, music on demand and intercarrier messaging, for their subscribers.

We were incorporated in 1994 in the State of Washington. Our common stock is listed on The NASDAQ Stock Market under the symbol “RNWK.”

In this Annual Report on Form 10-K for the year ended December 31, 2014, RealNetworks, Inc., together with its subsidiaries, is referred to as “RealNetworks”, the “Company”, “we”, “us”, or “our”. "RealPlayer," and other trademarks of ours appearing in this report are our property.

Segments

We manage our business and report revenue and operating income (loss) in three segments: (1) RealPlayer Group, (2) Mobile Entertainment, and (3) Games. We allocate certain corporate expenses which are directly attributable to supporting the business, including but not limited to a portion of finance, legal, human resources and headquarters facilities, to our reportable segments rather than retaining those expenses in our corporate segment.

RealPlayer Group

Our RealPlayer Group business consists of our new video sharing and storage product, RealPlayer Cloud, which we released worldwide in the first half of 2014, and our RealPlayer media player software and related products and services. Our new RealPlayer Cloud product contributed an immaterial amount of revenue in 2014 , however, in line with our growth plan, we are focusing our investments in this segment on this new product.

Our RealPlayer media player software includes features and services that enable consumers to discover, play, download, manage and edit digital video, specifically, allowing them to stream audio and video, download and save photos and videos from the web, transfer and share content on social networks, and edit their own video content. Building on this business, our new RealPlayer Cloud product gives consumers even more options and control over their digital memories. With the RealPlayer Cloud product, consumers can find, watch, save and share their videos on multiple devices and across 13 different platforms.

In our RealPlayer segment, revenue has historically been derived from sales of the premium version of our media player, and from the distribution of third-party software products to consumers who wish to download additional applications when downloading our software products. We also generate revenue through our RealPlayer subscription products, including RealPlayer Cloud and our SuperPass service. RealPlayer Cloud, an integrated video player and cloud service, is free to consumers up to a certain storage level after which additional storage is available based on a tiered subscription fee. SuperPass is our subscription service that provides consumers with access to a broad range of digital entertainment content for a monthly fee.

In addition to consumer products, we also license our technology to a variety of mobile network operators worldwide to preinstall our mobile media player software on mobile phones.

Mobile Entertainment

Mobile Entertainment consists primarily of the digital media services we provide to network service providers as software as a service (SaaS) offerings. The large majority of revenues from this segment are in Asia and North America. During the fourth quarter of 2013, we launched LISTEN, our application that allows smartphone users to utilize ringback tones as a productivity tool.

Our SaaS services include ringback tones and messaging services principally sold to a large number of mobile carriers worldwide, and music on demand services principally sold in Korea. These SaaS services generated most of the revenue within our Mobile Entertainment segment in 2014, although most of our investment-related expenditures have been focused on

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LISTEN.   In connection with our SaaS services, we also offer business intelligence, subscriber management and billing for our carrier customers. 

Our ringback tone services enable callers to hear subscriber-selected music instead of the traditional electronic ringing sound while waiting for the person they have called to answer. We primarily offer ringback tone services via carriers, where, in return for providing, operating and managing the ringback tone service for the carrier customers, we generally enter into revenue-sharing arrangements with the carriers based on monthly subscription fees, content download fees or a combination of such fees paid by subscribers. Our interactive and highly customizable LISTEN product takes the ringback tone service to a new level, allowing the subscriber to utilize the app as more of a time management and productivity tool .

Our intercarrier messaging services are delivered through various carrier partners within the U.S. and internationally. The revenue we earn from our intercarrier messaging service is subject to a revenue-sharing arrangement with our carrier partners.

Our music on demand services, provided through our partner in Korea, offer a wide range of songs for downloading or streaming to PCs and mobile devices through various payment arrangements.

Games

We own and operate a large casual games service, offering casual games via digital downloads, online subscription play, third-party portals, social networks and mobile devices. Casual games typically have simple graphics, rules and controls and are quick to learn. Casual games include board, card, puzzle, word and hidden-object games.

We develop, publish, license and distribute casual games. We have a large and diverse portfolio of original games developed by our in-house game studios, games developed by us from content we license from other intellectual property holders, and games licensed to us by third parties that we distribute to our customers. We also partner with external game developers who develop games for us on an outsourced basis, which gives those developers access to our large distribution network in exchange for distribution rights to their games. We distribute games principally in North America, Europe and Latin America through our GameHouse, Zylom and Atrativa websites and through websites owned or managed by third parties.

Consumers can play and purchase games from our catalog of online and downloadable PC games. We typically introduce new games by offering a free trial before purchase on an individual basis or as part of one of our subscription services. In addition to revenue from sales of games and subscriptions, we generate revenue from display advertising that is shown to consumers during online play.

We also develop, monetize and optimize games and game play experiences on social networks. Building on our 2013 acquisition of Slingo, Inc., during the second half of 2014 we launched our latest game, Slingo Adventure, on Facebook and mobile platforms worldwide. We monetize social and mobile games largely through sales of games licenses, advertising and microtransactions from mobile and social games. We have also adapted our games for play on mobile handsets, smartphones and tablets, which can be purchased in app stores.

See Note 18, Segment Information, in this 10-K for additional details on our segments.

Rhapsody

At December 31, 2014, we owned approximately 43% of the issued and outstanding stock of Rhapsody. See Note 4, Rhapsody Joint Venture, in this 10-K for additional details. Rhapsody provides music products and services that enable consumers to have access to digital music content from a variety of devices. The Rhapsody unlimited subscription service offers unlimited access to a catalog of tens of millions of music tracks by way of on-demand streaming and conditional downloads. Rhapsody also operates a radio-like service, branded as "UnRadio" in the U.S., through which users can listen to online radio stations based on selected artists or genres and download favorite tracks played on those stations for offline playback. Rhapsody currently offers music services in 32 different territories (under the Rhapsody or Napster brands) and generates revenue primarily through subscriptions to its music services either directly to consumers or through distribution partners, such as mobile carriers.

Customers and Seasonality

Our customers include consumers and businesses located throughout the world. Sales to customers outside the U.S., primarily in Asia and Europe, were 61%, 56% and 54% of our revenue during the years ended December 31, 2014, 2013 and 2012, respectively. See Note 18, Segment Information for details on geographic concentrations and see Note 6, Allowance for Doubtful Accounts Receivable and Sales Returns, for details on customer revenue concentrations.

We experience seasonality in our business, particularly with respect to the fourth quarter of our fiscal year. Our consumer businesses, which include advertising revenue, make up a large percentage of our revenue, and the fourth quarter has traditionally been the seasonally strongest quarter for Internet advertising.

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Research and Development

We devote a substantial portion of our resources to developing new products, enhancing existing products, expanding and improving our fundamental technology, and strengthening our technological expertise in all our businesses. During the years ended December 31, 2014, 2013, and 2012, we expended 34%, 30% and 24%, respectively, of our revenue on research and development activities.

Sales, Marketing and Distribution

Our marketing programs are aimed at increasing brand awareness of our products and services and stimulating demand. We use a variety of methods to market our products and services, including paid search advertising, affiliate marketing programs, advertising in print, electronic and other online media, direct mail and email offers to qualified potential and existing customers, and providing product specific information through our websites. We also cross-market products and services offered by some of our businesses through the RealPlayer and Games marketing and distribution channels. We also have subsidiaries and offices in several countries that market and sell our products outside the U.S.

Our products and services are marketed through direct and indirect channels. We use public relations, trade shows, events and speaking opportunities to market our products and services. We also use a variety of online channels, including social media, to promote and sell our products and services directly.

We market and sell our RealPlayer services directly through our own websites such as Real.com, as well as indirectly through affiliate partnerships.

Our Mobile Entertainment sales, marketing and business development team works closely with many of our enterprise, infrastructure, wireless, broadband and media customers to identify new business opportunities for our entertainment applications, services and systems. Through ongoing communications with the product and marketing divisions of our customers, we tailor our SaaS offerings to their strategic needs and the needs of their subscribers.

Our games are marketed directly from our websites and through third-party distribution channels, such as search engines, online portals, mobile phone application stores, major social networks and content publishers.

Customer Support

Customer support is integral to the provision of nearly all of our consumer products and services. Consumers who purchase and use our consumer software products and services can get assistance via the Internet, email or telephone, depending on the product or service. For most of our consumer products, we contract with third-party outsource support vendors to provide the primary staffing for our first-tier customer support globally. We also provide various support service options for our business customers and for software developers using our software products and associated services. Support service options include hotline telephone support, online support services, and on-site support personnel covering technical and business-related support topics.

Competition

The market for software and services for digital media delivery over the Internet and wireless networks is intensely competitive. Many of our current and potential competitors have longer operating histories, greater name recognition or brand awareness, more employees or significantly greater resources than we do.

Our RealPlayer Cloud product faces significant competition from cloud storage providers, including several large, well-resourced companies, as well as video sharing services, which include both well known, firmly established companies and entrepreneurial, nimble startups. In addition, as we continue to develop this product and expand its reach, we expect to see growing competition from companies offering innovative features for engaging with users' video content. Our RealPlayer media player continues to face competition from alternative streaming media playback technologies which have obtained very broad market penetration.

In our Mobile Entertainment segment, our SaaS business competes with a large and diverse number of domestic and international companies, and each of our SaaS offerings tends to face competitors specific to that product or service. Our SaaS business continues to experience significant competitive pricing pressure from carriers and the proliferation of smartphone applications and services, some of which do not depend on our carrier customers for distribution to consumers. Many of our SaaS services require a high degree of integration with carrier or service provider networks and thus require a high degree of operational expertise. In addition, our ability to enhance services with new features as the digital entertainment market evolves is critical to our competitive position, as is our knowledge of the consumer environment to which these services are targeted.

Our Games business competes with a variety of distributors, publishers and developers of casual games for PC and mobile platforms and for social networks. We compete in this market primarily on the basis of the quality and convenience of our services, the reach and quality of our distribution and the quality and breadth of our game catalog. In addition, the market for casual games has become increasingly price competitive in recent years. Our in-house content development studios compete

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with other developers and publishers of social and mobile games based on our ability to develop and publish high quality games that resonate with consumers, our effectiveness at building our brands, and our ability to secure broad distribution relationships with major social networks and mobile carriers. Our social and mobile games compete with a range of developers. Our family of websites serving the PC casual games market competes with other high volume distribution channels for downloadable, online and social games.

Intellectual Property

As of December 31, 2014, we had seven U.S. patents, 43 South Korean patents, 13 patents in other countries and more than 30 pending patent applications worldwide relating to various aspects of our technology. In 2012, we completed the sale of certain patents, patent applications and related rights held by us, and certain of our assets relating to our next generation video codec technologies to Intel. We regularly analyze our patent portfolio and prepare additional patent applications on current and anticipated features of our technology in various jurisdictions across the world.

In addition to our patent portfolio, we have assembled, over time, an international portfolio of trademarks and service marks that covers certain of our products and services. We also have applications pending for additional trademarks and service marks in jurisdictions around the world, and have several unregistered trademarks. Many of our marks begin with the word “Real” (such as RealPlayer). We are aware of other companies that use “Real” in their marks alone or in combination with other words, and we do not expect to be able to prevent all third-party uses of the word “Real” for all goods and services.

Our ability to compete across our businesses partly depends on the superiority, uniqueness and value of the technology that we both develop and license 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. These efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology, or may not prevent the development and design by others of products or technologies similar to or competitive with those we develop.

Employees

At December 31, 2014, we had approximately 769 employees, of which 359 were based in the Americas, 251 were based in Asia, and 159 were based in Europe. None of our employees are subject to a collective bargaining agreement.

Position on Charitable Responsibility

In periods when we have achieved sustained profitability, we intend to donate 5% of our net income to charitable organizations, which will reduce our net income for those periods. The non-profit RealNetworks Foundation, established in 2001, manages a substantial portion of our charitable giving efforts. Through the Foundation, we support our employees' philanthropic efforts by matching their donations of time and money to charitable organizations.

Available Information

Our corporate Internet address is www.realnetworks.com. We make available free of charge on www.investor.realnetworks.com our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (SEC). However, the information found on our corporate website is not part of this or any other report.

Item 1A. Risk Factors

You should carefully consider the risks described below together with all of the other information included in this annual report on Form 10-K. 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

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transition in our history. We can provide no assurance that we will be successful in implementing our growth plan, strategic initiatives, and restructuring efforts, either in a timely manner or at all, 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 level of 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 increase the current rate of decline in our 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 and 2014, each of our businesses introduced at least one new product or service. In early 2014, our RealPlayer business completed the global launch of RealPlayer Cloud, our integrated video player and cloud 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 August 2013, our Games business launched GameHouse Casino Plus with the Golden Dreams Sweepstakes feature and, in September 2014, launched Slingo Adventure. To date, we have not generated significant revenue from any of these new 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 both in further development and in sales and marketing efforts aimed at monetizing these products and services. These investments have and are expected to continue to have a significant negative impact on our cash position and there can be no assurance that our efforts will generate any meaningful 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 any such 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 and our ability to grow our businesses.

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

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 increasingly 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 legacy products and services also face continuing market challenges, including the rapid move to smartphones and tablets, and the introduction of new operating systems. We have historically distributed our legacy products and services 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 several 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 or effectively monetize our legacy products and services to these devices. 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 are likely to continue to face difficulties reaching our traditional customer base and other unknown distribution challenges. If we continue to have difficulty transitioning our legacy products and services for use on new devices or updated operating systems, then our revenues will continue to decline and our business could be significantly harmed.

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

Since 2012, we have taken 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. In August 2014, we announced a further reduction in our workforce and related cost reductions. We

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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 continue to 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. Increased competition has in the past resulted in pricing pressure, forcing us to lower the selling price of our services. We expect this pricing pressure to continue to materially harm our operating results and financial condition.

Our recently launched RealPlayer Cloud product faces competition from other cloud service providers, including some that are firmly established in the marketplace and have access to extensive resources, as well as video sharing services, which include both well known and established companies and entrepreneurial startups. In addition, as we continue to develop this product and expand its reach, we expect to see growing competition from companies offering innovative features for engaging with users' video content. Our RealPlayer software services compete with alternative streaming media playback technologies and audio and video formats which have obtained very broad market penetration. If we are unable to compete successfully, most notably through the development, marketing and monetization of RealPlayer Cloud, 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. 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. If we are unable 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, revenue in our Games business will continue to decline and the business will suffer.

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

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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. We may be required to 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 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. In 2013, we 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.

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.

Maintaining and growing the distribution of digital media products through our websites and our other distribution channels has historically been important to our business, including growth through the introduction of new products and services distributed through these channels. It is unlikely that consumers will continue to download and use our digital media products consistent with past usage, so we expect that our ability to generate revenue from those products will be continue to be reduced, which could lead to 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. Most of our revenue from the distribution of third-party products was historically derived from a single customer, however, that relationship ended during the third quarter of 2014, and we entered into an agreement with a new distribution partner. Our distribution revenue has been, and we expect will continue to be, materially negatively impacted by these factors.

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

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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 $6.00 to $8.38 per share during the 52-week period ended December 31, 2014 it also shows 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. In addition to these factors, the general difficulty in forecasting our operating results and metrics could result in actual results that differ significantly from expected results, causing volatility and continued weakness in our stock price.

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.

Any impairment to our goodwill, indefinite-lived intangible assets and definite-lived assets could result in a significant charge to our earnings.

In accordance with accounting principles generally accepted in the United States, we are required to test goodwill and indefinite-lived intangible 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. We review definite-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. 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. The total carrying value of our goodwill, indefinite-lived intangible assets and definite-lived assets as of December 31, 2014 was $44 million.

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

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 to changes in consumer preferences and changes on our part to focus on other products and services we offer, and we expect these trends 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 effect 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.

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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.

Global and national economic conditions have in the past and could in the future have a material adverse impact on our business, financial condition and results of operations.

Our business and operations depend significantly on global and national economic conditions. Because consumers may consider the purchase of our digital entertainment products and services to be a discretionary expenditure, their decision whether to purchase our products and services may be influenced by macroeconomic factors that affect consumer spending such as unemployment, access to credit, negative financial news, and declines in income. In addition, our carrier customers and business partners may reduce their business or advertising spending with us in the face of adverse macroeconomic conditions, such as financial market volatility, government austerity programs, tight credit, and declines in asset values.. We have in the past recorded material asset impairment charges due in part to weakness in the global economy, and we may need to record additional impairments to our assets in future periods in the event of renewed weakness and uncertainty in the global or national economy. Accordingly, any significant weakness in the national and/or global economy could materially impact our business, financial condition and results of operations in a negative manner.

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

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 the convertible preferred stock of 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. See Note 4, Rhapsody Joint Venture, for details on the liquidation preference on our convertible preferred investment.

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. 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 in July 2014. In addition, each member of our executive team is either new to RealNetworks or new to his or her executive position. 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

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and by our continued 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. Factors that may be considered a change in circumstances, indicating that our goodwill, indefinite-lived intangible assets or definite-lived assets may not be recoverable, include reduced future revenue and cash flow estimates due to changes in our forecasts, and unfavorable changes to valuation multiples and discount rates due to changes in the market. 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.

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.

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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 due to its geographic concentration 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 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 or servers hosted by third parties. 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 need to maintain compliance with standards of the Payment Card Industry, or PCI, for data security in connection with our use of credit card services for payment.

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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 a tax obligation, we collect and remit 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.

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

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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 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate and administrative headquarters and certain research and development and sales and marketing personnel are located at our facility in Seattle, Washington.

We lease properties primarily in the following locations that are utilized by all of our business segments, unless otherwise noted below, to house our research and development, sales and marketing, and general and administrative personnel:

Location	Area leased (sq. feet)	Lease expiration
Seattle, Washington	86,000	August 2024, with an option to renew for two five-year periods
Seoul, Republic of Korea (1)	30,000	October 2015

(1) This facility is utilized only by our Mobile Entertainment segment.

In addition, we lease smaller facilities in the U.S. and foreign countries, some of which support the operations of all of our business segments while others are dedicated to a specific business segment. We believe that our properties are in good condition, adequately maintained and suitable for the conduct of our business. For additional information regarding our obligations under leases, see Note 16, Commitments and Contingencies, in this 10-K.

Item 3. Legal Proceedings

See Note 16, Commitments and Contingencies, in this 10-K.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II.

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on The NASDAQ Stock Market under the symbol RNWK.

The high and low intraday sales prices for our common stock were as follows:

	Years Ended December 31,
	2014				2013
	High		Low		High		Low
First Quarter	$	8.00	$	6.83	$	8.01	$	7.13
Second Quarter	8.09		7.03		7.82		7.16
Third Quarter	8.38		6.91		8.70		6.87
Fourth Quarter	7.45		6.00		8.95		7.09

As of January 30, 2015, there were approximately 160 holders of record of our common stock. Most shares of our common stock are held by brokers and other institutions on behalf of shareholders.

In 2011 we paid a special cash dividend of $1.00 per common share to the holders of our common stock. However, the declaration and payment of any future dividends, as well as the amount thereof, are subject to the discretion of our board of directors and will depend upon our results of operations, financial condition, capital levels, cash requirements, future prospects and other factors deemed relevant by our board of directors. Accordingly, there can be no assurance that we will declare and pay any dividends in the future.

Comparison of 5 year cumulative total return to shareholders on RealNetworks, Inc., common stock with the cumulative total return on the NASDAQ Composite Index and the Dow Jones U.S. Technology Index for the period beginning on December 31, 2009 and ended on December 31, 2014.

The total return on our common stock and each index assumes the value of each investment was $100 on December 31, 2009, and that all dividends were reinvested. Return information is historical and not necessarily indicative of future performance.

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Item 6. Selected Financial Data

The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes to Consolidated Financial Statements included elsewhere in this report.

	Years Ended December 31,
	2014			2013			2012		2011			2010
	(In thousands, except per share data)
Consolidated Statements of Operations Data:
Net revenue	$	156,212		$	206,196		$	258,842	$	335,686		$	401,733
Cost of revenue	76,381			79,091			103,731		126,637			144,723
Extinguishment of liability	(10,580		)	—			—		—			—
Impairment of deferred costs	—			—			—		19,962			—
Gross profit	90,411			127,105			155,111		189,087			257,010
Sale of patents and other technology assets, net of costs	—			—			116,353		—			—
Operating expenses:
Research and development	52,765			60,880			63,194		70,212			100,955
Sales and marketing	66,926			80,011			90,301		111,300			118,543
Advertising with related party	—			—			—		—			1,065
General and administrative	34,001			36,643			43,891		37,181			51,217
Restructuring and other charges	4,992			5,765			15,225		8,650			12,361
Lease exit and related charges (gains)	880			3,089			3,290		(646		)	7,396
Loss on litigation settlements	—			11,525			—		—			—
Total operating expenses	159,564			197,913			215,901		226,697			291,537
Operating income (loss)	(69,153		)	(70,808		)	55,563		(37,610		)	(34,527		)
Other income (expense), net (A)	(1,382		)	16,721			1,796		(6,819		)	204
Income (loss) before income taxes	(70,535		)	(54,087		)	57,359		(44,429		)	(34,323		)
Income tax expense (benefit)	1,280			4,903			12,518		(17,329		)	(36,451		)
Net income (loss)	(71,815		)	(58,990		)	44,841		(27,100		)	2,128
Net loss attributable to the noncontrolling interest in Rhapsody	—			—			—		—			2,910
Net income (loss) attributable to common shareholders	$	(71,815	)	$	(58,990	)	$	44,841	$	(27,100	)	$	5,038
Diluted net income (loss) per share attributable to common shareholders	$	(2.00	)	$	(1.66	)	$	1.28	$	(0.79	)	$	0.26
Shares used to compute diluted net income (loss) per share	35,947			35,553			35,122		34,185			34,013
Special cash dividend of $1.00 per common share	—			—			—		$	136,793		—

(A) Includes a $21.4 million pretax gain from the sale of equity securities in 2013. See Note 5, Fair Value Measurements, in this 10-K for more details.

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	As of December 31,
	2014		2013		2012		2011		2010
	(In thousands)
Consolidated Balance Sheets Data:
Cash, cash equivalents, and short-term investments	$	161,706	$	226,155	$	271,414	$	185,072	$	334,321
Working capital	136,429		191,522		237,646		160,787		286,315
Total assets	250,299		342,781		433,897		393,397		577,936
Shareholders’ equity	197,198		268,981		342,728		286,894		425,239

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

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, , our new RealPlayer Cloud service, and our SuperPass service . Our Mobile Entertainment business generates revenue from the sale of its SaaS services, which include ringback tones, music on demand, and intercarrier messaging, and our LISTEN product. 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 segments. Our most significant expenses relate to cost of revenue, compensating employees, and selling and marketing our products and services.

In 2014 our consolidated revenue declined by $50.0 million compared with 2013, due to a decrease of $36.0 million in RealPlayer Group revenue, a $12.7 million decrease in Games revenue, and a $1.3 million decrease in Mobile Entertainment revenue.

Revenue from our legacy products continues to decline as a result of certain changes in our businesses and market-driven factors. Our SaaS business within Mobile Entertainment continues to be negatively impacted by the proliferation of smartphone applications and services, some of which do not depend on our carrier customers for distribution to consumers. In addition, we are still experiencing pricing pressure from carriers for our intercarrier messaging services. Furthermore, we are no longer investing in our Helix product. In our Games segment, our business continues to be challenged as consumer game play continues to shift from downloadable PC games to social networks and mobile devices. Since 2011, we have been focusing on developing social and mobile games and monetizing those game play experiences. In our RealPlayer Group segment, revenue is being negatively impacted as a result of our transition to a new third party distribution partner at significantly lower rates compared to our previous partner, lower distribution in our licensing business and due to our focus towards RealPlayer Cloud and away from our legacy products.     

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 over ten million active RealPlayer users around the world. In our Mobile Entertainment business we continue our efforts to roll out our new LISTEN product. In our Games business, we launched Slingo Adventure worldwide on Facebook and on mobile platforms during the second half of 2014. We expect to continue to invest heavily in our growth initiatives, including further development and marketing efforts around our products. These investments have negatively impacted our recent operating results, which may continue until the expected revenue growth materializes.

In addition to our revenue growth plans, we have continued to better align our operating expenses with our revenue profile through various restructuring actions, as described below in Consolidated Operating Expenses. These actions drove the $38.3 million decline in our operating expenses during 2014 compared to 2013 of which $11.5 million of the decline was due to a litigation settlement in 2013.

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Summary of Results

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

	2014			2013			2012			2014-2013 Change			% Change		2013-2012 Change			% Change
Total revenue	$	156,212		$	206,196		$	258,842		$	(49,984	)	(24	)%	$	(52,646	)	(20	)%
Cost of revenue	76,381			79,091			103,731			(2,710		)	(3	)%	(24,640		)	(24	)%
Extinguishment of liability	(10,580		)	—			—			(10,580		)	—	%	—			—	%
Gross profit	90,411			127,105			155,111			(36,694		)	(29	)%	(28,006		)	(18	)%
Gross margin	58		%	62		%	60		%	(4		)%			2		%
Sale of patents and other technology assets, net of costs	—			—			116,353			—			—	%	(116,353		)	(100	)%
Total operating expenses	159,564			197,913			215,901			(38,349		)	(19	)%	(17,988		)	(8	)%
Operating income (loss)	$	(69,153	)	$	(70,808	)	$	55,563		$	1,655		2	%	$	(126,371	)	(227	)%

2014 compared with 2013

Revenue decreased by $50.0 million, or 24%. The reduction in revenue resulted from a decline of $36.0 million in our RealPlayer Group segment, a decline of $12.7 million in our Games segment, and a decline of $1.3 million in our Mobile Entertainment segment, due to the factors described above. Gross margin decreased to 58% from 62%, primarily as a result of our transition to a new third party distribution arrangement at significantly lower rates compared to our previous partner in our RealPlayer business, and to declining sales in our storefront business in Games. These decreases in gross margin were partially offset by the extinguishment in Q1 2014 of certain accrued royalty liabilities of $10.6 million associated with our historical music business, which had been originally recorded based on statutory rates.

Operating expenses decreased by $38.3 million primarily due to reductions in personnel and related costs of $10.9 million, reductions in marketing costs of $10.4 million and lower costs related to our 2013 headquarters relocation of $5.7 million, which resulted from our ongoing expense re-alignment efforts, as well as litigation settlement costs of $11.5 million in the prior year.

2013 compared with 2012

Revenue decreased by $52.6 million, or 20%. The reduction in revenue resulted from a decline of $19.1 million in our Mobile Entertainment segment, a decline of $17.2 million in our Games segment, and a decline of $16.3 million in our RealPlayer Group segment, due to the factors described above. Gross margin increased to 62% from 60%, primarily as a result of lower personnel and related costs that resulted from our ongoing expense alignment efforts. Operating expenses decreased by $18.0 million primarily due to reductions in personnel and related costs that resulted from our ongoing expense alignment efforts, partially offset by litigation settlement costs of $11.5 million.

Segment Results

RealPlayer Group

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

	2014			2013			2012			2014-2013 Change			% Change		2013-2012 Change			% Change
Total revenue	$	39,201		$	75,206		$	91,469		$	(36,005	)	(48	)%	$	(16,263	)	(18	)%
Cost of revenue	14,508			16,220			21,544			(1,712		)	(11	)%	(5,324		)	(25	)%
Gross profit	24,693			58,986			69,925			(34,293		)	(58	)%	(10,939		)	(16	)%
Gross margin	63		%	78		%	76		%	(15		)%			2		%
Total operating expenses	55,742			60,484			55,223			(4,742		)	(8	)%	5,261			10	%
Operating income (loss)	$	(31,049	)	$	(1,498	)	$	14,702		$	(29,551	)	NM		$	(16,200	)	(110	)%

2014 compared with 2013

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Total RealPlayer Group revenue decreased by $36.0 million, or 48%. This decrease was primarily a result of our transition to a new third party distribution arrangement at significantly lower rates compared to our previous partner that caused our third party distribution revenue to decrease by $16.0 million, and lower subscription revenue of $5.5 million due to fewer SuperPass subscribers. Further contributing to the decline was a decrease in RealPlayer license revenue of $7.6 million due to our focus away from our RealPlayer product and towards increasing RealPlayer Cloud subscriptions, and a decrease of $5.9 million in distribution of intellectual property licenses.

Gross margin decreased by 15 percentage points, due primarily to our transition to a new third party distribution arrangement at significantly lower rates compared to our previous partner. Operating expenses decreased by $4.7 million primarily due to decreased marketing spend of $5.5 million mainly related to our third party distribution arrangements.

2013 compared with 2012

Total RealPlayer Group revenue decreased by $16.3 million, or 18%. This decrease was primarily a result of lower subscriptions revenue of $11.8 million due to fewer subscribers, primarily attributable to our SuperPass product.

Gross margin increased by 2 percentage points, due primarily to a higher proportion of lower margin revenue in the prior year.

Operating expenses increased by $5.3 million. Personnel and related costs increased $5.2 million, primarily due to investment in our new RealPlayer Cloud service.

Mobile Entertainment

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

	2014			2013			2012			2014-2013 Change			% Change		2013-2012 Change			% Change
Total revenue	$	79,901		$	81,181		$	100,318		$	(1,280	)	(2	)%	$	(19,137	)	(19	)%
Cost of revenue	50,399			47,608			57,670			2,791			6	%	(10,062		)	(17	)%
Gross profit	29,502			33,573			42,648			(4,071		)	(12	)%	(9,075		)	(21	)%
Gross margin	37		%	41		%	43		%	(4		)%			(2		)%
Total operating expenses	33,325			35,839			52,614			(2,514		)	(7	)%	(16,775		)	(32	)%
Operating income (loss)	$	(3,823	)	$	(2,266	)	$	(9,966	)	$	(1,557	)	(69	)%	$	7,700		77	%

2014 compared with 2013

Mobile Entertainment revenue decreased by $1.3 million, or 2%. This decrease was primarily due to a decrease of $3.4 million due to termination of carrier contracts and a decrease of $1.2 million in our Helix business. These decreases, along with certain other declines in our SaaS business, were partially offset by an increase of $4.9 million in music on demand revenue, primarily in Korea.

Gross margin declined by 4 percentage points in 2014, due primarily to a higher proportion of lower margin revenue, such as music on demand, compared to the prior year.

2013 compared with 2012

In the quarter ended September 30, 2013, we acquired Muzicall, a ringback tone company based in London, for total cash consideration of $6.7 million. This acquisition is intended to accelerate our growth initiatives within the Mobile Entertainment segment.

Mobile Entertainment revenue decreased by $19.1 million, or 19%. This decrease was primarily due to reduced revenue from our SaaS offerings of $16.0 million, resulting from $17.0 million of lost revenue upon the termination of certain SaaS contracts over the previous six quarters. Slightly offsetting this decrease was an increase in ringback tones revenue of $2.1 million, resulting from our purchase of Muzicall.

Gross margin declined by 2 percentage points, due primarily to a higher proportion of lower margin revenue, such as music on demand, in the current year.

Operating expenses declined by $16.8 million primarily due to reductions in personnel and related costs of $17.2 million that resulted in part from the termination of certain SaaS contracts mentioned above, as well as from our ongoing expense re-

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alignment efforts. Partially offsetting these declines was an increase in total operating expense of $2.5 million as a result of the acquisition of Muzicall in 2013.

Games

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

	2014			2013			2012			2014-2013 Change			% Change		2013-2012 Change			% Change
Total revenue	$	37,110		$	49,809		$	67,055		$	(12,699	)	(25	)%	$	(17,246	)	(26	)%
Cost of revenue	11,074			13,359			21,828			(2,285		)	(17	)%	(8,469		)	(39	)%
Gross profit	26,036			36,450			45,227			(10,414		)	(29	)%	(8,777		)	(19	)%
Gross margin	70		%	73		%	67		%	(3		)%			6		%
Total operating expenses	37,170			47,177			51,890			(10,007		)	(21	)%	(4,713		)	(9	)%
Operating income (loss)	$	(11,134	)	$	(10,727	)	$	(6,663	)	$	(407	)	(4	)%	$	(4,064	)	(61	)%

2014 compared with 2013

Games revenue decreased by $12.7 million, or 25%. Lower revenue from subscription products, advertising and license sales contributed $5.8 million, and $3.7 million, and $2.2 million, respectively, to the decline during the period.

Cost of revenue decreased by $2.3 million, or 17%. The decrease was primarily due to the decrease in partner royalties expense, which has a direct correlation with the decrease in Games revenue, in addition to reduced personnel costs. Gross margin decreased due primarily to a higher proportion of lower margin revenue in the current year.

Operating expenses decreased by $10.0 million, or 21%. The decrease was primarily due to reductions in personnel and related costs of $4.9 million, and reductions in marketing expense of $4.3 million.

2013 compared with 2012

In the quarter ended June 30, 2013, we acquired Slingo, a social casino games company based in the U.S., for total cash consideration of $15.6 million. This acquisition is intended to enhance our footprint in the social casino games arena. Associated with this are incremental costs for investment in new products, which have directly impacted our operating loss before taxes.

Games revenue decreased by $17.2 million, or 26%. Lower revenue from license sales, subscription products, and advertising contributed $8.3 million, $5.8 million, and $4.3 million, respectively, to the decline during the period. Slightly offsetting these decreases was an increase of $2.1 million in games revenue as a result of the acquisition of Slingo.

Cost of revenue decreased by $8.5 million, or 39%. The decrease was due to the decrease in partner royalties expense, which has a direct correlation with the decrease in Games revenue. Gross margin increased due to lower margin projects that occurred in the prior year periods, in addition to lower personnel and related costs in the current period resulting from our ongoing expense alignment efforts.

Operating expenses decreased by $4.7 million, or 9%. The decrease was primarily due to reductions in personnel and related costs of $5.5 million, and reductions in marketing expense of $1.9 million. Partially offsetting these declines was an increase in total operating expense of $3.9 million as a result of the acquisition and investment in new products related to Slingo.

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, extinguishment of liability, lease exit and related charges, and, for 2013, the loss on litigation settlements, are included in the corporate segment.

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

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	2014			2013			2012		2014-2013 Change			% Change		2013-2012 Change			% Change
Cost of revenue	$	400		$	1,904		$	2,689	$	(1,504	)	(79	)%	$	(785	)	(29	)%
Extinguishment of liability	(10,580		)	—			—		(10,580		)	100	%	—			—	%
Gain on sale of patents and other technology assets, net of costs	—			—			116,353		—			—	%	(116,353		)	(100	)%
Total operating expenses	33,327			54,413			56,174		(21,086		)	(39	)%	(1,761		)	(3	)%
Operating income (loss)	$	(23,147	)	$	(56,317	)	$	57,490	$	33,170		59	%	$	(113,807	)	(198	)%

2014 compared with 2013

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.

Cost of revenue decreased by $1.5 million. The decrease was due primarily to lower costs resulting from the 2013 Seattle headquarters relocation.

Operating expenses decreased by $21.1 million, or 39%. The decrease was primarily due to savings from the 2013 relocation of our Seattle headquarters totaling $5.7 million, reduced restructuring and lease exit charges of $3.0 million and the litigation settlements of $11.5 million that occurred in 2013.

2013 compared with 2012

The 2012 gain from the sale of patents and other technology assets to Intel Corporation of $116.4 million reflects the cash proceeds of $120.0 million in the second quarter, less $3.6 million of direct transaction expenses incurred during the first and second quarters.

Operating expenses decreased by $1.8 million, or 3%. The decrease was primarily due to reductions in personnel and related costs of $3.0 million, in addition to reduced restructuring charges of $9.7 million. Partially offsetting these decreases were the 2013 litigation settlements of $11.5 million.

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):

	2014		2013		2012		2014-2013 Change			% Change		2013-2012 Change			% Change
Research and development	$	52,765	$	60,880	$	63,194	$	(8,115	)	(13	)%	$	(2,314	)	(4	)%
Sales and marketing	66,926		80,011		90,301		(13,085		)	(16	)%	(10,290		)	(11	)%
General and administrative	34,001		36,643		43,891		(2,642		)	(7	)%	(7,248		)	(17	)%
Restructuring and other charges	4,992		5,765		15,225		(773		)	(13	)%	(9,460		)	(62	)%
Lease exit and related charges (gains)	880		3,089		3,290		(2,209		)	(72	)%	(201		)	(6	)%
Loss on litigation settlements	—		11,525		—		(11,525		)	100	%	11,525			100	%
Total consolidated operating expenses	$	159,564	$	197,913	$	215,901	$	(38,349	)	(19	)%	$	(17,988	)	(8	)%

Research and development expenses decreased by $8.1 million, or 13%, in the year ended 2014, compared with 2013. While we continue to invest in new products, we saw an overall decrease in personnel and related costs of $5.4 million, resulting from our ongoing expense re-alignment efforts in addition to $3.8 million savings from the relocation of our Seattle headquarters.

Research and development expenses decreased by $2.3 million, or 4%, in the year ended 2013, compared with 2012. While we continue to invest in new products, we saw an overall decrease in personnel and related costs of $3.6 million, resulting from our ongoing expense re-alignment efforts.

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Sales and marketing expenses decreased by $13.1 million, or 16%, in the year ended 2014, compared with 2013. The decrease was due primarily due to reductions in marketing expenses of $10.5 million, related to our third party distribution arrangements.

Sales and marketing expenses decreased by $10.3 million, or 11%, in the year ended 2013, compared with 2012. The decrease was due primarily to a decrease in personnel and related costs of $7.8 million resulting from our ongoing expense re-alignment efforts.

General and administrative expenses decreased by $2.6 million, or 7%, in the year ended 2014, compared with 2013. Contributing to the decrease for the period was a decrease in personnel and related costs of $1.8 million resulting from our ongoing expense re-alignment efforts.

General and administrative expenses decreased by $7.2 million, or 17%, in the year ended 2013, compared with 2012. Contributing to the decrease for the period was a decrease in personnel and related costs of $6.0 million, and to $1.3 million related to the expense in 2012 for the final settlement of the Washington State Attorney General's office matter, as disclosed in the 2012 10-K.

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 re-alignment efforts. The restructuring expense amounts in all years primarily related to severance costs due to workforce reductions. For additional details on these charges see Note 10, Restructuring Charges and Note 11, Lease Exit and Related Charges.

Loss on litigation settlements recorded during 2013 relates to settlement agreements executed in October 2013, for which we paid in full an aggregate amount of $11.5 million during the fourth quarter of 2013, as discussed in Note 16, Commitments and Contingencies.

Other Income (Expenses)

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

	2014			Change		2013			Change		2012
Interest income, net	$	556		(51	)%	$	1,133		(5	)%	$	1,192
Gain (loss) on sale of equity investments,net	2,371			(89	)%	21,389			322	%	5,072
Equity in net loss of Rhapsody	(4,452		)	29	%	(6,268		)	10	%	(5,709		)
Other income (expense), net	143			(69	)%	467			(62	)%	1,241
Total other income (expense), net	$	(1,382	)	(108	)%	$	16,721		831	%	$	1,796

As described further in Note 4, 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 2014 gain on sale of equity investments, net, was due to a $2.4 million gain on the sale of a portion of our shares held in J-Stream. The 2013 gain on sale of equity investments, net, was due to a $21.4 million gain on the sale of all of our remaining shares of common stock in LoEn Entertainment, Inc. The 2012 gain on sale of equity investments, net, was driven by the sale of a portion of our shares in LoEn and a gain on the sale of our Film.com assets, totaling $5.3 million. For additional details on the J-Stream and LoEn transactions see Note 5, Fair Value Measurements.

Income Taxes

During the years ended December 31, 2014, 2013, and 2012, we recognized income tax expense of $1.3 million, $4.9 million and $12.5 million, respectively, related to U.S. and foreign income taxes.

The tax expense for the year ended December 31, 2014 was largely the result of foreign withholding taxes and income taxes in foreign jurisdictions. The tax expense for the year ended December 31, 2013 was largely the result of valuation allowances we recorded in certain foreign jurisdictions. The tax expense for the year ended December 31, 2012 was largely the result of the sale of certain patent assets and other technology assets to Intel Corporation for gross cash consideration of $120 million in 2012.

We assess the likelihood that our deferred tax assets will be recovered based upon our consideration of many factors, including the current economic climate, our expectations of future taxable income, our ability to project such income, and the appreciation of our investments and other assets. We maintain a partial valuation allowance of $149.5 million for our deferred

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tax assets due to uncertainty regarding their realization as of December 31, 2014. The net increase in the valuation allowance since December 31, 2013 of $20.6 million was the result of an increase in current year deferred tax assets for which the Company maintains a valuation allowance.

We generate income in a number of foreign jurisdictions, some of which have higher tax rates and some of which have lower tax rates relative to the U.S. federal statutory rate. Changes to the blend of income between jurisdictions with higher or lower effective tax rates than the U.S. federal statutory rate could affect our effective tax rate. For the year ended December 31, 2014, decreases in tax expense from income generated in foreign jurisdictions with lower tax rates in comparison to the U.S. federal statutory rate were 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 of December 31, 2014 and 2013, we had $3.5 million and $4.5 million of unrecognized tax benefits, respectively. The decrease in unrecognized tax benefits is due to the expiration of statute of limitations. As of December 31, 2014, there are no unrecognized tax benefits remaining that would affect our effective tax rate if recognized, as the offset would increase the valuation allowance. The total amount of unrecognized tax benefits that would affect our effective tax rate if recognized was $0.4 million as of December 31, 2013. 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 audit for United States federal returns 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):

	2014		2013		2012		2014-2013 Change			% Change		2013-2012 Change			% Change
United States	$	61,660	$	90,250	$	117,844	$	(28,590	)	(32	)%	$	(27,594	)	(23	)%
Europe	26,575		38,155		56,473		(11,580		)	(30	)%	(18,318		)	(32	)%
Korea	39,852		46,601		40,467		(6,749		)	(14	)%	6,134			15	%
Rest of World	28,125		31,190		44,058		(3,065		)	(10	)%	(12,868		)	(29	)%
Total Revenue	$	156,212	$	206,196	$	258,842	$	(49,984	)	(24	)%	$	(52,646	)	(20	)%

Revenue in the U.S. decreased by $28.6 million, or 32%, in the year-ended 2014, compared with 2013. The decline was mainly due to a reduction in revenue from the distribution of our third party software products of $14.9 million, a decline in revenue from our games business of $3.6 million, a decline of $4.7 million relating to our SuperPass subscriptions offering, a decrease in revenue from our RealPlayer Plus product of $2.4 million, and a decline in our SaaS revenue of $1.9 million.

Revenue in the U.S. declined by $27.6 million, or 23%, in the year-ended 2013, compared with 2012. The decline was primarily due to reductions in revenue generated from our SaaS offerings of $13.0 million, lower sales of RealPlayer Group subscriptions, mainly including our SuperPass product, of $8.3 million, and lower sales of games subscriptions and licenses of $5.8 million.

Revenue in Europe decreased by $11.6 million, or 30%, in the year-ended 2014, compared with 2013. The decrease was primarily due to lower revenue from our Games segment of $7.7 million, lower revenue generated from sales of RealPlayer Plus totaling $1.9 million and a $1.3 million decrease in revenue from the distribution of our third party software products.

Revenue in Europe decreased by $18.3 million, or 32%, in the year-ended 2013, compared with 2012. The decrease was primarily due to lower revenue from our Games segment of $9.3 million, reductions in revenue generated from our SaaS offerings of $3.3 million, and lower intellectual property license revenue of $2.8 million.

Revenue in Korea decreased by $6.7 million, or 14%, in the year-ended 2014, compared with 2013. The decrease was primarily due to decreased revenue from intellectual property licensing of $8.3 million. Revenue from our SaaS offerings, however, increased approximately $2.1 million, due in part to increased music on demand revenue of $5.7 million, partially offset by a decrease in several other SaaS offerings totaling $3.6 million.

Revenue in Korea increased by $6.1 million, or 15%, in the year-ended 2013, compared with 2012. The increase was primarily due to increased revenue from intellectual property licensing of $4.7 million. Additionally we saw increased revenue generated from our SaaS offerings of $2.6 million, due in part to increased lower margin music on demand revenue of $9.4 million, offset by declines in our other SaaS offerings of $6.8 million. These increases were partially offset by a decline in professional services revenue of $1.4 million.

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Revenue in the rest of world decreased by $3.1 million, or 10%, in the year-ended 2014, compared with 2013. The decrease was primarily due to lower overall revenue within our RealPlayer Group from sales of RealPlayer Plus of $2.3 million, lower revenue from our SaaS business of $1.3 million, lower subscription revenue of $1.2 million and lower revenue from the distribution of third party software products of $0.9 million. In addition, revenue generated from our Games business was $0.4 million lower. These decreases were slightly offset, however, by an increase in revenue from sales of our intellectual property license of $2.8 million.

Revenue in the rest of world decreased by $12.9 million, or 29%, in the year-ended 2013, compared with 2012. The decrease was primarily due to lower revenue within our RealPlayer Group from licensing and subscriptions revenue of $4.3 million and $2.3 million, respectively, in addition to lower revenue generated from our SaaS offerings of $2.2 million.

Liquidity and Capital Resources

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

	December 31,
	2014		2013
Working capital	$	136,429	$	191,522
Cash, cash equivalents, and short-term investments	161,706		226,155
Restricted cash and investments	3,000		3,000

The decrease in 2014 working capital from December 31, 2013, which includes cash, cash equivalents short term investments, was primarily due to cash used in our operations of $60.2 million.

The following summarizes cash flow activity (in thousands):

	Years Ended December 31,
	2014			2013			2012
Cash provided by (used in) operating activities	$	(60,244	)	$	(49,879	)	$	(33,313	)
Cash provided by (used in) investing activities	15,561			39,242			87,135
Cash provided by (used in) financing activities	(637		)	(1,435		)	2,807

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

Cash used in operating activities was $10.4 million more in 2014 than in 2013. This increase in cash used was primarily due to the decline in revenue of $50.0 million which was offset, in part, by the decrease in operating expenses of $ 38.3 million.

The higher amount of cash used in operating activities for 2013 compared to 2012 was primarily due to the decline in revenues of $52.6 million for 2013 compared with the prior year, which was partially offset by a decline in cost of revenue of $24.6 million for 2013. We also had a net decrease in cash of $3.6 million for the year ended December 31, 2013 related to changes in certain operating assets and liabilities, compared with a net decrease in cash of $11.7 million for the year ended December 31, 2012 related to changes in certain operating assets and liabilities.

For the year ended December 31, 2014, cash provided by investing activities of $15.6 million was mainly from sales and maturities, net of purchases, of short-term investments totaling $16.5 million. In addition, cash proceeds from the sale of available for sale securities of $2.8 million in 2014 mainly offset purchases of equipment, software and leasehold improvements of $2.5 million.

For the year ended December 31, 2013, cash provided by investing activities of $39.2 million was due to the net cash proceeds of $29.2 million received from the sale of our remaining shares of common stock in LoEn. Further contributing to the total cash provided was sales and maturities, net of purchases, of short-term investments of $33.3 million. Offsetting these cash proceeds was cash used for the acquisition of businesses, net of cash acquired, of $22.5 million.

For the year ended December 31, 2012, cash provided by investing activities of $87.1 million was due to the net cash proceeds of $116.4 million received from the sale of certain patents and other technology assets to Intel Corporation in the second quarter, and cash proceeds of $7.3 million related to the sale of certain equity and other investments, offset in part by purchases of equipment, software and leasehold improvements totaling $7.2 million, and purchases, net of sales and maturities, of short-term investments of $29.5 million.

Financing activities for the year ended December 31, 2014 used cash totaling $0.6 million which was mainly due to tax payments from shares withheld upon vesting of restricted stock and the payment of contingent consideration related to acquisitions of businesses, partially offset by proceeds received from the issuance of common stock.

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Financing activities for the year ended December 31, 2013 used cash primarily from tax payments from shares withheld upon the vesting of employee restricted stock, in addition to payment of contingent consideration relating to a previous acquisition. This was partially offset by the proceeds from the exercise of employee stock options and proceeds from sales of common stock under the employee stock purchase plan.

Financing activities for the year ended December 31, 2012, provided cash from the proceeds from the exercise of employee stock options and proceeds from sales of common stock under the employee stock purchase plan, offset partially by tax payments from shares withheld upon the vesting of employee restricted stock.

We currently have no planned significant capital expenditures for 2015 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.

In the future, we may seek to raise additional funds through public or private equity financing, or through other sources such as future 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 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 December 31, 2014, approximately $27.1 million of the $161.7 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. 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 December 31, 2014, we have not provided for U.S. federal and state income taxes on approximately $13.9 million of undistributed earnings of our foreign subsidiaries, since such earnings are considered permanently 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 taxes. It is not practicable to determine the U.S. federal 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 repatriated, an additional provision for U.S. income and foreign withholding taxes, net of foreign tax credits, may be necessary.

Contractual Obligations

Please refer to Note 16, Commitments and Contingencies, for details on our contractual obligations, which consist of operating leases for office facilities. For income tax liabilities for uncertain tax positions we cannot make a reasonably reliable estimate of the amount and period of any related future payments. As of December 31, 2014 we had $3.5 million of gross unrecognized tax benefits for uncertain tax positions.

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

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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

• 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 operations, 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 have made estimates of amounts that may be owed related to music royalties for our historical domestic and international music services. 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 have delivered. 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. 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 have based our estimates on historical experience and on various other assumptions that management believes to be

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reasonable under the circumstances, actual results may differ materially from these estimates under different assumptions or conditions.

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. Our remaining accrued royalty liability as of December 31, 2014 totaled $2.9 million.

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.

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. As further described in Note 4, 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, which is impacted by Rhapsody equity transactions, below $10.0 million, unless Rhapsody's book value is reduced below $10.0 million.

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 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.

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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 cash flows of our long-term operating plans, 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.

As of December 31, 2014, we had $9 million in total carrying value of definite-lived assets related to our Mobile Entertainment group. In accordance with our policy as described above, we reviewed these assets for impairment as of December 31, 2014. Our estimate of the fair value of this asset group exceeds the carrying amount and, therefore, no impairment is indicated as of December 31, 2014. However, it is reasonably possible that the estimate of the fair value of the Mobile Entertainment group may change in the near term should we experience adverse changes in our estimates and assumptions, which could result in impairments of those assets. For further discussion, please see the risk factor entitled, "Any impairment to our goodwill, indefinite-lived intangible assets or definite-lived assets could result in a significant charge to our earnings" under Item 1A Risk Factors.

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.

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 cash flows of long-term operating plans, market and interest rate risk, and risk-commensurate discount rates and cost of capital.

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 estimate the fair value of the intangible assets. If the carrying amount of the intangible assets exceeds the estimated fair value, an impairment charge is recorded to reduce the carrying value to the 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 cash flows of long-term operating plans, market and interest rate risk, and risk-commensurate discount rates and cost of capital.

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 using the Black-Scholes option-pricing model or other appropriate valuation models such as Monte Carlo simulation. 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 for new awards 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.

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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 income tax expense and 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 the current and deferred 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 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 December 31, 2014, $27.1 million of the $161.7 million of cash, cash equivalents, and short-term investments was held by our foreign subsidiaries.

As of December 31, 2014, we have not provided for U.S. federal and state income taxes on approximately $13.9 million of 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. federal 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.

Recently Issued Accounting Standards

See Note 2, Recent Accounting Pronouncements.

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Item 7A. 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 5, 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 December 31, 2014. Based on our cash, cash equivalents, short-term investments, and restricted cash equivalents as of December 31, 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 December 31, 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 this 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. 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 December 31, 2014 would not result in more than a nominal amount of unrealized gain or loss.

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Item 8. Financial Statements and Supplementary Data

REALNETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	December 31, 2014			December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	103,253		$	151,235
Short-term investments	58,453			74,920
Trade accounts receivable, net of allowances	15,257			24,613
Deferred costs, current portion	702			1,601
Deferred tax assets, current portion	652			306
Prepaid expenses and other current assets	8,980			9,124
Total current assets	187,297			261,799
Equipment and software	74,100			86,721
Leasehold improvements	3,590			3,482
Total equipment, software, and leasehold improvements	77,690			90,203
Less accumulated depreciation and amortization	61,442			67,031
Net equipment, software, and leasehold improvements	16,248			23,172
Restricted cash equivalents and investments	3,000			3,000
Equity method investment	10,000			12,473
Available for sale securities	2,676			7,181
Other assets	2,299			2,332
Deferred costs, non-current portion	316			946
Deferred tax assets, net, non-current portion	999			1,409
Other intangible assets, net	10,109			12,993
Goodwill	17,355			17,476
Total assets	$	250,299		$	342,781
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	18,653		$	19,987
Accrued and other current liabilities	25,286			41,893
Deferred tax liabilities, net, current portion	1,628			899
Deferred revenue, current portion	5,301			7,498
Total current liabilities	50,868			70,277
Deferred revenue, non-current portion	235			166
Deferred rent	1,215			1,318
Deferred tax liabilities, net, non-current portion	702			1,556
Other long-term liabilities	81			483
Total liabilities	53,101			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 36,099 shares in 2014 and 35,833 shares in 2013	36			36
Additional paid-in capital	617,756			610,167
Accumulated other comprehensive loss	(55,252		)	(47,695		)
Retained deficit	(365,342		)	(293,527		)
Total shareholders’ equity	197,198			268,981
Total liabilities and shareholders’ equity	$	250,299		$	342,781

See accompanying notes to consolidated financial statements.

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REALNETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

	Years Ended December 31,
	2014			2013			2012
Net revenue (A)	$	156,212		$	206,196		$	258,842
Cost of revenue (B)	76,381			79,091			103,731
Extinguishment of liability (See Note 9)	(10,580		)	—			—
Gross profit	90,411			127,105			155,111
Sale of patents and other technology assets, net of costs	—			—			116,353
Operating expenses:
Research and development	52,765			60,880			63,194
Sales and marketing	66,926			80,011			90,301
General and administrative	34,001			36,643			43,891
Restructuring and other charges	4,992			5,765			15,225
Lease exit and related charges	880			3,089			3,290
Loss on litigation settlements	—			11,525			—
Total operating expenses	159,564			197,913			215,901
Operating income (loss)	(69,153		)	(70,808		)	55,563
Other income (expenses):
Interest income, net	556			1,133			1,192
Gain on sale of equity and other investments, net	2,371			21,389			5,072
Equity in net loss of Rhapsody investment	(4,452		)	(6,268		)	(5,709		)
Other income (expense), net	143			467			1,241
Total other income (expenses), net	(1,382		)	16,721			1,796
Income (loss) before income taxes	(70,535		)	(54,087		)	57,359
Income tax expense (benefit)	1,280			4,903			12,518
Net income (loss)	$	(71,815	)	$	(58,990	)	$	44,841
Basic net income (loss) per share	$	(2.00	)	$	(1.66	)	$	1.29
Diluted net income (loss) per share	$	(2.00	)	$	(1.66	)	$	1.28
Shares used to compute basic net income (loss) per share	35,947			35,553			34,873
Shares used to compute diluted net income (loss) per share	35,947			35,553			35,122
Comprehensive income (loss):
Unrealized investment holding gains (losses), net of reclassification adjustments	$	(4,145	)	$	(20,288	)	$	(633	)
Foreign currency translation adjustments, net of reclassification adjustments	(3,412		)	(867		)	(1,023		)
Total other comprehensive income (loss)	(7,557		)	(21,155		)	(1,656		)
Net income (loss)	(71,815		)	(58,990		)	44,841
Comprehensive income (loss)	$	(79,372	)	$	(80,145	)	$	43,185
(A) Components of net revenue:
License fees	$	28,308		$	43,709		$	56,640
Service revenue	127,904			162,487			202,202
	$	156,212		$	206,196		$	258,842
(B) Components of cost of revenue:
License fees	$	8,012		$	8,538		$	11,689
Service revenue	68,369			70,553			92,042
	$	76,381		$	79,091		$	103,731

See accompanying notes to consolidated financial statements.

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REALNETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended December 31,
	2014			2013			2012
Cash flows from operating activities:
Net income (loss)	$	(71,815	)	$	(58,990	)	$	44,841
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	11,959			18,748			16,959
Stock-based compensation	5,204			7,468			8,123
Loss (gain) on asset disposal	—			—			2,509
Equity in net loss of Rhapsody	4,452			6,268			5,709
Lease exit and related charges (gains)	668			1,421			3,290
Deferred income taxes, net	(237		)	676			20,324
Gain on sale of patent and other technology assets, net of costs of $3,647	—			—			(116,353		)
Gain on sale of available for sale securities	(2,371		)	(21,389		)	(5,072		)
Realized translation gain	(48		)	(571		)	(1,966		)
Extinguishment of liability	(10,580		)	—			—
Other	—			51			—
Net change in certain operating assets and liabilities:
Trade accounts receivable	8,732			8,442			11,163
Deferred costs, prepaid expenses and other assets	1,982			8,112			(986		)
Accounts payable	(769		)	321			549
Accrued and other liabilities	(7,421		)	(20,436		)	(22,403		)
Net cash provided by (used in) operating activities	(60,244		)	(49,879		)	(33,313		)
Cash flows from investing activities:
Purchases of equipment, software, and leasehold improvements	(2,460		)	(7,727		)	(7,170		)
Proceeds from sale of patents and other technology assets, net of costs of $3,647	—			—			116,353
Proceeds from sale of available for sale securities	2,754			29,153			7,261
Purchases of short-term investments	(81,216		)	(131,690		)	(116,963		)
Proceeds from sales and maturities of short-term investments	97,683			164,986			87,487
Decrease in restricted cash equivalents and investments	—			10,000			167
Increase in restricted cash equivalents and investments	—			(3,000		)	—
Acquisitions of businesses, net of cash acquired	(733		)	(22,480		)	—
Other	(467		)	—			—
Net cash provided by (used in) investing activities	15,561			39,242			87,135
Cash flows from financing activities:
Proceeds from issuance of common stock (stock options and stock purchase plan)	812			594			3,802
Tax payments from shares withheld upon vesting of restricted stock	(407		)	(1,201		)	(995		)
Payment of contingent consideration	(1,042		)	(828		)	—
Net cash provided by (used in) financing activities	(637		)	(1,435		)	2,807
Effect of exchange rate changes on cash and cash equivalents	(2,662		)	109			236
Net increase (decrease) in cash and cash equivalents	(47,982		)	(11,963		)	56,865
Cash and cash equivalents, beginning of year	151,235			163,198			106,333
Cash and cash equivalents, end of year	$	103,253		$	151,235		$	163,198
Supplemental disclosure of cash flow information:
Cash received from income tax refunds	$	654		$	8,405		$	456
Cash paid for income taxes	$	1,882		$	4,600		$	3,296
Non-cash investing activities:
Increase (decrease) in accrued purchases of equipment, software, and leasehold improvements	$	(297	)	$	335		$	212

See accompanying notes to consolidated financial statements.

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REALNETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

	Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Deficit)			Total Shareholders’ Equity
	Shares	Amount
Balances, December 31, 2011	34,422	$	34	$	591,122		$	(24,884	)	$	(279,378	)	$	286,894
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock	902	1		2,807			—			—			2,808
Share of Rhapsody equity transactions	—	—		1,718			—			—			1,718
Stock-based compensation	—	—		8,123			—			—			8,123
Other comprehensive income (loss)	—	—		—			(1,656		)	—			(1,656		)
Net income (loss)	—	—		—			—			44,841			44,841
Balances, December 31, 2012	35,324	$	35	$	603,770		$	(26,540	)	$	(234,537	)	$	342,728
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock	509	1		(608		)	—			—			(607		)
Share of Rhapsody equity transactions	—	—		(463		)	—			—			(463		)
Stock-based compensation	—	—		7,468			—			—			7,468
Other comprehensive income (loss)	—	—		—			(21,155		)	—			(21,155		)
Net income (loss)	—	—		—			—			(58,990		)	(58,990		)
Balances, December 31, 2013	35,833	$	36	$	610,167		$	(47,695	)	$	(293,527	)	$	268,981
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock	266	—		405			—			—			405
Share of Rhapsody equity transactions	—	—		1,980			—			—			1,980
Stock-based compensation	—	—		5,204			—			—			5,204
Other comprehensive income (loss)	—	—		—			(7,557		)	—			(7,557		)
Net income (loss)	—	—		—			—			(71,815		)	(71,815		)
Balances, December 31, 2014	36,099	$	36	$	617,756		$	(55,252	)	$	(365,342	)	$	197,198

See accompanying notes to consolidated financial statements.

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REALNETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2014, 2013 and 2012

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 Annual Report on Form 10-K for the year ended December 31, 2014 (10-K), RealNetworks, Inc. and subsidiaries is referred to as “RealNetworks”, the “Company”, “we”, “us”, or “our”.

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

The consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the periods presented. Operating results for the year ended December 31, 2014 are not necessarily indicative of the results that may be expected for any subsequent periods.

Use of Estimates.    The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (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.

2012 Sale of Patents and Other Technology Assets to Intel Corporation. In the second quarter of 2012, we completed the sale of certain patents, patent applications and related rights held by us, and certain of our assets relating to our next generation video codec technologies to Intel Corporation (Intel). Intel acquired the assets for a gross cash purchase price of $120.0 million. In addition, Intel granted us a non-exclusive, royalty-free, fully paid up, irrevocable and worldwide license (without the right to grant sublicenses) to use the patent assets we sold to Intel in connection with our businesses. The proceeds, net of related direct costs, of $116.4 million were recorded as a gain in the statement of operations.

Cash and Cash Equivalents, Short-Term Investments, and Available-for-Sale Securities. We consider all short-term investments with a remaining contractual maturity at date of purchase of three months or less to be cash equivalents.

We have classified as available-for-sale all marketable debt and equity securities for which there is determinable fair market value and there are no restrictions on our ability to sell. Available-for-sale securities are carried at fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss) (AOCI) in shareholders' equity, net of any applicable income taxes. 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. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in other income (expense), net. Realized and unrealized gains and losses on available-for-sale securities are determined using the specific identification method.

Trade Accounts Receivable.    Trade accounts receivable consist of amounts due from customers and do not bear interest. The allowance for doubtful accounts and sales returns is our estimate of the amount of probable credit losses and returns in our existing accounts receivable. We determine the allowances based on analysis of historical bad debts, customer concentrations, customer credit-worthiness, return history and current economic trends. We review the allowances for doubtful accounts and sales returns quarterly. Past due balances over 90 days and specified other balances are reviewed individually for collectability. All other balances are reviewed on an aggregate basis. Account balances are written off against the allowance after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance sheet credit exposure related to our customers.

Concentration of Credit Risk.    Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts receivable. Short-term investments consist of U.S. government and government agency securities, corporate notes and bonds, and municipal securities. We derive a portion of our revenue from a large number of individual consumers spread globally. We also derive revenue from several large customers. If the financial condition or results of operations of any one of the large customers deteriorates substantially, our operating results could be adversely affected. To reduce credit risk, management performs ongoing credit evaluations of the financial condition of significant customers. We do not generally require collateral and we maintain an allowance for estimated credit losses on customer accounts when considered necessary.

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Depreciation and Amortization.    Depreciation of equipment and software, as well as amortization of leasehold improvements is computed using the straight-line method over the lesser of the estimated useful lives of the assets or the related lease term. The useful life of equipment and software is generally three to five years.

Depreciation and amortization expense of these assets during the years ended December 31, 2014, 2013, and 2012 was $8.5 million, $14.3 million, and $12.9 million, respectively.

Equity Method Investment.    We use the equity method 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. As further described in Note 4, 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, which is impacted by Rhapsody equity transactions, below $10.0 million, unless Rhapsody's book value is reduced below $10.0 million.

We evaluate impairment of an investment accounted for under the equity method if events and circumstances warrant. An impairment charge would be recorded if a decline in the fair 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.

Deferred Costs. We defer certain costs on projects for service revenues 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 and related costs for employees and other third parties. Deferred costs are capitalized during the implementation period.

We recognize such costs as a component of cost of revenue, the timing of which is dependent upon the revenue recognition policy by contract. 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 or if actual deferred costs exceed estimated contractual revenue. Assessing the recoverability of deferred 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 and prepaid royalty advances. We cannot accurately predict the amount and timing of any such impairments. Should deferred project costs or prepaid royalty advances become impaired, we would record the appropriate charge, which could have a material adverse effect on our financial condition and results of operations.

As of December 31, 2014, we determined that the total estimated costs associated with a project exceeded the total estimated revenues expected to be recognized on that project. As a result, we impaired $0.7 million in deferred project costs. This charge was included in cost of revenue in the accompanying consolidated statements of operations and comprehensive income (loss). No such charges were incurred in 2013 or 2012.

Definite-Lived Tangible and Intangible Assets.    Definite-lived tangible assets include equipment, software and leasehold improvements and are carried at cost less accumulated depreciation and amortization. Definite-lived intangible assets consist primarily of the fair value of customer agreements and contracts, and developed technology acquired in business combinations and are amortized over their estimated useful lives.

We review these assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. If the carrying amount of an asset group is not recoverable, an impairment loss is recognized if the carrying amount of the asset group exceeds its estimated fair value, which is generally determined as the present value of estimated future cash flows to a market participant. Our impairment analysis is based on significant assumptions of future results, including operating and cash flow projections. Significant or sustained declines in future revenue or cash flows, or adverse changes in our business climate, among other factors, could result in the need to record an impairment charge in future periods.

Goodwill.    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

38

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.

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 judgment is required in determining the reporting units and assessing fair value of the reporting units.

Indefinite-Lived Intangible Assets.    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 estimate the fair value of the intangible assets. If the carrying amount of the intangible assets exceeds the estimated fair value, an impairment charge is recorded to reduce the carrying value to the estimated fair value. Significant judgment is required in assessing fair value of the indefinite-lived intangible assets.

Fair Value.     Fair value is the price that would be received from selling an asset or paid in transfering a liability in an orderly transaction between market participants at the measurement date. Our fair value measurements consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

Fair values are determined based on three levels of inputs:

• Level 1: Quoted prices in active markets for identical assets or liabilities

• Level 2: Directly or indirectly observed inputs for the asset or liability, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active

• Level 3: Significant unobservable inputs that reflect our own estimates of assumptions that market participants would use

Research and Development.    Costs incurred in research and development are expensed as incurred. Software development costs are capitalized when a product’s technological feasibility has been established through the date the product is available for general release to customers. Other than internal use software, we have not capitalized any software development costs, as technological feasibility is generally not established until a working model is completed, at which time substantially all development is complete.

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 products 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 operations, we derive revenue through (1) subscriptions of our SuperPass and Real Player Cloud products 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.

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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 fair value 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.

Advertising Expenses.   We expense the cost of advertising and promoting our products as incurred. These costs are included in sales and marketing expense and totaled $23.1 million in 2014, $30.6 million in 2013 and $31.7 million in 2012.

Foreign Currency.    The functional currency of the Company’s foreign subsidiaries is the currency of the country in which the subsidiary operates. Assets and liabilities of foreign operations are translated into U.S. dollars using rates of exchange in effect at the end of the reporting period. The net gain or loss resulting from translation is shown as translation adjustment and included in AOCI in shareholders’ equity. Income and expense accounts are translated into U.S. dollars using average rates of exchange. Gains and losses from foreign currency transactions are included in the consolidated statements of operations.

Derivative Financial Instruments.    We conduct business internationally in several currencies and thus we are exposed to adverse movements in foreign currency exchange rates. A portion of these risks may be managed through the use of financial derivatives, but fluctuations in foreign exchange rates could impact our results of operations and financial position. Our foreign currency risk management program reduces, but does not entirely eliminate, the impact of currency exchange rate movements.

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 foreign exchange forward contracts related to short-term intercompany accounts as hedges and, accordingly, we adjust these instruments to fair value through our results of operations. However, we may periodically hedge a portion of our foreign exchange exposures associated with material firmly committed transactions and long-term investments.

All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If the derivative is designated a hedge, then depending on the nature of the hedge, changes in fair value will either be recorded immediately in results of operations, or be recognized in AOCI until the hedged item is recognized in results of operations.

We had nominal amounts of derivatives outstanding at either December 31, 2014 or 2013.

Accounting for Taxes Collected from Customers.    Our revenues are reported net of sales and other transaction taxes that are collected from customers and remitted to taxing authorities.

Income Taxes.    We compute income taxes using the asset and liability method, under which deferred income taxes are provided for temporary differences between financial reporting basis and tax basis of our assets and liabilities and operating loss and tax credit carryforwards. We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character in the appropriate taxing jurisdictions. Adjustments to the valuation allowance could be required in the future if we estimate that the amount of deferred tax assets to be realized is more or less than the net amount we have recorded. Any increase or decrease in the valuation allowance could have the effect of increasing or decreasing the income tax provision in the statement of operations.

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 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

40

states and foreign jurisdictions for certain tax years subsequent to 1993. We are currently under audit for United States federal returns for the consolidated group (RealNetworks, Inc. and Subsidiaries) for the year ended December 31, 2012.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax expense.

Stock-Based Compensation.    Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is the vesting period. We use the Black-Scholes option-pricing model or other appropriate valuation models such as Monte Carlo simulation to determine the fair value of stock-based option awards. The fair value of restricted stock awards is based on the closing market price of our common stock on the award date. Generally, we recognize the compensation cost for awards on a straight-line basis for the entire award, over the applicable vesting period. For performance-based awards, expense is recognized when it is probable the performance goal will be achieved, however if the likelihood becomes improbable, that expense is reversed. For market-based stock options, fair value is measured at the grant date using the Monte Carlo simulation model and we recognize compensation cost for these awards on a straight-line basis over the requisite service period for each separately vesting portion of the awards. For our employee stock purchase plan, compensation expense is measured based on the discount the employee is entitled to upon purchase.

The valuation models for stock-based option awards 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 for new awards may differ materially in the future from the amounts recorded in the consolidated statements of operations. For all awards, we also estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.

Net Income 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.

Note 2.     Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (FASB) issued a new standard, "Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern". This standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. The new guidance is effective for all annual and interim periods ending after December 15, 2016. We are currently evaluating the impact, if any, the adoption of this standard will have on our consolidated financial statements.

In May 2014, the 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

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

41

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 are evaluated annually in our fourth quarter for impairment, or more frequently, if circumstances indicate an impairment may exist. The remaining $3.5 million included developed game technology and existing customer relationships, and is being amortized over their estimated 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. This acquisition has enhanced 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 are being amortized over their estimated 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, 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 has helped us accelerate our growth initiatives within the Mobile Entertainment segment.

Note 4.     Rhapsody Joint Venture

As of December 31, 2014 we owned approximately 43% 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 transaction, RealNetworks contributed $18.0 million in cash, the Rhapsody brand and certain other assets, including content licenses, in exchange for shares of convertible preferred stock of Rhapsody, carrying a $10.0 million preference upon certain liquidation events.

In the fourth quarter of 2014, Rhapsody issued common stock to a new strategic partner which decreased our equity interest from approximately 45% to approximately 43%.

We recorded our share of losses in the operations of Rhapsody of $4.5 million, $6.3 million, and $5.7 million for the years ended December 31, 2014, 2013 and 2012, 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, which is impacted by Rhapsody equity transactions, below $10.0 million, unless Rhapsody's book value is reduced below $10.0 million. The carrying value of our Rhapsody investment was $10.0 million and $12.5 million at December 31, 2014 and 2013, respectively.

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

	Year ended December 31, 2014			Year ended December 31, 2013			Year ended December 31, 2012
Net revenue	$	173,484		$	140,596		$	143,674
Gross profit	32,145			34,141			36,260
Net loss	(21,336		)	(14,663		)	(12,228		)

	As of December 31, 2014		As of December 31, 2013
Current assets	$	47,021	$	31,245
Non-current assets	20,616		17,305
Current liabilities	65,458		46,458
Non-current liabilities	16,487		—

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Note 5.     Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

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

	Fair Value Measurements as of								Amortized Cost as of
	December 31, 2014								December 31, 2014
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash	$	30,105	$	—	$	—	$	30,105	$	30,105
Money market funds	11,629		—		—		11,629		11,630
Corporate notes and bonds	—		61,519		—		61,519		61,520
Total cash and cash equivalents	41,734		61,519		—		103,253		103,255
Short-term investments:
Corporate notes and bonds	—		51,453		—		51,453		51,438
U.S. government agency securities	7,000		—		—		7,000		7,000
Total short-term investments	7,000		51,453		—		58,453		58,438
Restricted cash equivalents and investments	—		3,000		—		3,000		3,000
Equity investments in publicly traded securities	2,676		—		—		2,676		428
Total	$	51,410	$	115,972	$	—	$	167,382	$	165,121

	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 investments in publicly traded securities	7,181		—		—		7,181		842
Total	$	68,237	$	168,099	$	—	$	236,336	$	229,950

Restricted cash equivalents and investments as of December 31, 2014 and 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 2014, 2013, and 2012 were not significant. Gross unrealized gains and gross unrealized losses on short-term investment securities as of December 31, 2014 and 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 December 31, 2014 are as follows (in thousands):

43

	Estimated Fair Value
Within one year	$	46,336
Between one year and five years	12,117
Total short-term investments	$	58,453

Our equity investment in a publicly traded company as of December 31, 2014 and 2013 consisted of J-Stream Inc., a Japanese media services company. This equity investment is accounted for as available for sale. In 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, reported in Other income (expense), net, in the consolidated statement of operations.

In 2013 and 2012 we sold shares of common stock in LoEn Entertainment, Inc., a Korean digital music distribution company. The 2013 sales resulted in cash proceeds of $29.2 million, net of transaction costs, and a total pre-tax gain of $21.4 million. The 2012 sales resulted in net cash proceeds of $6.4 million and a total pre-tax gain of $4.3 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).

See Note 11, Lease Exit and Related Charges, for a discussion of the losses related to reductions in the use of RealNetworks' office space.

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Note 6. Allowance for Doubtful Accounts Receivable and Sales Returns

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

	Years ended December 31,
	2014			2013			2012
Balance, beginning of year	$	966		$	1,010		$	1,445
Addition (reduction) to allowance	433			(2		)	76
Amounts written off	—			(83		)	(529		)
Effects of foreign currency translation	(111		)	41			18
Balance, end of year	$	1,288		$	966		$	1,010

Activity in the allowance for sales returns (in thousands):

	Years ended December 31,
	2014			2013			2012
Balance, beginning of year	$	569		$	653		$	668
Addition (reduction) to allowance	(209		)	(64		)	153
Amounts written off	(6		)	(21		)	(168		)
Effects of foreign currency translation	—			1			—
Balance, end of year	$	354		$	569		$	653
Total, Allowance for Doubtful Accounts Receivable and Sales Returns	$	1,642		$	1,535		$	1,663

One customer accounted for 21% and one other customer accounted for 15% of trade accounts receivable as of December 31, 2014. One customer accounted for 17% of trade accounts receivable as of December 31, 2013.

One customer accounted for approximately 20% or $31.9 million, of consolidated revenue during the year ended December 31, 2014, in our Mobile Entertainment segment.

One customer accounted for 13%, or $27.0 million, of consolidated revenue during the year ended December 31, 2013, in our RealPlayer and Games segments. One other customer accounted for 13%, or $26.4 million, of consolidated revenue during the year ended December 31, 2013, in our Mobile Entertainment segment.

One customer accounted for 11%, or $27.7 million, of consolidated revenue during the year ended December 31, 2012, in our RealPlayer and Games segments.

Note 7. Other Intangible Assets

Other intangible assets (in thousands):

		As of December 31,
		2014						2013
		Gross Amount		Accumulated Amortization		Net		Gross Amount		Accumulated Amortization		Net
Amortizing intangible assets:
	Customer relationships	$	33,853	$	31,643	$	2,210	$	35,156	$	31,262	$	3,894
	Developed technology	28,261		25,699		2,562		29,097		25,039		4,058
	Patents, trademarks and tradenames	3,817		3,528		289		4,021		3,627		394
	Service contracts	6,312		5,764		548		5,679		5,532		147
		72,243		66,634		5,609		73,953		65,460		8,493
Non-amortizing intangible assets:
	Trademarks and tradenames	4,500		—		4,500		4,500		—		4,500
	Total	$	76,743	$	66,634	$	10,109	$	78,453	$	65,460	$	12,993

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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.

Amortization expense related to other intangible assets during the years ended December 31, 2014, 2013, and 2012 was $3.4 million, $4.4 million, and $4.1 million, respectively.

Estimated future amortization of other intangible assets (in thousands):

2015	$	2,654
2016	1,724
2017	856
2018	375
Total	$	5,609

No impairments of other intangible assets were recognized in 2014, 2013 or 2012.

Note 8. Goodwill

Changes in goodwill (in thousands):

	December 31,
	2014			2013
Balance, beginning of year
Goodwill	$	328,129		$	316,962
Accumulated impairment losses	(310,653		)	(310,653		)
	17,476			6,309
Increases due to current year acquisitions	460			11,463
Effects of foreign currency translation	(581		)	(296		)
	(121		)	11,167
Balance, end of year
Goodwill	328,008			328,129
Accumulated impairment losses	(310,653		)	(310,653		)
	$	17,355		$	17,476

Goodwill by segment (in thousands):

	December 31,
	2014		2013
RealPlayer Group	$	985	$	580
Mobile Entertainment	1,976		2,119
Games	14,394		14,777
Total goodwill	$	17,355	$	17,476

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. For the 2013 year increases in goodwill, see Note 3, Acquisitions, for details on our acquisitions of Slingo, a social casino games business and Muzicall, a ringback tone business.

No impairments of goodwill were recorded in 2014, 2013, or 2012.

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Note 9. Accrued and Other Current Liabilities

Accrued and other current liabilities (in thousands):

	December 31, 2014		December 31, 2013
Royalties and other fulfillment costs	$	4,868	$	16,467
Employee compensation, commissions and benefits	7,711		10,060
Sales, VAT and other taxes payable	5,896		7,237
Other	6,811		8,129
Total accrued and other current liabilities	$	25,286	$	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 10. Restructuring Charges

Restructuring and other charges in 2014, 2013 and 2012 consist of costs associated with the ongoing reorganization of our business operations and our ongoing expense re-alignment efforts. The expense amounts in all three years primarily relate to severance costs due to workforce reductions and are classified as Employee Separation Costs in the table below.

We also incurred restructuring charges during 2013 related to the relocation of our Seattle headquarters totaling $1.8 million, which is classified as Asset Related and Other Costs in the table below. For details on other costs associated with the termination of our Seattle headquarters lease see Note 11, Lease exit and related charges.

In 2012 we assigned two of our existing domestic carrier SaaS service contracts to a third party, resulting in contract assignment costs of $3.6 million and asset related and other costs of $2.5 million.

Details of restructuring charges for the years ended December 31, 2014, 2013, and 2012 are shown in the table below (in thousands):

	By Type of Cost
	Employee Separation Costs		Contract Assignment Costs		Asset Related and Other Costs		Total
Costs incurred and charged to expense for the year ended December 31, 2014	$	4,992	$	—	$	—	$	4,992
Costs incurred and charged to expense for the year ended December 31, 2013	$	3,961	$	—	$	1,804	$	5,765
Costs incurred and charged to expense for the year ended December 31, 2012	$	9,052	$	3,629	$	2,544	$	15,225

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Changes to the accrued restructuring liability (which is included in Accrued and other current liabilities) for 2014, 2013 and 2012, (in thousands):

	By Type of Cost
	Employee Separation Costs			Contract Assignment Costs			Total
Accrued liability as of December 31, 2011	$	131		$	—		$	131
Costs incurred and charged to expense for the year ended December 31, 2012, excluding non-cash charges	8,300			3,629			11,929
Cash payments	(7,700		)	(1,929		)	(9,629		)
Accrued liability as of December 31, 2012	731			1,700			2,431
Costs incurred and charged to expense for the year ended December 31, 2013	3,961			—			3,961
Cash payments	(3,936		)	(1,700		)	(5,636		)
Accrued liability as of December 31, 2013	756			—			756
Costs incurred and charged to expense for the year ended December 31, 2014	4,992			—			4,992
Cash payments	(5,299		)	—			(5,299		)
Accrued liability as of December 31, 2014	$	449		$	—		$	449

Note 11. Lease Exit and Related Charges

As a result of the reduction in use of RealNetworks' office space, primarily in our former corporate headquarters in Seattle, Washington, and certain other locations, losses have been recognized representing rent and contractual operating expenses over the remaining life of the leases, and related write-downs of leasehold improvements to their estimated fair value.

In 2013, we entered into a new lease in a new location for our Seattle headquarters and concurrently entered into an amendment to our then-current headquarters office lease that provided for an early termination of such lease. The new Seattle building lease is for an initial term of 11 years and we have the option to extend the lease for two additional five-year terms, with certain increases in base rent. The early termination of our former Seattle headquarters office lease in 2013 resulted in us paying the landlord $6.5 million in fees in 2013.

Changes to the accrued loss on excess office facilities (in thousands):

	Years Ended December 31,
	2014			2013			2012
Accrued loss, beginning of year	$	254		$	4,213		$	2,747
Additions and adjustments to the lease loss accrual, including sublease income estimate revision, and related asset write-downs	668			1,421			3,290
Less write-down of leasehold improvements	—			—			(496		)
Less amounts paid, net of sublease income	(688		)	(5,380		)	(1,328		)
Accrued loss, end of year	234			254			4,213
Less current portion (included in Accrued and other current liabilities)	(234		)	(254		)	(2,463		)
Accrued loss, non-current portion (included in Other long term liabilities)	$	—		$	—		$	1,750

Note 12. Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss)

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

48

		Years Ended December 31,
		2014			2013			2012
Investments
	Accumulated other comprehensive income (loss), beginning of period	$	6,397		$	26,685		$	27,318
	Unrealized gains (losses), net of tax effects of $0, $(54) and $0	(1,774		)	2,121			3,313
	Reclassification adjustments for losses (gains) included in other income (expense), net of tax effects of $4, $(800) and $0	(2,371		)	(22,409		)	(3,946		)
	Net current period other comprehensive income	(4,145		)	(20,288		)	(633		)
	Accumulated other comprehensive income (loss) balance, end of period	$	2,252		$	6,397		$	26,685
Foreign currency translation
	Accumulated other comprehensive income (loss), beginning of period	$	(54,092	)	$	(53,225	)	$	(52,202	)
	Translation adjustments	(3,364		)	(296		)	943
	Reclassification adjustments for losses (gains) included in other income (expense)	(48		)	(571		)	(1,966		)
	Net current period other comprehensive income	(3,412		)	(867		)	(1,023		)
	Accumulated other comprehensive loss balance, end of period	$	(57,504	)	$	(54,092	)	$	(53,225	)
Total accumulated other comprehensive income (loss), end of period		$	(55,252	)	$	(47,695	)	$	(26,540	)

Preferred Stock.    Each share of Series A preferred stock entitles the holder to one thousand votes and dividends equal to one thousand times the aggregate per share amount of dividends declared on the common stock. There are no shares of Series A preferred stock outstanding.

Undesignated preferred stock will have rights and preferences that are determinable by the Board of Directors if and when determination of a new series of preferred stock has been established.

Note 13. Employee Stock and Benefit Plans

Equity Compensation Plans.  Under our equity incentive plans we may grant various types of equity awards to employees and Directors. We have granted time-vest and performance-vest stock options and time-vest and performance-vest restricted stock. Generally, options vest based on continuous employment, over a four-year period. The options generally expire seven years from the date of grant and are exercisable at the market value of the common stock at the grant date. Time-vest restricted stock awards generally vest based on continuous employment over a two or four-year period. Performance-based awards vest if the specified performance targets are met and the grantee remains employed over the required period. The performance targets for these awards are generally based on the achievement of company-specific financial results. For these performance-based awards, expense is recognized when it is probable the performance goal will be achieved. We have also issued market-based performance stock options to certain employees. These awards vest if the market condition is met and the grantee remains employed over the requisite service period.

We issue new shares of common stock upon exercise of stock options and the vesting of restricted stock. As of December 31, 2014 there were 7.0 million shares of common stock authorized for future equity awards. Each restricted stock unit granted reduces and each restricted stock unit forfeited or canceled increases the shares available for future grant by a factor of 1.6 shares. Each stock option granted reduces and each stock option forfeited or canceled increases the shares available for future grant by a factor of one share. We also have an employee stock purchase plan, under which 0.5 million shares of common stock are authorized for future issuance as of December 31, 2014.

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

49

	Years Ended December 31,
	2014		2013		2012
Total stock-based compensation expense	$	5,204	$	7,468	$	8,123

The total stock-based compensation amounts disclosed above are recorded in their respective line items within operating expenses in the consolidated statement of operations. No stock-based compensation was capitalized as part of the cost of an asset as of December 31, 2014, 2013, or 2012. As of December 31, 2014, we had $10.5 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 three years.

As discussed in Note 1, Description of Business and Summary of Significant Accounting Policies - Stock-Based Compensation, the valuation models for stock option awards require various highly judgmental assumptions. The assumption for the expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, including the contractual terms, vesting schedules, and expectations of future employee behavior. Expected stock price volatility is based on historical volatility of our common stock for the related expected term. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with a term equivalent to the expected term of the stock options. The dividend yield is estimated at zero because we do not currently anticipate paying dividends in the foreseeable future.

The fair value of options granted used the following weighted average assumptions:

	Years ended December 31,
	2014		2013		2012
Expected dividend yield	—	%	—	%	—	%
Risk-free interest rate	1.40	%	0.86	%	0.50	%
Expected term (years)	4.5		4.3		4.2
Volatility	41	%	48	%	58	%

Restricted stock unit and award activity was as follows (shares are in thousands):

	Shares		Weighted Average Grant Date Fair Value Per Share		Total Grant Date Fair Value of Vested Awards (000's)
Nonvested shares, December 31, 2011	463		$	9.42
Granted	1,536		8.70
Vested	(437	)	9.47		$	4,106
Forfeited/Canceled	(313	)	9.42
Nonvested shares, December 31, 2012	1,249		$	8.52
Granted	232		7.18
Vested	(581	)	9.13		$	4,438
Forfeited/Canceled	(410	)	7.74
Nonvested shares, December 31, 2013	490		$	7.80
Granted	159		7.60
Vested	(193	)	8.35		$	1,608
Forfeited/Canceled	(56	)	7.73
Nonvested shares, December 31, 2014	400		$	7.47

At December 31, 2014 the aggregate intrinsic value of restricted stock awards was $2.8 million and the weighted average remaining contractual term was approximately 2 years.

Stock option activity (shares are in thousands):

50

	Options Outstanding				Weighted Average Grant Date Fair Value
	Number of Shares		Weighted Average Exercise Price
Outstanding, December 31, 2011	6,365		$	14.24
Options granted at common stock price	1,422		8.29		$	3.71
Options exercised	(466	)	6.61
Options cancelled	(2,787	)	12.76
Outstanding, December 31, 2012	4,534		$	14.07
Options granted at common stock price	3,578		7.56		$	2.93
Options exercised	(24	)	5.56
Options cancelled	(1,463	)	15.76
Outstanding, December 31, 2013	6,625		$	10.21
Options granted at common stock price	2,036		7.44		$	2.51
Options exercised	(44	)	7.26
Options cancelled	(1,893	)	14.47
Outstanding, December 31, 2014	6,724		$	8.19
Exercisable, December 31, 2014	2,601		$	9.19
Vested and expected to vest, December 31, 2014	5,982		$	8.26

In 2014 we granted 400,000 market-based stock options, which are included in the stock option tables above.

As of December 31, 2014, the weighted average remaining contractual life of the options was as follows: outstanding options 5.2 years; exercisable options 3.9 years; and vested and expected to vest options 5.1 years.

As of December 31, 2014, the aggregate intrinsic value of the options was as follows: outstanding options $0.2 million; exercisable options $0.1 million; and vested and expected to vest options $0.2 million.

The aggregate intrinsic value of stock options exercised in 2014 was insignificant. The aggregate intrinsic value of stock options exercised in 2013 and 2012 was, $0.1 million and $1.0 million.

Employee Stock Purchase Plan.    Our Employee Stock Purchase Plan (ESPP) allows an eligible employee to purchase shares of our common stock at a price equal to 85 percent of the fair market value of the common stock at the end of the semi-annual offering periods, subject to certain limitations. Under the ESPP, 78,500, 71,600, and 102,700 shares were purchased during the years ended December 31, 2014, 2013 and 2012, respectively.

Retirement Savings Plan.    We have a salary deferral plan (401(k) Plan) that covers substantially all employees. Eligible employees may contribute a portion of their eligible compensation to the plan up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws. During the years ended December 31, 2014, 2013, and 2012, we matched 50% of the first three percent of participating employees’ contributions, and contributed $0.7 million, $0.8 million, and $1.0 million, respectively, in matching contributions. We can terminate the matching contributions at our discretion. We have no other post-employment or post-retirement benefit plans.

Note 14. Income Taxes

Components of income (loss) before income taxes (in thousands):

	Years ended December 31,
	2014			2013			2012
United States operations	$	(67,186	)	$	(50,032	)	$	59,807
Foreign operations	(3,349		)	(4,055		)	(2,448		)
Income (loss) before income taxes	$	(70,535	)	$	(54,087	)	$	57,359

Components of income tax expense (benefit) (in thousands):

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	Years ended December 31,
	2014			2013			2012
Current:
United States federal	$	547		$	2,460		$	1,372
State and local	69			61			(2,957		)
Foreign	901			1,706			(6,221		)
Total current	1,517			4,227			(7,806		)
Deferred:
United States federal	21			(1,890		)	22,029
State and local	(40		)	51			556
Foreign	(218		)	2,515			(2,261		)
Total deferred	(237		)	676			20,324
Total income tax expense (benefit)	$	1,280		$	4,903		$	12,518

Income tax expense differs from “expected” income tax expense (computed by applying the U.S. federal income tax rate of 35%) due to the following (in thousands):

	Years ended December 31,
	2014			2013			2012
United States federal tax expense (benefit) at statutory rate	$	(24,687	)	$	(18,930	)	$	20,076
State taxes, net of United States federal tax expense (benefit)	(1,083		)	(841		)	(1,098		)
Change in valuation allowance	27,759			25,046			2,136
Non-deductible stock compensation	270			415			341
Impact of non-U.S. jurisdictional tax rate difference	529			487			313
Research and development tax credit	(325		)	(1,632		)	(1,923		)
Increase (reversal) of unrecognized tax benefits	(901		)	671			(7,826		)
Non-U.S. withholding tax	393			1,805			471
Other	(675		)	(2,118		)	28
Total income tax expense (benefit)	$	1,280		$	4,903		$	12,518

Net deferred tax assets are comprised of the following (in thousands):

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	December 31,
	2014			2013
Deferred tax assets:
United States federal net operating loss carryforwards	$	66,547		$	41,612
Deferred expenses	2,552			7,166
Research and development tax credit carryforwards	22,979			23,079
Alternative minimum tax credit carryforward	3,626			3,561
Net unrealized loss on investments	97			109
Accrued loss on excess office facilities	—			54
Stock-based compensation	11,398			12,225
State net operating loss carryforwards	8,400			7,392
Foreign net operating loss carryforwards	34,210			37,594
Deferred revenue	401			128
Equipment, software, and leasehold improvements	3,252			2,736
Intangibles	19			27
Other	4,332			4,489
Gross deferred tax assets	157,813			140,172
Less valuation allowance	149,474			128,865
Gross deferred tax assets, net of valuation allowance	$	8,339		$	11,307
Deferred tax liabilities:
Other intangible assets	$	(3,035	)	$	(3,761	)
Net unrealized gains and basis differences on investments	(4,226		)	(6,912		)
Other	(397		)	(560		)
Prepaid expenses	(1,360		)	(814		)
Gross deferred tax liabilities	(9,018		)	(12,047		)
Net deferred tax assets (liabilities)	$	(679	)	$	(740	)

Income tax receivables were $0.1 million and $0.4 million at December 31, 2014 and 2013, respectively.

In 2014, we continued to record a valuation allowance on the deferred tax assets that we believe are not more likely than not to be realized. The net change in valuation allowance was a $20.6 million increase and a $38.1 million increase during the years ended December 31, 2014 and 2013, respectively.

We maintain a valuation allowance of $149.5 million for our deferred tax assets due to uncertainty regarding their realization as of December 31, 2014. The net increase in the valuation allowance since December 31, 2013 of $20.6 million was the result of an increase in current year deferred tax assets for which the Company maintains a valuation allowance.

RealNetworks' U.S. federal net operating loss carryforwards totaled $190.1 million and $118.9 million at December 31, 2014 and 2013, respectively. The increase is mainly due to the current year U.S. taxable loss. The remaining net operating loss carryforwards as of December 31, 2014 are from the U.S. taxable losses in 2010, 2011 and 2013 and from acquired subsidiaries that are limited under Internal Revenue Code Section 382. These net operating loss carryforwards expire between 2024 and 2034.

RealNetworks' alternative minimum tax credit carryforward remained at $3.6 million from December 31, 2013 to December 31, 2014. The alternative minimum tax credit can be carried forward indefinitely.

RealNetworks' U.S. federal research and development tax credit carryforward totaled $23.0 million and $23.1 million at December 31, 2014 and 2013, respectively. The research and development credit carryforwards expire between 2020 and 2034.

As of December 31, 2014 and 2013, we had $3.5 million and $4.5 million of unrecognized tax benefits, respectively. The decrease in unrecognized tax benefits is due to the expiration of the statute of limitations. As of December 31, 2014, there are no unrecognized tax benefits remaining that would affect our effective tax rate if recognized, as the offset would increase the valuation allowance. The total amount of unrecognized tax benefits that would affect our effective tax rate if recognized was $0.4 million in December 31, 2013.

As of December 31, 2014, we have no accrued interest or penalties related to uncertain tax positions. As of December 31, 2013, we had approximately $0.1 million of accrued interest and penalties related to uncertain tax positions. To the extent

53

interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

Reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits (in thousands):

	Years ended December 31,
	2014			2013			2012
Balance, beginning of year	$	4,505		$	3,978		$	16,721
Increases related to prior year tax positions	—			—			416
Decreases related to prior year tax positions	(196		)	(125		)	(94		)
Settlements with taxing authorities	—			—			(13,065		)
Increases related to current year tax positions	130			652			—
Expiration of the statute of limitations	(898		)	—			—
Balance, end of year	$	3,541		$	4,505		$	3,978

Note 15. Earnings (Loss) Per Share

Basic and diluted net income (loss) per share (EPS) (in thousands, except per share data):

	Years ended December 31,
	2014			2013			2012
Net income (loss)	$	(71,815	)	$	(58,990	)	$	44,841
Weighted average common shares outstanding used to compute basic EPS	35,947			35,553			34,873
Dilutive effect of stock based awards	—			—			249
Weighted average common shares outstanding used to compute diluted EPS	35,947			35,553			35,122
Basic EPS	$	(2.00	)	$	(1.66	)	$	1.29
Diluted EPS	$	(2.00	)	$	(1.66	)	$	1.28

Approximately 6.3 million, 4.6 million, and 5.1 million shares of potentially issuable shares from stock awards were excluded from the calculation of diluted EPS for the years ended December 31, 2014, 2013, and 2012, respectively, because of their antidilutive effect.

Note 16. Commitments and Contingencies

Commitments.    We have commitments for future payments related to office facilities leases. We lease office facilities under various operating leases expiring through 2024. Future minimum payments as of December 31, 2014 are as follows (in thousands):

	Office Leases
2015	$	6,667
2016	4,741
2017	3,179
2018	2,721
2019	3,186
Thereafter	15,883
Total minimum payments	$	36,377

Of the total office lease future minimum payments, $0.2 million is recorded in accrued lease exit and related charges at December 31, 2014.

Rent expense during the years ended December 31, 2014, 2013, and 2012, was $6.8 million, $8.3 million, and $9.1 million, respectively. These amounts are net of sublease income of $0.2 million, $0.8 million and $1.0 million in each of the years ended December 31,2014, 2013 and 2012.

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Litigation. In October 2013, we executed settlement agreements relating to certain outstanding litigation matters; specifically, the matters brought against us by VoiceAge Corporation and Callertone Innovations, Inc. which are more fully described in our 2013 Annual Report on Form 10-K. During the fourth quarter of 2013, we paid an aggregate of $11.5 million, representing our total obligation under these settlements.

We 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.

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 some of our 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.

Note 18. Segment Information

We have three reportable segments: (1) RealPlayer Group, which includes our new RealPlayer Cloud product, our RealPlayer media player software and related products, and our SuperPass service; (2) Mobile Entertainment, which includes our SaaS services, our LISTEN product and to a lesser degree, 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 are reported as corporate items. Also reported as corporate items were the 2014 extinguishment of the liability associated with our historical musical business, the 2013 loss on litigation settlements, and in 2012, the sale of patent and other technology assets, net of costs.     

RealNetworks reports the three reportable segments based on factors such as how we manage our operations and how our Chief Operating Decision Maker reviews results. Our Chief Operating Decision Maker is considered to be the CEO Staff (CEOS), which includes the Chief Executive Officer, Chief Financial Officer, our Presidents and General Counsel. 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.

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Segment results for the years ended December 31, 2014, 2013 and 2012 were as follows (in thousands):

RealPlayer Group

	2014			2013			2012
Revenue	$	39,201		$	75,206		$	91,469
Cost of revenue	14,508			16,220			21,544
Gross profit	24,693			58,986			69,925
Operating expenses	55,742			60,484			55,223
Operating income (loss)	$	(31,049	)	$	(1,498	)	$	14,702

Mobile Entertainment

	2014			2013			2012
Revenue	$	79,901		$	81,181		$	100,318
Cost of revenue	50,399			47,608			57,670
Gross profit	29,502			33,573			42,648
Operating expenses	33,325			35,839			52,614
Operating income (loss)	$	(3,823	)	$	(2,266	)	$	(9,966	)

Games

	2014			2013			2012
Revenue	$	37,110		$	49,809		$	67,055
Cost of revenue	11,074			13,359			21,828
Gross profit	26,036			36,450			45,227
Operating expenses	37,170			47,177			51,890
Operating income (loss)	$	(11,134	)	$	(10,727	)	$	(6,663	)

Corporate

	2014			2013			2012
Cost of revenue	$	400		$	1,904		$	2,689
Extinguishment of liability	(10,580		)	—			—
Gain on sale of patents and other technology assets, net of costs	—			—			116,353
Operating expenses	33,327			54,413			56,174
Operating income (loss)	$	(23,147	)	$	(56,317	)	$	57,490

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

	Years ended December 31,
	2014		2013		2012
United States	$	61,660	$	90,250	$	117,844
Europe	26,575		38,155		56,473
Republic of Korea	39,852		46,601		40,467
Rest of the World	28,125		31,190		44,058
Total	$	156,212	$	206,196	$	258,842

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

	December 31,
	2014		2013		2012
United States	$	33,421	$	40,347	$	27,915
Europe	6,696		8,280		2,350
Republic of Korea	547		936		2,463
Rest of the World	3,048		4,078		6,172
Total long-lived assets	$	43,712	$	53,641	$	38,900

Note 19. Related Party Transactions

Transactions with Rhapsody. See Note 4, 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. During the years ended December 31,2013, and 2012 we charged Rhapsody $0.5 million and $0.8 million, respectively, for the support services.

Transactions with LoEn Entertainment, Inc. In 2008, RealNetworks acquired, at market prices, approximately 11% of the common shares of LoEn Entertainment, Inc., whose shares are traded on the Korean Securities Dealers Automated Quotations. In November 2013, we sold all of our remaining shares of common stock in LoEn, which equaled approximately 9% of the outstanding shares as of September 30, 2013, as discussed in more detail in Note 5, Fair Value Measurements. Our investment in LoEn was treated as an available for sale investment and was marked-to-market each period with resulting unrealized gains or losses recognized in AOCI. During the years ended December 31,2013, and 2012, we recorded revenue from LoEn of $26.4 million and $18.1 million, respectively. Revenue consisted primarily of sales of application service provider services, which include sales of ringback tones, music on demand, video on demand, and intercarrier messaging services.

Note 20. Quarterly Information (Unaudited)

The following table summarizes the unaudited statement of operations for each quarter of 2014 and 2013 (in thousands, except per share data):

	Total			Dec. 31 (3)			Sept. 30 (4)			June 30			Mar. 31 (2)
2014
Net revenue	$	156,212		$	35,506		$	34,157		$	40,825		$	45,724
Gross profit	90,411			17,625			15,229			20,039			37,518
Operating (loss) income	(69,153		)	(20,682		)	(20,763		)	(18,832		)	(8,876		)
Net income (loss)	(71,815		)	(20,838		)	(22,178		)	(21,029		)	(7,770		)
Basic net income (loss) per share (1)	(2.00		)	(0.58		)	(0.62		)	(0.59		)	(0.22		)
Diluted net income (loss) per share (1)	(2.00		)	(0.58		)	(0.62		)	(0.59		)	(0.22		)
2013
Net revenue	$	206,196		$	50,595		$	48,958		$	49,850		$	56,793
Gross profit	127,105			30,519			29,968			30,331			36,287
Operating (loss) income	(70,808		)	(14,441		)	(28,437		)	(16,504		)	(11,426		)
Net income (loss)	(58,990		)	2,530			(31,375		)	(18,471		)	(11,674		)
Basic net income (loss) per share (1)	(1.66		)	0.07			(0.88		)	(0.52		)	(0.33		)
Diluted net income (loss) per share (1)	(1.66		)	0.07			(0.88		)	(0.52		)	(0.33		)

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(1) The sum of the quarterly net income per share amounts will not necessarily equal net income per share for the year due to the use of weighted average quarterly shares and the effects of rounding.

(2) In 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.

(3) In the quarter ended December 31, 2013, we sold our remaining shares of common stock in LoEn Entertainment for a net gain of $21.4 million, as described in further detail in Note 5.

(4) In the quarter ended September 30, 2013, we accrued an aggregate of $11.5 million for certain legal matters, which was subsequently paid in the fourth quarter of 2013.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

RealNetworks, Inc.:

We have audited the accompanying consolidated balance sheets of RealNetworks, Inc. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RealNetworks, Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2014 in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), RealNetworks, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 25, 2015 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Seattle, Washington

February 25, 2015

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

RealNetworks, Inc.:

We have audited RealNetworks, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control — Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). RealNetworks, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting (Item 9A). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, RealNetworks, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of RealNetworks, Inc. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2014, and our report dated February 25, 2015 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Seattle, Washington

February 25, 2015

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of the principal executive officer and principal financial officer, has evaluated the effectiveness of our "disclosure controls and procedures" (as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act)). Based on their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that we file or submit under the Exchange Act (1) is recorded, processed, summarized, and reported within the time period specified in the Securities and Exchange Commission rules and forms and (2) is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation, our management concluded that, as of December 31, 2014 RealNetworks maintained effective internal control over financial reporting.

KPMG LLP, an independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2014, which is included within Item 8.

Changes in Internal Control over Financial Reporting

Our management, with the participation of the principal executive officer and principal financial officer, has evaluated the changes to our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2014 as required by paragraph (d) of Rules 13a-15 and 15d-15 of the Exchange Act and has concluded that there were no such changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Not applicable.

PART III.

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated by reference to the information contained in part in the sections captioned “Proposal 1–Election of Directors,” “Board of Directors,” and “Voting Securities and Principal Holders” of the Proxy Statement relating to RealNetworks’ 2015 Annual Meeting of Shareholders or in an amendment to this 10-K, to be filed with the Securities and Exchange Commission within 120 days after the fiscal year ended December 31, 2014.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference to the information contained in the section captioned “Executive Compensation” of the Proxy Statement relating to RealNetworks’ 2015 Annual Meeting of Shareholders or in an amendment to this 10-K, to be filed with the Securities and Exchange Commission within 120 days after the fiscal year ended December 31, 2014.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

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The information required by this item is incorporated by reference to the information contained in the section captioned “Voting Securities and Principal Holders” of the Proxy Statement relating to RealNetworks’ 2015 Annual Meeting of Shareholders or in an amendment to this 10-K, to be filed with the Securities and Exchange Commission within 120 days after the fiscal year ended December 31, 2014.

Equity Compensation Plans

As of December 31, 2014, we had awards outstanding under five equity compensation plans. These plans include the RealNetworks, Inc. 1995 Stock Option Plan (1995 Plan), the RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated (1996 Plan), the RealNetworks, Inc. 2000 Stock Option Plan, as amended and restated (2000 Plan), the RealNetworks, Inc. 2005 Stock Incentive Plan, as amended and restated (2005 Plan), and the RealNetworks, Inc. 2002 Director Stock Option Plan (2002 Plan). In addition, we maintain the RealNetworks, Inc. 2007 Employee Stock Purchase Plan, as amended and restated October 2010 (2007 ESPP). The 1995 Plan, 1996 Plan, 2002 Plan, 2005 Plan and 2007 ESPP have been approved by our shareholders. The 2000 Plan has not been approved by our shareholders.

In 2005, our shareholders approved the 2005 Plan and upon this approval of the 2005 Plan, we terminated the 1995 Plan, the 1996 Plan, the 2000 Plan and the 2002 Plan. In 2007, our shareholders approved an amended and restated 2005 Plan, and upon this approval, we terminated the RealNetworks, Inc. Director Compensation Stock Plan. As a result of the termination of these Plans, all new equity awards will be issued under the 2005 Plan. In 2007, our shareholders also approved the 2007 ESPP.

The following table aggregates the data from our plans (in thousands):

Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (in 000’s)(a)	Weighted-average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (in 000’s)(c)
Equity compensation plans approved by security holders	7,119	$	8.18	7,028	(1)(2)
Equity compensation plans not approved by security holders	5	$	29.13	—
Total	7,124	$	8.19	7,028	(3)

(1) On January 1, 2008, the 2007 ESPP became effective. Column (c) above excludes an aggregate of 0.5 million shares of the Company’s common stock that are authorized for issuance pursuant to the 2007 ESPP.

(2) Includes shares available for future issuances pursuant to the RealNetworks, Inc. 2007 Director Compensation Stock Plan (2007 Director Plan), a sub-plan that operates and is administered under the 2005 Plan. Under the 2007 Director Plan, outside directors may elect to receive all or a portion of his or her quarterly director compensation in shares of the Company’s common stock in lieu of cash. Shares issued to directors under the 2007 Director Plan are issued from the shares reserved under the 2005 Plan.

(3) The total securities in column (a) include 6,724 stock options and 400 restricted stock units and awards. The weighted average exercise prices in columns (b) relate to the stock options only; restricted stock units and awards have no exercise price.

Equity Compensation Plans Not Approved By Security Holders.    The Board of Directors adopted the 2000 Plan to enable the grant of nonqualified stock options to employees and consultants of RealNetworks and its subsidiaries who are not otherwise officers or directors of RealNetworks. The 2000 Plan has not been approved by RealNetworks’ shareholders. The Compensation Committee of the Board of Directors is the administrator of the 2000 Plan, and as such determines all matters relating to options granted under the 2000 Plan. Nonqualified stock options granted pursuant to the 2000 Plan were granted with exercise prices equal to the fair market value of RealNetworks’ common stock on the date of grant and typically vest over five years as determined by the Compensation Committee or pursuant to delegated authority as provided in the 2000 Plan. In June 2005, the 2000 Plan was terminated and the remaining available shares were transferred to the 2005 Plan.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference to the information contained in the section captioned “Executive Compensation–Policies and Procedures with Respect to Related Person Transactions” and “Election of Directors–Director Independence” of the Proxy Statement relating to RealNetworks’ 2015 Annual Meeting of Shareholders or in an amendment to this 10-K, to be filed with the Securities and Exchange Commission within 120 days after the fiscal year ended December 31, 2014.

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Item 14. Principal Accountant Fees and Services

The information required by this item is incorporated by reference to the information contained in the section captioned “Proposal 2–Ratification of Appointment of Independent Registered Public Accounting Firm” of the Proxy Statement relating to RealNetworks’ 2015 Annual Meeting of Shareholders or in an amendment to this 10-K, to be filed with the Securities and Exchange Commission within 120 days after the fiscal year ended December 31, 2014.

PART IV.

Item 15. Exhibits and Financial Statement Schedules

(a)(1) Index to Consolidated Financial Statements

The following consolidated financial statements of RealNetworks, Inc. and subsidiaries are filed as part of this report:

Consolidated Balance Sheets — December 31, 2014 and 2013

Consolidated Statements of Operations and Comprehensive Income (Loss) — Years Ended December 31, 2014, 2013, and 2012

Consolidated Statements of Cash Flows — Years Ended December 31, 2014, 2013, and 2012

Consolidated Statements of Shareholders’ Equity — Years Ended December 31, 2014, 2013, and 2012

Notes to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

(a)(2) Financial Statement Schedules

All financial statement schedules have been omitted since they are either not required, not applicable, or because the information required is included in the consolidated financial statements or the notes thereto.

(a)(3) Index to Exhibits

See Index to Exhibits below.

63

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Seattle, State of Washington, on February 25, 2015.

REALNETWORKS, INC.
BY:	/s/ ROBERT GLASER
	Robert Glaser
	Chairman of the Board and Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints Robert Glaser and Michael Parham, and each of them severally, his or her true and lawful attorneys-in-fact and agents, with full power to act without the other and with full power of substitution and resubstitution, to execute in his or her name and on his or her behalf, individually and in each capacity stated below, any and all amendments and supplements to this Report, and any and all other instruments necessary or incidental in connection herewith, and to file the same with the Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated below on February 25, 2015.

Signature	Title
/S/    _______ROBERT GLASER________          Robert Glaser	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
/S/    ______MARJORIE THOMAS_______        Marjorie Thomas	Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)
/S/  ___JOHN E. CUNNINGHAM IV____                 John E. Cunningham IV	Director
/S/     _____MICHAEL T. GALGON_____                 Michael T. Galgon	Director
/S/     _______DAWN G. LEPORE______                 Dawn G. Lepore	Director
/S/     _______JANICE ROBERTS______                 Janice Roberts	Director
/S/     _____MICHAEL B. SLADE______                 Michael B. Slade	Director
/S/     ___DOMINIQUE TREMPONT___                       Dominique Trempont	Director

64

Exhibit Index

			Incorporated by Reference
Exhibit No.		Exhibit Description	Form	SEC File No.	Exhibit	Filing Date
2.1		Transaction, Contribution and Purchase Agreement dated as of February 9, 2010 among Rhapsody America LLC, RealNetworks, Inc., RealNetworks Digital Music of California, Inc., Viacom International Inc. and DMS Holdco Inc.	8-K	000-23137	2.1	04/06/10
2.2	s	Asset Purchase Agreement dated as of January 26, 2012, by and between RealNetworks, Inc. and Intel Corporation. Certain schedules and exhibits referenced in the Asset Purchase Agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.	8-K	000-23137	2.1	01/30/12
3.1		Amended and Restated Articles of Incorporation	10-Q	000-23137	3.1	08/11/00
3.2		Articles of Amendment to the Amended and Restated Articles of Incorporation	8-K	000-23137	3.1	08/31/11
3.3		Amended and Restated Bylaws effective July 23, 2010	8-K	000-23137	3.1	07/29/10
4.1		Amended and Restated Shareholder Rights Plan dated as of December 2, 2008, by and between RealNetworks, Inc. and Mellon Investor Services LLC including the form of Certificate of Designation, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B and C, respectively	8-K	000-23137	4.1	12/03/08
10.1	†	RealNetworks, Inc. 1995 Stock Option Plan	S-8	333-63333	99.1	09/14/98
10.2	†	RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated on June 1, 2001	10-Q	000-23137	10.1	08/13/01
10.3	†	Amendment No. 1 to the RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated on June 1, 2001	8-K	000-23137	10.3	12/21/09
10.4	†	RealNetworks, Inc. 2000 Stock Option Plan, as amended and restated on June 1, 2001	10-Q	000-23137	10.2	08/13/01
10.5	†	Amendment No. 1 to the RealNetworks, Inc. 2000 Stock Option Plan, as amended and restated on June 1, 2001	8-K	000-23137	10.2	12/21/09
10.6	†	RealNetworks, Inc. 2002 Director Stock Option Plan	10-Q	000-23137	10.2	07/25/02
10.7	†	Form of Stock Option Agreement under the RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated	10-Q	000-23137	10.1	11/14/02
10.8	†	Form of Stock Option Agreement under the RealNetworks, Inc. 2000 Stock Option Plan, as amended and restated	10-Q	000-23137	10.2	11/14/02
10.9	†	Forms of Stock Option Agreement under the RealNetworks, Inc. 2002 Director Stock Option Plan	10-Q	000-23137	10.3	11/14/02
10.10	†	RealNetworks, Inc. 2007 Employee Stock Purchase Plan as amended and restated effective October 18, 2010	10-K	000-23137	10.10	03/16/11
10.11	†	RealNetworks, Inc. 2007 Director Compensation Stock Plan	10-K	000-23137	10.9	02/29/08
10.12	†	RealNetworks, Inc. 2005 Stock Incentive Plan, as amended and restated effective July 24, 2014	10-Q	000-23137	10.1	11/06/14
10.13	†	Form of Non-Qualified Stock Option Terms and Conditions for use under the RealNetworks, Inc. 2005 Stock Incentive Plan, as amended and restated	10-K	000-23137	10.13	03/18/13
10.14	†	Form of Restricted Stock Units Terms and Conditions for use under the RealNetworks, Inc. 2005 Stock Incentive Plan, as amended and restated	10-K	000-23137	10.14	03/18/13
10.15	†	Form of Performance Restricted Stock Units Terms and Conditions for use under the RealNetworks, Inc. 2005 Stock Incentive Plan, as amended and restated	10-K	000-23137	10.15	03/18/13

65

			Incorporated by Reference
Exhibit No.		Exhibit Description	Form	SEC File No.	Exhibit	Filing Date
10.16		Office Building Lease dated May 2, 2013 between 1501 First Avenue South Limited Partnership, as landlord, and RealNetworks, Inc., as tenant	10-Q	000-23137	10.2	08/08/13
10.17	†	Form of Director and Officer Indemnification Agreement	S-1	333-36553	10.14	09/26/97
10.18		Voting Agreement dated September 25, 1997 by and among RealNetworks, Robert Glaser, Accel IV L.P., Mitchell Kapor and Bruce Jacobsen	S-1	333-36553	10.17	09/26/97
10.19		Agreement dated September 26, 1997 by and between RealNetworks and Robert Glaser	S-1	333-36553	10.18	09/26/97
10.20	†	Offer Letter dated July 24, 2014 between RealNetworks, Inc. and Robert Glaser	10-Q	000-23137	10.2	11/06/14
10.21	†	Offer Letter dated February 21, 2014 between RealNetworks, Inc. and Atul Bali	10-Q	000-23137	10.1	05/08/14
10.22	†	Offer Letter dated May 31, 2014 between RealNetworks, Inc. and Michael Mulica	10-Q	000-23137	10.1	08/07/14
10.23	†	Offer Letter dated January 7, 2013 between RealNetworks, Inc. and Max Pellegrini	10-Q	000-23137	10.1	05/08/13
10.24	†	Promotion Letter dated August 24, 2012 between RealNetworks, Inc. and Michael Parham	10-Q	000-23137	10.3	08/08/13
10.25	†*	Offer Letter dated between RealNetworks, Inc. and Marjorie Thomas
10.26	†	Promotion Letter dated May 31, 2011 between RealNetworks, Inc. and Scott Uomoto	10-K	000-23137	10.26	03/18/13
10.27	†	Promotion Letter dated April 2, 2012 between RealNetworks, Inc. and Tim Wan	10-K	000-23137	10.27	03/18/13
10.28	†	Form of Amended and Restated Change in Control and Severance Agreement for Executive Officers	10-Q	000-23137	10.5	08/09/11
10.29	†	Form of MBO Plan Document under the RealNetworks, Inc. 2013 Executive Compensation Program	8-K	000-23137	10.1	03/29/13
10.30	†	Form of MBO Plan Document under the RealNetworks, Inc. 2014 Executive Compensation Program	8-K	000-23137	10.1	02/13/14
10.31	s	Amended and Restated Settlement Agreement dated as of March 10, 2006 between RealNetworks, Inc. and Microsoft Corporation	10-K	000-23137	10.24	03/16/06
10.32	s	Transaction, Contribution and Purchase Agreement dated as of August 20, 2007 by and among Rhapsody America LLC, RealNetworks, Inc., RealNetworks Digital Music of California, Inc., Viacom International Inc. and DMS Holdco Inc.	10-Q	000-23137	10.1	11/09/07
10.33		Amended and Restated Stockholder Agreement dated as of November 30, 2011 among Rhapsody International Inc., RealNetworks, Inc., RealNetworks Digital Music of California, Inc., Viacom International Inc., Napster, LLC, Best Buy Co., Inc. and DMS Holdco Inc.	10-K	000-23137	10.43	02/29/12
10.34	s	License Agreement, dated as of January 26, 2012, by and between RealNetworks, Inc. and Intel Corporation	8-K/A	000-23137	10.1	04/11/12
21.1	*	Subsidiaries of RealNetworks, Inc.
23.1	*	Consent of KPMG LLP
24.1	*	Power of Attorney (included on signature page)
31.1	*	Certification of Robert Glaser, 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

66

			Incorporated by Reference
Exhibit No.		Exhibit Description	Form	SEC File No.	Exhibit	Filing Date
31.2	*	Certification of Marjorie Thomas, Senior Vice President, 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, 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 Marjorie Thomas, Senior Vice President, 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
†	Indicates management contract or compensatory plan.
s	Portions of this exhibit are omitted and were filed separately with the Securities and Exchange Commission pursuant to an application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
*	Filed herewith.
**	Furnished herewith.

67

EX-10.25

Exhibit 10.25

December 23, 2014

Marjorie Thomas

Mountain View, CA

Via e-mail

Dear Marj,

I am extremely pleased to offer you employment at RealNetworks, Inc. (“Real”, the “Company” or “us”) as Senior Vice President, Finance, reporting directly to me. Your start date will be mutually determined between us but in no case later thanJanuary 15^th, 2015.

This offer is for a full-time, exempt, regular position with RealNetworks at our headquarters location in Seattle. 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 $325,000 (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 $243,750.00, for an annual target total cash compensation of $568,750.00 You will have an opportunity to earn more than your target bonus 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 2015 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 either (a) a grant of stock options for the purchase of 200,000 shares of RealNetworks common stock. These options 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.

You will receive a sign-on bonus of $100,000 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 12 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 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 recognizes that you will temporarily continue to maintain your primary residence in Northern California. For a period of up to 4 months, RealNetworks will cover your travel between the Bay Area and Seattle as well as housing expenses in Seattle up to a monthly cap of $6,000

Further, in accordance with its relocation guidelines, RealNetworks will pay or reimburse you for all your reasonable expenses incurred in connection with relocating to Seattle up to a maximum of $50,000, unless authorized by RealNetworks. This relocation benefit shall expire on July 15, 2015. These relocation reimbursements and payments will be reported as taxable income. If you voluntarily leave your employment with RealNetworks within one year of your relocation, (other than for “good reason” as defined on Exhibit A) you will be required to reimburse RealNetworks on a pro-rated basis all relocation expenses incurred by RealNetworks on your behalf. For example, if you voluntarily leave RealNetworks six months after your relocation date (other than for “good reason”), you would be responsible for repayment of 50% of all relocation expenses incurred to date.

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 untilthe earlier of (a) 12 months or (b) you have another employer covering your health care costs. Such severance benefits are subject to the terms set forth on Exhibit A under the section titled “Release and Section 409A.”

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 30%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.

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.

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 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

2

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 December 30, 2014, and subject to final approval of Real’s Compensation Committee and completion of checks personal references you have provided us.

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,

/s/ Rob Glaser

Rob Glaser

Chief Executive Officer

RealNetworks, Inc.

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.

Marjorie Thomas:    /s/ Marjorie Thomas     Date: December 30, 2014

3

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

RealNetworks, Inc.:

We consent to the incorporation by reference in the registration statements (No. 333‑114088) on Form S-3 and (Nos. 333-63333, 333-12844, 333-42579, 333-147279, 333-172871 and 333-199898) on Form S-8 of RealNetworks, Inc. of our reports dated February 25, 2015, with respect to the consolidated balance sheets of RealNetworks, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2014, and the effectiveness of internal control over financial reporting as of December 31, 2014, which reports appear in the December 31, 2014 annual report on Form 10‑K of RealNetworks, Inc.

/s/ KPMG LLP

Seattle, Washington

February 25, 2015

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-K 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: February 25, 2015

/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, Marjorie Thomas, certify that:

1. I have reviewed this report on Form 10-K 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: February 25, 2015

/s/ MARJORIE THOMAS

Marjorie Thomas

Title: Senior Vice President, 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, President, 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 Annual Report of RealNetworks, Inc. on Form 10-K for the fiscal year ended December 31, 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 Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of RealNetworks, Inc.

Date: February 25, 2015

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, Marjorie Thomas, 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 Annual Report of RealNetworks, Inc. on Form 10-K for the fiscal year ended December 31, 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 Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of RealNetworks, Inc.

Date: February 25, 2015

By:	/s/ MARJORIE THOMAS
Name:	Marjorie Thomas
Title:	Senior Vice President, 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.

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Employee Stock and Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2014

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

Schedule of Total Stock-based Compensation Expense

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

	Years Ended December 31,
	2014		2013		2012
Total stock-based compensation expense	$	5,204	$	7,468	$	8,123

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

The fair value of options granted used the following weighted average assumptions:

	Years ended December 31,
	2014		2013		2012
Expected dividend yield	—	%	—	%	—	%
Risk-free interest rate	1.40	%	0.86	%	0.50	%
Expected term (years)	4.5		4.3		4.2
Volatility	41	%	48	%	58	%

Schedule of Nonvested Restricted Stock Units Activity

Restricted stock unit and award activity was as follows (shares are in thousands):

	Shares		Weighted Average Grant Date Fair Value Per Share		Total Grant Date Fair Value of Vested Awards (000's)
Nonvested shares, December 31, 2011	463		$	9.42
Granted	1,536		8.70
Vested	(437	)	9.47		$	4,106
Forfeited/Canceled	(313	)	9.42
Nonvested shares, December 31, 2012	1,249		$	8.52
Granted	232		7.18
Vested	(581	)	9.13		$	4,438
Forfeited/Canceled	(410	)	7.74
Nonvested shares, December 31, 2013	490		$	7.80
Granted	159		7.60
Vested	(193	)	8.35		$	1,608
Forfeited/Canceled	(56	)	7.73
Nonvested shares, December 31, 2014	400		$	7.47

Schedule of Stock Options and Restricted Stock Units Activity

Stock option activity (shares are in thousands):

	Options Outstanding				Weighted Average Grant Date Fair Value
	Number of Shares		Weighted Average Exercise Price
Outstanding, December 31, 2011	6,365		$	14.24
Options granted at common stock price	1,422		8.29		$	3.71
Options exercised	(466	)	6.61
Options cancelled	(2,787	)	12.76
Outstanding, December 31, 2012	4,534		$	14.07
Options granted at common stock price	3,578		7.56		$	2.93
Options exercised	(24	)	5.56
Options cancelled	(1,463	)	15.76
Outstanding, December 31, 2013	6,625		$	10.21
Options granted at common stock price	2,036		7.44		$	2.51
Options exercised	(44	)	7.26
Options cancelled	(1,893	)	14.47
Outstanding, December 31, 2014	6,724		$	8.19
Exercisable, December 31, 2014	2,601		$	9.19
Vested and expected to vest, December 31, 2014	5,982		$	8.26

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Other Intangible Assets (Schedule of Intangible Asset by Class) (Detail) (USD $)	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2014	Jun. 30, 2013
Schedule of Finite-Lived Intangible Assets and Indefinite-lived intangible assets [Line Items]
Gross Amount	$ 72,243,000	$ 73,953,000
Accumulated Amortization	66,634,000	65,460,000
Net	5,609,000	8,493,000
Intangible Assets, Gross	76,743,000	78,453,000
Other intangible assets, net	10,109,000	12,993,000
Customer relationships
Schedule of Finite-Lived Intangible Assets and Indefinite-lived intangible assets [Line Items]
Gross Amount	33,853,000	35,156,000
Accumulated Amortization	31,643,000	31,262,000
Net	2,210,000	3,894,000
Developed technology
Schedule of Finite-Lived Intangible Assets and Indefinite-lived intangible assets [Line Items]
Gross Amount	28,261,000	29,097,000
Accumulated Amortization	25,699,000	25,039,000
Net	2,562,000	4,058,000
Patents, trademarks and tradenames
Schedule of Finite-Lived Intangible Assets and Indefinite-lived intangible assets [Line Items]
Gross Amount	3,817,000	4,021,000
Accumulated Amortization	3,528,000	3,627,000
Net	289,000	394,000
Service contracts
Schedule of Finite-Lived Intangible Assets and Indefinite-lived intangible assets [Line Items]
Gross Amount	6,312,000	5,679,000
Accumulated Amortization	5,764,000	5,532,000
Net	548,000	147,000
RealPlayer Group
Schedule of Finite-Lived Intangible Assets and Indefinite-lived intangible assets [Line Items]
Intangible assets acquired			800,000
Slingo, Inc
Schedule of Finite-Lived Intangible Assets and Indefinite-lived intangible assets [Line Items]
Intangible assets acquired				8,000,000
Tradenames and Trademarks
Schedule of Finite-Lived Intangible Assets and Indefinite-lived intangible assets [Line Items]
Indefinite-Lived Intangible Assets	4,500,000	4,500,000
Tradenames and Trademarks | Slingo, Inc
Schedule of Finite-Lived Intangible Assets and Indefinite-lived intangible assets [Line Items]
Indefinite-Lived Intangible Assets		$ 4,500,000		$ 4,500,000

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Rhapsody Joint Venture (Summarized Financial Information for Rhapsody) (Detail) (Rhapsody America LLC, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Rhapsody America LLC
Gross Profit (Loss)
Net revenue	$ 173,484	$ 140,596	$ 143,674
Gross profit	32,145	34,141	36,260
Net loss	(21,336)	(14,663)	(12,228)
Assets and Liabilities
Current assets	47,021	31,245
Non-current assets	20,616	17,305
Current liabilities	65,458	46,458
Non-current liabilities	$ 16,487	$ 0

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Income Taxes (Components of Income Tax Expense (Benefit)) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Current:
United States federal	$ 547	$ 2,460	$ 1,372
State and local	69	61	(2,957)
Foreign	901	1,706	(6,221)
Total current	1,517	4,227	(7,806)
Deferred:
United States federal	21	(1,890)	22,029
State and local	(40)	51	556
Foreign	(218)	2,515	(2,261)
Total deferred	(237)	676	20,324
Total income tax expense (benefit)	$ 1,280	$ 4,903	$ 12,518

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Other Intangible Assets (Additional Information and Expected Amortization) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 3,400,000	$ 4,400,000	$ 4,100,000
Amortization Expense, Fiscal Year Maturity [Abstract]
2015	2,654,000
2016	1,724,000
2017	856,000
2018	375,000
Net	$ 5,609,000	$ 8,493,000

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Segment Information (Narrative) (Detail)	12 Months Ended
	Dec. 31, 2014 Segment
Segment Reporting [Abstract]
Number of reporting segments	3

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Acquisitions (Details) (USD $)	3 Months Ended
	Jun. 30, 2013	Sep. 30, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Business Acquisition [Line Items]
Goodwill			$ 17,355,000	$ 17,476,000	$ 6,309,000
Slingo, Inc
Business Acquisition [Line Items]
Percentage of voting interests acquired	100.00%
Payments to acquire businesses	15,600,000
Intangible assets acquired	8,000,000
Deferred tax liability	2,700,000
Goodwill	9,900,000
Muzicall Ltd
Business Acquisition [Line Items]
Percentage of voting interests acquired		100.00%
Payments to acquire businesses		6,700,000
Deferred tax assets		3,400,000
Goodwill		1,300,000
Tradenames and Trademarks
Business Acquisition [Line Items]
Indefinite-Lived Intangible Assets (Excluding Goodwill)			4,500,000	4,500,000
Tradenames and Trademarks | Slingo, Inc
Business Acquisition [Line Items]
Indefinite-Lived Intangible Assets (Excluding Goodwill)	4,500,000			4,500,000
Developed Technology, tradenames and trademarks and customer relationships [Member] | Muzicall Ltd
Business Acquisition [Line Items]
Finite-lived intangibles acquired		5,400,000
Developed Technology and Customer Relationships | Slingo, Inc
Business Acquisition [Line Items]
Finite-lived intangibles acquired	$ 3,500,000

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Other Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Other Intangible Assets

Other intangible assets (in thousands):

		As of December 31,
		2014						2013
		Gross Amount		Accumulated Amortization		Net		Gross Amount		Accumulated Amortization		Net
Amortizing intangible assets:
	Customer relationships	$	33,853	$	31,643	$	2,210	$	35,156	$	31,262	$	3,894
	Developed technology	28,261		25,699		2,562		29,097		25,039		4,058
	Patents, trademarks and tradenames	3,817		3,528		289		4,021		3,627		394
	Service contracts	6,312		5,764		548		5,679		5,532		147
		72,243		66,634		5,609		73,953		65,460		8,493
Non-amortizing intangible assets:
	Trademarks and tradenames	4,500		—		4,500		4,500		—		4,500
	Total	$	76,743	$	66,634	$	10,109	$	78,453	$	65,460	$	12,993

Schedule of Expected Amortization Expense

Estimated future amortization of other intangible assets (in thousands):

2015	$	2,654
2016	1,724
2017	856
2018	375
Total	$	5,609

No impairments of other intangible assets were recognized in 2014, 2013 or 2012.

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Segment Information (Segment Results) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended												12 Months Ended
	Dec. 31, 2014		Sep. 30, 2014	Jun. 30, 2014		Mar. 31, 2014	Dec. 31, 2013		Sep. 30, 2013	Jun. 30, 2013		Mar. 31, 2013	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012
Segment Reporting Information [Line Items]
Revenue	$ 35,506		$ 34,157	$ 40,825	[1]	$ 45,724	$ 50,595	[2]	$ 48,958	$ 49,850	[1]	$ 56,793	$ 156,212	[3]	$ 206,196	[3]	$ 258,842	[3]
Cost of revenue													76,381	[4]	79,091	[4]	103,731	[4]
Extinguishment of liability						10,600							10,580		0		0
Gain on sale of patent and other technology assets, net of costs													0		0		116,353
Gross profit	17,625	[2]	15,229	20,039	[1]	37,518	30,519	[2]	29,968	30,331	[1]	36,287	90,411		127,105		155,111
Operating expenses													159,564		197,913		215,901
Operating (loss) income	(20,682)	[2]	(20,763)	(18,832)	[1]	(8,876)	(14,441)	[2]	(28,437)	(16,504)	[1]	(11,426)	(69,153)		(70,808)		55,563
RealPlayer Group
Segment Reporting Information [Line Items]
Revenue													39,201		75,206		91,469
Cost of revenue													14,508		16,220		21,544
Gross profit													24,693		58,986		69,925
Operating expenses													55,742		60,484		55,223
Operating (loss) income													(31,049)		(1,498)		14,702
Mobile Entertainment
Segment Reporting Information [Line Items]
Revenue													79,901		81,181		100,318
Cost of revenue													50,399		47,608		57,670
Gross profit													29,502		33,573		42,648
Operating expenses													33,325		35,839		52,614
Operating (loss) income													(3,823)		(2,266)		(9,966)
Games
Segment Reporting Information [Line Items]
Revenue													37,110		49,809		67,055
Cost of revenue													11,074		13,359		21,828
Gross profit													26,036		36,450		45,227
Operating expenses													37,170		47,177		51,890
Operating (loss) income													(11,134)		(10,727)		(6,663)
Corporate
Segment Reporting Information [Line Items]
Cost of revenue													400		1,904		2,689
Extinguishment of liability													(10,580)		0		0
Gain on sale of patent and other technology assets, net of costs													0		0		116,353
Operating expenses													33,327		54,413		56,174
Operating (loss) income													$ (23,147)		$ (56,317)		$ 57,490

[1] In 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.

[2] In the quarter ended December 31, 2013, we sold our remaining shares of common stock in LoEn Entertainment for a net gain of $21.4 million, as described in further detail in Note 5.

[3] December 31, 2012 December 31, 2011 December 31, 2010Components of Cost of Revenue License Fees8,012 8,538 11,689Service Revenue68,369 70,553 92,042Net Revenue Costs76,381 79,091 103,731

[4] December 31, 2013 December 31, 2012 December 31, 2011Components of Revenue License Fees28,308 43,709 56,640Service Revenue127,904 162,487 202,202Net Revenue156,212 206,196 258,842

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Income Taxes (Schedule of Unrecognized Tax Benefits) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Balance, beginning of year	$ 4,505	$ 3,978	$ 16,721
Increases related to prior year tax positions	0	0	416
Decreases related to prior year tax positions	(196)	(125)	(94)
Settlements with taxing authorities	0	0	(13,065)
Increases related to current year tax positions	130	652	0
Expiration of the statute of limitations	(898)	0	0
Balance, end of year	$ 3,541	$ 4,505	$ 3,978

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Goodwill (Goodwill by Segments and Acquisition) (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended		3 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Jun. 30, 2014	Dec. 31, 2012
Goodwill [Line Items]
Goodwill	$ 17,355	$ 17,476		$ 6,309
Goodwill acquired during period	460	11,463
RealPlayer Group
Goodwill [Line Items]
Goodwill acquired during period			500
RealPlayer Group
Goodwill [Line Items]
Goodwill	985	580
Mobile Entertainment
Goodwill [Line Items]
Goodwill	1,976	2,119
Games
Goodwill [Line Items]
Goodwill	$ 14,394	$ 14,777

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Commitments and Contingencies (Commitments) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Office Leases
2015	$ 6,667,000
2016	4,741,000
2017	3,179,000
2018	2,721,000
2019	3,186,000
Thereafter	15,883,000
Total minimum payments	36,377,000
Rent expense	6,800,000	8,300,000	9,100,000
Sublease income	200,000	800,000	1,000,000
Accrued Loss on Excess Office Facilities
Office Leases
Total minimum payments	$ 200,000

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Segment Information (Long-Lived Assets by Geographic Region) (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	$ 43,712	$ 53,641	$ 38,900
United States
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	33,421	40,347	27,915
Europe
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	6,696	8,280	2,350
Republic of Korea
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	547	936	2,463
Rest of World
Long-Lived Assets by Geographical Areas [Line Items]
Long-lived assets	$ 3,048	$ 4,078	$ 6,172

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Commitments and Contingencies (Litigation) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]
Payments for litigation	$ 11.5

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Income Taxes (Income Tax Rate Reconciliation) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]
U.S. federal income tax rate	35.00%	35.00%	35.00%
Income Tax Expense (Benefit), Continuing Operations, Income Tax Reconciliation [Abstract]
United States federal tax expense (benefit) at statutory rate	$ (24,687)	$ (18,930)	$ 20,076
State taxes, net of United States federal tax expense (benefit)	(1,083)	(841)	(1,098)
Change in valuation allowance	27,759	25,046	2,136
Non-deductible stock compensation	270	415	341
Impact of non-U.S. jurisdictional tax rate difference	529	487	313
Research and development tax credit	(325)	(1,632)	(1,923)
Increase (reversal) of unrecognized tax benefits	(901)	671	(7,826)
Non-U.S. withholding tax	393	1,805	471
Other	(675)	(2,118)	28
Total income tax expense (benefit)	$ 1,280	$ 4,903	$ 12,518

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Guarantees

12 Months Ended

Dec. 31, 2014

Guarantees [Abstract]

Guarantees

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 some of our 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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Fair Value Measurements (Short-term Investments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	$ 167,382	$ 236,336
Short-term Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	58,453	74,920
Estimated Fair Value | Short-term Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	58,453
Estimated Fair Value | Within one year | Short-term Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	46,336
Estimated Fair Value | Between one year and five years | Short-term Investments
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	$ 12,117

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Payments

Future minimum payments as of December 31, 2014 are as follows (in thousands):

	Office Leases
2015	$	6,667
2016	4,741
2017	3,179
2018	2,721
2019	3,186
Thereafter	15,883
Total minimum payments	$	36,377

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Earnings (Loss) Per Share (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended																12 Months Ended
	Dec. 31, 2014		Sep. 30, 2014		Jun. 30, 2014		Mar. 31, 2014		Dec. 31, 2013		Sep. 30, 2013		Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012
Earnings Per Share [Abstract]
Net income (loss)	$ (20,838)	[1]	$ (22,178)		$ (21,029)	[2]	$ (7,770)		$ 2,530	[1]	$ (31,375)		$ (18,471)	[2]	$ (11,674)		$ (71,815)		$ (58,990)		$ 44,841
Weighted average common shares outstanding used to compute basic EPS																	35,947,000		35,553,000		34,873,000
Dilutive effect of stock based awards																	0		0		249,000
Weighted average common shares outstanding used to compute diluted EPS																	35,947,000		35,553,000		35,122,000
Basic EPS (in dollars per share)	$ (0.58)	[1],[3]	$ (0.62)	[3]	$ (0.59)	[2],[3]	$ (0.22)	[3]	$ 0.07	[1],[3]	$ (0.88)	[3]	$ (0.52)	[2],[3]	$ (0.33)	[3]	$ (2.00)		$ (1.66)	[3]	$ 1.29
Diluted EPS (in dollars per share)	$ (0.58)	[1],[3]	$ (0.62)	[3]	$ (0.59)	[2],[3]	$ (0.22)	[3]	$ 0.07	[1],[3]	$ (0.88)	[3]	$ (0.52)	[2],[3]	$ (0.33)	[3]	$ (2.00)	[3]	$ (1.66)	[3]	$ 1.28
Shares of common stock excluded from the calculation of diluted net income per share because of antidilutive effect																	6,300,000		4,600,000		5,100,000

[1] In the quarter ended December 31, 2013, we sold our remaining shares of common stock in LoEn Entertainment for a net gain of $21.4 million, as described in further detail in Note 5.

[2] In 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.

[3] The sum of the quarterly net income per share amounts will not necessarily equal net income per share for the year due to the use of weighted average quarterly shares and the effects of rounding.

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Loss on Exit and Related Charges (Tables)

12 Months Ended

Dec. 31, 2014

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

Changes to Accrued Loss on Excess Office Facilities

Changes to the accrued loss on excess office facilities (in thousands):

	Years Ended December 31,
	2014			2013			2012
Accrued loss, beginning of year	$	254		$	4,213		$	2,747
Additions and adjustments to the lease loss accrual, including sublease income estimate revision, and related asset write-downs	668			1,421			3,290
Less write-down of leasehold improvements	—			—			(496		)
Less amounts paid, net of sublease income	(688		)	(5,380		)	(1,328		)
Accrued loss, end of year	234			254			4,213
Less current portion (included in Accrued and other current liabilities)	(234		)	(254		)	(2,463		)
Accrued loss, non-current portion (included in Other long term liabilities)	$	—		$	—		$	1,750

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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	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Movement in Valuation Allowances and Reserves [Roll Forward]
Ending Balance	$ 1,642	$ 1,535	$ 1,663
Allowance for Doubtful Accounts Receivable
Movement in Valuation Allowances and Reserves [Roll Forward]
Beginning Balance	966	1,010	1,445
Addition (reduction) to allowance	433	(2)	76
Amounts written off	0	(83)	(529)
Effects of foreign currency translation	(111)	41	18
Ending Balance	1,288	966	1,010
Allowance for Sales Returns
Movement in Valuation Allowances and Reserves [Roll Forward]
Beginning Balance	569	653	668
Addition (reduction) to allowance	(209)	(64)	153
Amounts written off	(6)	(21)	(168)
Effects of foreign currency translation	0	1	0
Ending Balance	$ 354	$ 569	$ 653

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Employee Stock and Benefit Plans (Employee Stock Purchase Plan Narrative) (Details) (Employee Stock Purchase Plan)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Discount from market price percentage from ofering date	85.00%
Shares purchased under ESPP	78,500	71,600	102,700

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Shareholders’ Equity (Accumulated Other Comprehensive Income (Loss)) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Accumulated other comprehensive income (loss), beginning of period	$ (47,695,000)	$ (26,540,000)
Unrealized gains (losses), net of tax effects of $0, $(54) and $0	(4,145,000)	(20,288,000)	(633,000)
Net current period other comprehensive income	(7,557,000)	(21,155,000)	(1,656,000)
Accumulated other comprehensive loss balance, end of period	(55,252,000)	(47,695,000)	(26,540,000)
Investments
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Accumulated other comprehensive income (loss), beginning of period	6,397,000	26,685,000	27,318,000
Unrealized gains (losses), net of tax effects of $0, $(54) and $0	(1,774,000)	2,121,000	3,313,000
Reclassification adjustments for losses (gains) included in other income (expense)	(2,371,000)	(22,409,000)	(3,946,000)
Net current period other comprehensive income	(4,145,000)	(20,288,000)	(633,000)
Accumulated other comprehensive loss balance, end of period	2,252,000	6,397,000	26,685,000
Accumulated Other Comprehensive Income (Loss), Tax [Abstract]
Unrealized gains (losses), tax effects	0	(54)	0
Reclassification adjustments for losses (gains) included in other income (expense), tax effects	4	(800)	0
Foreign currency translation
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Accumulated other comprehensive income (loss), beginning of period	(54,092,000)	(53,225,000)	(52,202,000)
Translation adjustments	(3,364,000)	(296,000)	943,000
Reclassification adjustments for losses (gains) included in other income (expense)	(48,000)	(571,000)	(1,966,000)
Net current period other comprehensive income	(3,412,000)	(867,000)	(1,023,000)
Accumulated other comprehensive loss balance, end of period	$ (57,504,000)	$ (54,092,000)	$ (53,225,000)

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Rhapsody Joint Venture (Additional Information) (Detail) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2010	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2014	Mar. 30, 2010
Schedule of Equity Method Investments [Line Items]
Cash payments		$ 5,299,000	$ 5,636,000	$ 9,629,000
Losses recorded in the operations of Rhapsody		4,452,000	6,268,000	5,709,000
Carrying value of Rhapsody investment		10,000,000	12,473,000
Rhapsody America LLC
Schedule of Equity Method Investments [Line Items]
Ownership interest (percent)	47.00%	43.00%			45.00%	51.00%
Cash payments	18,000,000
Liquidation preference		10,000,000
Losses recorded in the operations of Rhapsody		4,500,000	6,300,000	5,700,000
Carrying value of Rhapsody investment		$ 10,000,000	$ 12,500,000
Rhapsody America LLC | MTV Networks
Schedule of Equity Method Investments [Line Items]
Noncontrolling ownership interest (percent)	49.00%

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Description of Business and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 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 Annual Report on Form 10-K for the year ended December 31, 2014 (10-K), RealNetworks, Inc. and subsidiaries is referred to as “RealNetworks”, the “Company”, “we”, “us”, or “our”.

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

The consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the periods presented. Operating results for the year ended December 31, 2014 are not necessarily indicative of the results that may be expected for any subsequent periods.

Use of Estimates.    The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (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.

2012 Sale of Patents and Other Technology Assets to Intel Corporation. In the second quarter of 2012, we completed the sale of certain patents, patent applications and related rights held by us, and certain of our assets relating to our next generation video codec technologies to Intel Corporation (Intel). Intel acquired the assets for a gross cash purchase price of $120.0 million. In addition, Intel granted us a non-exclusive, royalty-free, fully paid up, irrevocable and worldwide license (without the right to grant sublicenses) to use the patent assets we sold to Intel in connection with our businesses. The proceeds, net of related direct costs, of $116.4 million were recorded as a gain in the statement of operations.

Cash and Cash Equivalents, Short-Term Investments, and Available-for-Sale Securities. We consider all short-term investments with a remaining contractual maturity at date of purchase of three months or less to be cash equivalents.

We have classified as available-for-sale all marketable debt and equity securities for which there is determinable fair market value and there are no restrictions on our ability to sell. Available-for-sale securities are carried at fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss) (AOCI) in shareholders' equity, net of any applicable income taxes. 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. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in other income (expense), net. Realized and unrealized gains and losses on available-for-sale securities are determined using the specific identification method.

Trade Accounts Receivable.    Trade accounts receivable consist of amounts due from customers and do not bear interest. The allowance for doubtful accounts and sales returns is our estimate of the amount of probable credit losses and returns in our existing accounts receivable. We determine the allowances based on analysis of historical bad debts, customer concentrations, customer credit-worthiness, return history and current economic trends. We review the allowances for doubtful accounts and sales returns quarterly. Past due balances over 90 days and specified other balances are reviewed individually for collectability. All other balances are reviewed on an aggregate basis. Account balances are written off against the allowance after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance sheet credit exposure related to our customers.

Concentration of Credit Risk.    Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts receivable. Short-term investments consist of U.S. government and government agency securities, corporate notes and bonds, and municipal securities. We derive a portion of our revenue from a large number of individual consumers spread globally. We also derive revenue from several large customers. If the financial condition or results of operations of any one of the large customers deteriorates substantially, our operating results could be adversely affected. To reduce credit risk, management performs ongoing credit evaluations of the financial condition of significant customers. We do not generally require collateral and we maintain an allowance for estimated credit losses on customer accounts when considered necessary.

Depreciation and Amortization.    Depreciation of equipment and software, as well as amortization of leasehold improvements is computed using the straight-line method over the lesser of the estimated useful lives of the assets or the related lease term. The useful life of equipment and software is generally three to five years.

Depreciation and amortization expense of these assets during the years ended December 31, 2014, 2013, and 2012 was $8.5 million, $14.3 million, and $12.9 million, respectively.

Equity Method Investment.    We use the equity method 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. As further described in Note 4, 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, which is impacted by Rhapsody equity transactions, below $10.0 million, unless Rhapsody's book value is reduced below $10.0 million.

We evaluate impairment of an investment accounted for under the equity method if events and circumstances warrant. An impairment charge would be recorded if a decline in the fair 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.

Deferred Costs. We defer certain costs on projects for service revenues 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 and related costs for employees and other third parties. Deferred costs are capitalized during the implementation period.

We recognize such costs as a component of cost of revenue, the timing of which is dependent upon the revenue recognition policy by contract. 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 or if actual deferred costs exceed estimated contractual revenue. Assessing the recoverability of deferred 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 and prepaid royalty advances. We cannot accurately predict the amount and timing of any such impairments. Should deferred project costs or prepaid royalty advances become impaired, we would record the appropriate charge, which could have a material adverse effect on our financial condition and results of operations.

As of December 31, 2014, we determined that the total estimated costs associated with a project exceeded the total estimated revenues expected to be recognized on that project. As a result, we impaired $0.7 million in deferred project costs. This charge was included in cost of revenue in the accompanying consolidated statements of operations and comprehensive income (loss). No such charges were incurred in 2013 or 2012.

Definite-Lived Tangible and Intangible Assets.    Definite-lived tangible assets include equipment, software and leasehold improvements and are carried at cost less accumulated depreciation and amortization. Definite-lived intangible assets consist primarily of the fair value of customer agreements and contracts, and developed technology acquired in business combinations and are amortized over their estimated useful lives.

We review these assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. If the carrying amount of an asset group is not recoverable, an impairment loss is recognized if the carrying amount of the asset group exceeds its estimated fair value, which is generally determined as the present value of estimated future cash flows to a market participant. Our impairment analysis is based on significant assumptions of future results, including operating and cash flow projections. Significant or sustained declines in future revenue or cash flows, or adverse changes in our business climate, among other factors, could result in the need to record an impairment charge in future periods.

Goodwill.    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.

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 judgment is required in determining the reporting units and assessing fair value of the reporting units.

Indefinite-Lived Intangible Assets.    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 estimate the fair value of the intangible assets. If the carrying amount of the intangible assets exceeds the estimated fair value, an impairment charge is recorded to reduce the carrying value to the estimated fair value. Significant judgment is required in assessing fair value of the indefinite-lived intangible assets.

Fair Value.     Fair value is the price that would be received from selling an asset or paid in transfering a liability in an orderly transaction between market participants at the measurement date. Our fair value measurements consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

Fair values are determined based on three levels of inputs:

• Level 1: Quoted prices in active markets for identical assets or liabilities

• Level 2: Directly or indirectly observed inputs for the asset or liability, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active

• Level 3: Significant unobservable inputs that reflect our own estimates of assumptions that market participants would use

Research and Development.    Costs incurred in research and development are expensed as incurred. Software development costs are capitalized when a product’s technological feasibility has been established through the date the product is available for general release to customers. Other than internal use software, we have not capitalized any software development costs, as technological feasibility is generally not established until a working model is completed, at which time substantially all development is complete.

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 products 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 operations, we derive revenue through (1) subscriptions of our SuperPass and Real Player Cloud products 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 fair value 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.

Advertising Expenses.   We expense the cost of advertising and promoting our products as incurred. These costs are included in sales and marketing expense and totaled $23.1 million in 2014, $30.6 million in 2013 and $31.7 million in 2012.

Foreign Currency.    The functional currency of the Company’s foreign subsidiaries is the currency of the country in which the subsidiary operates. Assets and liabilities of foreign operations are translated into U.S. dollars using rates of exchange in effect at the end of the reporting period. The net gain or loss resulting from translation is shown as translation adjustment and included in AOCI in shareholders’ equity. Income and expense accounts are translated into U.S. dollars using average rates of exchange. Gains and losses from foreign currency transactions are included in the consolidated statements of operations.

Derivative Financial Instruments.    We conduct business internationally in several currencies and thus we are exposed to adverse movements in foreign currency exchange rates. A portion of these risks may be managed through the use of financial derivatives, but fluctuations in foreign exchange rates could impact our results of operations and financial position. Our foreign currency risk management program reduces, but does not entirely eliminate, the impact of currency exchange rate movements.

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 foreign exchange forward contracts related to short-term intercompany accounts as hedges and, accordingly, we adjust these instruments to fair value through our results of operations. However, we may periodically hedge a portion of our foreign exchange exposures associated with material firmly committed transactions and long-term investments.

All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If the derivative is designated a hedge, then depending on the nature of the hedge, changes in fair value will either be recorded immediately in results of operations, or be recognized in AOCI until the hedged item is recognized in results of operations.

We had nominal amounts of derivatives outstanding at either December 31, 2014 or 2013.

Accounting for Taxes Collected from Customers.    Our revenues are reported net of sales and other transaction taxes that are collected from customers and remitted to taxing authorities.

Income Taxes.    We compute income taxes using the asset and liability method, under which deferred income taxes are provided for temporary differences between financial reporting basis and tax basis of our assets and liabilities and operating loss and tax credit carryforwards. We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character in the appropriate taxing jurisdictions. Adjustments to the valuation allowance could be required in the future if we estimate that the amount of deferred tax assets to be realized is more or less than the net amount we have recorded. Any increase or decrease in the valuation allowance could have the effect of increasing or decreasing the income tax provision in the statement of operations.

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 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 audit for United States federal returns for the consolidated group (RealNetworks, Inc. and Subsidiaries) for the year ended December 31, 2012.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax expense.

Stock-Based Compensation.    Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is the vesting period. We use the Black-Scholes option-pricing model or other appropriate valuation models such as Monte Carlo simulation to determine the fair value of stock-based option awards. The fair value of restricted stock awards is based on the closing market price of our common stock on the award date. Generally, we recognize the compensation cost for awards on a straight-line basis for the entire award, over the applicable vesting period. For performance-based awards, expense is recognized when it is probable the performance goal will be achieved, however if the likelihood becomes improbable, that expense is reversed. For market-based stock options, fair value is measured at the grant date using the Monte Carlo simulation model and we recognize compensation cost for these awards on a straight-line basis over the requisite service period for each separately vesting portion of the awards. For our employee stock purchase plan, compensation expense is measured based on the discount the employee is entitled to upon purchase.

The valuation models for stock-based option awards 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 for new awards may differ materially in the future from the amounts recorded in the consolidated statements of operations. For all awards, we also estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.

Net Income 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.

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Shareholders’ Equity (Narrative) (Details) (Preferred stock, Series A)	Dec. 31, 2014 vote	Sep. 30, 2014	Oct. 16, 1988
Preferred stock, Series A
Class of Stock [Line Items]
Number of votes available	1,000
Dividends declared		0.001	0.001

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2014

Segment Reporting [Abstract]

Segment Results

Segment results for the years ended December 31, 2014, 2013 and 2012 were as follows (in thousands):

RealPlayer Group

	2014			2013			2012
Revenue	$	39,201		$	75,206		$	91,469
Cost of revenue	14,508			16,220			21,544
Gross profit	24,693			58,986			69,925
Operating expenses	55,742			60,484			55,223
Operating income (loss)	$	(31,049	)	$	(1,498	)	$	14,702

Mobile Entertainment

	2014			2013			2012
Revenue	$	79,901		$	81,181		$	100,318
Cost of revenue	50,399			47,608			57,670
Gross profit	29,502			33,573			42,648
Operating expenses	33,325			35,839			52,614
Operating income (loss)	$	(3,823	)	$	(2,266	)	$	(9,966	)

Games

	2014			2013			2012
Revenue	$	37,110		$	49,809		$	67,055
Cost of revenue	11,074			13,359			21,828
Gross profit	26,036			36,450			45,227
Operating expenses	37,170			47,177			51,890
Operating income (loss)	$	(11,134	)	$	(10,727	)	$	(6,663	)

Corporate

	2014			2013			2012
Cost of revenue	$	400		$	1,904		$	2,689
Extinguishment of liability	(10,580		)	—			—
Gain on sale of patents and other technology assets, net of costs	—			—			116,353
Operating expenses	33,327			54,413			56,174
Operating income (loss)	$	(23,147	)	$	(56,317	)	$	57,490

Revenue by Geographic Region

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

	Years ended December 31,
	2014		2013		2012
United States	$	61,660	$	90,250	$	117,844
Europe	26,575		38,155		56,473
Republic of Korea	39,852		46,601		40,467
Rest of the World	28,125		31,190		44,058
Total	$	156,212	$	206,196	$	258,842

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):

	December 31,
	2014		2013		2012
United States	$	33,421	$	40,347	$	27,915
Europe	6,696		8,280		2,350
Republic of Korea	547		936		2,463
Rest of the World	3,048		4,078		6,172
Total long-lived assets	$	43,712	$	53,641	$	38,900

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

12 Months Ended

Dec. 31, 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 Annual Report on Form 10-K for the year ended December 31, 2014 (10-K), RealNetworks, Inc. and subsidiaries is referred to as “RealNetworks”, the “Company”, “we”, “us”, or “our”.

Basis of Presentation

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

The consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the periods presented. Operating results for the year ended December 31, 2014 are not necessarily indicative of the results that may be expected for any subsequent periods.

Use of Estimates

Use of Estimates.    The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (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.

2012 Sale of Patents and Other Technology Assets to Intel Corporation

2012 Sale of Patents and Other Technology Assets to Intel Corporation. In the second quarter of 2012, we completed the sale of certain patents, patent applications and related rights held by us, and certain of our assets relating to our next generation video codec technologies to Intel Corporation (Intel). Intel acquired the assets for a gross cash purchase price of $120.0 million. In addition, Intel granted us a non-exclusive, royalty-free, fully paid up, irrevocable and worldwide license (without the right to grant sublicenses) to use the patent assets we sold to Intel in connection with our businesses.

Cash and, Cash Equivalents, and Short-Term Investments, and Available-for-Sale Securities

Cash and Cash Equivalents, Short-Term Investments, and Available-for-Sale Securities. We consider all short-term investments with a remaining contractual maturity at date of purchase of three months or less to be cash equivalents.

We have classified as available-for-sale all marketable debt and equity securities for which there is determinable fair market value and there are no restrictions on our ability to sell. Available-for-sale securities are carried at fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss) (AOCI) in shareholders' equity, net of any applicable income taxes. 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. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in other income (expense), net. Realized and unrealized gains and losses on available-for-sale securities are determined using the specific identification method.

Trade Accounts Receivable

Trade Accounts Receivable.    Trade accounts receivable consist of amounts due from customers and do not bear interest. The allowance for doubtful accounts and sales returns is our estimate of the amount of probable credit losses and returns in our existing accounts receivable. We determine the allowances based on analysis of historical bad debts, customer concentrations, customer credit-worthiness, return history and current economic trends. We review the allowances for doubtful accounts and sales returns quarterly. Past due balances over 90 days and specified other balances are reviewed individually for collectability. All other balances are reviewed on an aggregate basis. Account balances are written off against the allowance after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance sheet credit exposure related to our customers.

Concentration of Credit Risk

Concentration of Credit Risk.    Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts receivable. Short-term investments consist of U.S. government and government agency securities, corporate notes and bonds, and municipal securities. We derive a portion of our revenue from a large number of individual consumers spread globally. We also derive revenue from several large customers. If the financial condition or results of operations of any one of the large customers deteriorates substantially, our operating results could be adversely affected. To reduce credit risk, management performs ongoing credit evaluations of the financial condition of significant customers. We do not generally require collateral and we maintain an allowance for estimated credit losses on customer accounts when considered necessary.

Depreciation and Amortization

Depreciation and Amortization.    Depreciation of equipment and software, as well as amortization of leasehold improvements is computed using the straight-line method over the lesser of the estimated useful lives of the assets or the related lease term. The useful life of equipment and software is generally three to five years.

Depreciation and amortization expense of these assets during the years ended December 31, 2014, 2013, and 2012 was $8.5 million, $14.3 million, and $12.9 million, respectively.

Valuation of Equity Method Investments

Equity Method Investment.    We use the equity method 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. As further described in Note 4, 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, which is impacted by Rhapsody equity transactions, below $10.0 million, unless Rhapsody's book value is reduced below $10.0 million.

We evaluate impairment of an investment accounted for under the equity method if events and circumstances warrant. An impairment charge would be recorded if a decline in the fair 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.

Deferred Costs

Deferred Costs. We defer certain costs on projects for service revenues 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 and related costs for employees and other third parties. Deferred costs are capitalized during the implementation period.

We recognize such costs as a component of cost of revenue, the timing of which is dependent upon the revenue recognition policy by contract. 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 or if actual deferred costs exceed estimated contractual revenue. Assessing the recoverability of deferred 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 and prepaid royalty advances. We cannot accurately predict the amount and timing of any such impairments. Should deferred project costs or prepaid royalty advances become impaired, we would record the appropriate charge, which could have a material adverse effect on our financial condition and results of operations.

As of December 31, 2014, we determined that the total estimated costs associated with a project exceeded the total estimated revenues expected to be recognized on that project. As a result, we impaired $0.7 million in deferred project costs. This charge was included in cost of revenue in the accompanying consolidated statements of operations and comprehensive income (loss). No such charges were incurred in 2013 or 2012.

Other Definite-Lived Intangible Assets

Definite-Lived Tangible and Intangible Assets.    Definite-lived tangible assets include equipment, software and leasehold improvements and are carried at cost less accumulated depreciation and amortization. Definite-lived intangible assets consist primarily of the fair value of customer agreements and contracts, and developed technology acquired in business combinations and are amortized over their estimated useful lives.

We review these assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. If the carrying amount of an asset group is not recoverable, an impairment loss is recognized if the carrying amount of the asset group exceeds its estimated fair value, which is generally determined as the present value of estimated future cash flows to a market participant. Our impairment analysis is based on significant assumptions of future results, including operating and cash flow projections. Significant or sustained declines in future revenue or cash flows, or adverse changes in our business climate, among other factors, could result in the need to record an impairment charge in future periods.

Goodwill

Goodwill.    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.

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 judgment is required in determining the reporting units and assessing fair value of the reporting units.

Indefinite-Lived Intangible Assets

Indefinite-Lived Intangible Assets.    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 estimate the fair value of the intangible assets. If the carrying amount of the intangible assets exceeds the estimated fair value, an impairment charge is recorded to reduce the carrying value to the estimated fair value. Significant judgment is required in assessing fair value of the indefinite-lived intangible assets.

Fair Value of Financial Instruments

Fair Value.     Fair value is the price that would be received from selling an asset or paid in transfering a liability in an orderly transaction between market participants at the measurement date. Our fair value measurements consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

Fair values are determined based on three levels of inputs:

• Level 1: Quoted prices in active markets for identical assets or liabilities

• Level 2: Directly or indirectly observed inputs for the asset or liability, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active

• Level 3: Significant unobservable inputs that reflect our own estimates of assumptions that market participants would use

Research and Development

Research and Development.    Costs incurred in research and development are expensed as incurred. Software development costs are capitalized when a product’s technological feasibility has been established through the date the product is available for general release to customers. Other than internal use software, we have not capitalized any software development costs, as technological feasibility is generally not established until a working model is completed, at which time substantially all development is complete.

Revenue Recognition

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 products 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 operations, we derive revenue through (1) subscriptions of our SuperPass and Real Player Cloud products 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 fair value 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.

Advertising Expenses

Advertising Expenses.   We expense the cost of advertising and promoting our products as incurred.

Foreign Currency

Foreign Currency.    The functional currency of the Company’s foreign subsidiaries is the currency of the country in which the subsidiary operates. Assets and liabilities of foreign operations are translated into U.S. dollars using rates of exchange in effect at the end of the reporting period. The net gain or loss resulting from translation is shown as translation adjustment and included in AOCI in shareholders’ equity. Income and expense accounts are translated into U.S. dollars using average rates of exchange. Gains and losses from foreign currency transactions are included in the consolidated statements of operations.

Derivative Financial Instruments

Derivative Financial Instruments.    We conduct business internationally in several currencies and thus we are exposed to adverse movements in foreign currency exchange rates. A portion of these risks may be managed through the use of financial derivatives, but fluctuations in foreign exchange rates could impact our results of operations and financial position. Our foreign currency risk management program reduces, but does not entirely eliminate, the impact of currency exchange rate movements.

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 foreign exchange forward contracts related to short-term intercompany accounts as hedges and, accordingly, we adjust these instruments to fair value through our results of operations. However, we may periodically hedge a portion of our foreign exchange exposures associated with material firmly committed transactions and long-term investments.

All derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. If the derivative is designated a hedge, then depending on the nature of the hedge, changes in fair value will either be recorded immediately in results of operations, or be recognized in AOCI until the hedged item is recognized in results of operations.

Accounting for Taxes Collected from Customers

Accounting for Taxes Collected from Customers.    Our revenues are reported net of sales and other transaction taxes that are collected from customers and remitted to taxing authorities.

Income Taxes

Income Taxes.    We compute income taxes using the asset and liability method, under which deferred income taxes are provided for temporary differences between financial reporting basis and tax basis of our assets and liabilities and operating loss and tax credit carryforwards. We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character in the appropriate taxing jurisdictions. Adjustments to the valuation allowance could be required in the future if we estimate that the amount of deferred tax assets to be realized is more or less than the net amount we have recorded. Any increase or decrease in the valuation allowance could have the effect of increasing or decreasing the income tax provision in the statement of operations.

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 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 audit for United States federal returns for the consolidated group (RealNetworks, Inc. and Subsidiaries) for the year ended December 31, 2012.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize accrued interest and penalties related to uncertain tax positions as a component of income tax expense.

Stock-Based Compensation

Stock-Based Compensation.    Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is the vesting period. We use the Black-Scholes option-pricing model or other appropriate valuation models such as Monte Carlo simulation to determine the fair value of stock-based option awards. The fair value of restricted stock awards is based on the closing market price of our common stock on the award date. Generally, we recognize the compensation cost for awards on a straight-line basis for the entire award, over the applicable vesting period. For performance-based awards, expense is recognized when it is probable the performance goal will be achieved, however if the likelihood becomes improbable, that expense is reversed. For market-based stock options, fair value is measured at the grant date using the Monte Carlo simulation model and we recognize compensation cost for these awards on a straight-line basis over the requisite service period for each separately vesting portion of the awards. For our employee stock purchase plan, compensation expense is measured based on the discount the employee is entitled to upon purchase.

The valuation models for stock-based option awards 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 for new awards may differ materially in the future from the amounts recorded in the consolidated statements of operations. For all awards, we also estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.

Net Income Per Share

Net Income 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.

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Quarterly Information (Unaudited)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Quarterly Information (Unaudited)

Note 20. Quarterly Information (Unaudited)

The following table summarizes the unaudited statement of operations for each quarter of 2014 and 2013 (in thousands, except per share data):

	Total			Dec. 31 (3)			Sept. 30 (4)			June 30			Mar. 31 (2)
2014
Net revenue	$	156,212		$	35,506		$	34,157		$	40,825		$	45,724
Gross profit	90,411			17,625			15,229			20,039			37,518
Operating (loss) income	(69,153		)	(20,682		)	(20,763		)	(18,832		)	(8,876		)
Net income (loss)	(71,815		)	(20,838		)	(22,178		)	(21,029		)	(7,770		)
Basic net income (loss) per share (1)	(2.00		)	(0.58		)	(0.62		)	(0.59		)	(0.22		)
Diluted net income (loss) per share (1)	(2.00		)	(0.58		)	(0.62		)	(0.59		)	(0.22		)
2013
Net revenue	$	206,196		$	50,595		$	48,958		$	49,850		$	56,793
Gross profit	127,105			30,519			29,968			30,331			36,287
Operating (loss) income	(70,808		)	(14,441		)	(28,437		)	(16,504		)	(11,426		)
Net income (loss)	(58,990		)	2,530			(31,375		)	(18,471		)	(11,674		)
Basic net income (loss) per share (1)	(1.66		)	0.07			(0.88		)	(0.52		)	(0.33		)
Diluted net income (loss) per share (1)	(1.66		)	0.07			(0.88		)	(0.52		)	(0.33		)

(1) The sum of the quarterly net income per share amounts will not necessarily equal net income per share for the year due to the use of weighted average quarterly shares and the effects of rounding.

(2) In 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.

(3) In the quarter ended December 31, 2013, we sold our remaining shares of common stock in LoEn Entertainment for a net gain of $21.4 million, as described in further detail in Note 5.

(4) In the quarter ended September 30, 2013, we accrued an aggregate of $11.5 million for certain legal matters, which was subsequently paid in the fourth quarter of 2013.

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Goodwill (Changes in Goodwill) (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Goodwill [Roll Forward]
Balance, beginning of year, Goodwill, gross	$ 328,129	$ 316,962
Balance, beginning of year, Accumulated impairment lossses	(310,653)	(310,653)
Balance, beginning of year, Goodwill, Net	17,476	6,309
Increases due to current year acquisitions	460	11,463
Effects of foreign currency translation	(581)	(296)
Total goodwill increase (decrease)	(121)	11,167
Balance, end of year, Goodwill, gross	328,008	328,129
Balance, end of year, Accumulated impairment lossses	(310,653)	(310,653)
Balance, end of year, Goodwill, Net	$ 17,355	$ 17,476

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Quarterly Information (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

The following table summarizes the unaudited statement of operations for each quarter of 2014 and 2013 (in thousands, except per share data):

	Total			Dec. 31 (3)			Sept. 30 (4)			June 30			Mar. 31 (2)
2014
Net revenue	$	156,212		$	35,506		$	34,157		$	40,825		$	45,724
Gross profit	90,411			17,625			15,229			20,039			37,518
Operating (loss) income	(69,153		)	(20,682		)	(20,763		)	(18,832		)	(8,876		)
Net income (loss)	(71,815		)	(20,838		)	(22,178		)	(21,029		)	(7,770		)
Basic net income (loss) per share (1)	(2.00		)	(0.58		)	(0.62		)	(0.59		)	(0.22		)
Diluted net income (loss) per share (1)	(2.00		)	(0.58		)	(0.62		)	(0.59		)	(0.22		)
2013
Net revenue	$	206,196		$	50,595		$	48,958		$	49,850		$	56,793
Gross profit	127,105			30,519			29,968			30,331			36,287
Operating (loss) income	(70,808		)	(14,441		)	(28,437		)	(16,504		)	(11,426		)
Net income (loss)	(58,990		)	2,530			(31,375		)	(18,471		)	(11,674		)
Basic net income (loss) per share (1)	(1.66		)	0.07			(0.88		)	(0.52		)	(0.33		)
Diluted net income (loss) per share (1)	(1.66		)	0.07			(0.88		)	(0.52		)	(0.33		)

(1) The sum of the quarterly net income per share amounts will not necessarily equal net income per share for the year due to the use of weighted average quarterly shares and the effects of rounding.

(2) In 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.

(3) In the quarter ended December 31, 2013, we sold our remaining shares of common stock in LoEn Entertainment for a net gain of $21.4 million, as described in further detail in Note 5.

(4) In the quarter ended September 30, 2013, we accrued an aggregate of $11.5 million for certain legal matters, which was subsequently paid in the fourth quarter of 2013.

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Rhapsody Joint Venture (Tables)

12 Months Ended

Dec. 31, 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, is as follows (in thousands):

	Year ended December 31, 2014			Year ended December 31, 2013			Year ended December 31, 2012
Net revenue	$	173,484		$	140,596		$	143,674
Gross profit	32,145			34,141			36,260
Net loss	(21,336		)	(14,663		)	(12,228		)

	As of December 31, 2014		As of December 31, 2013
Current assets	$	47,021	$	31,245
Non-current assets	20,616		17,305
Current liabilities	65,458		46,458
Non-current liabilities	16,487		—

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Financial Assets Measured at Fair Value on a Recurring Basis

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

	Fair Value Measurements as of								Amortized Cost as of
	December 31, 2014								December 31, 2014
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash	$	30,105	$	—	$	—	$	30,105	$	30,105
Money market funds	11,629		—		—		11,629		11,630
Corporate notes and bonds	—		61,519		—		61,519		61,520
Total cash and cash equivalents	41,734		61,519		—		103,253		103,255
Short-term investments:
Corporate notes and bonds	—		51,453		—		51,453		51,438
U.S. government agency securities	7,000		—		—		7,000		7,000
Total short-term investments	7,000		51,453		—		58,453		58,438
Restricted cash equivalents and investments	—		3,000		—		3,000		3,000
Equity investments in publicly traded securities	2,676		—		—		2,676		428
Total	$	51,410	$	115,972	$	—	$	167,382	$	165,121

	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 investments in publicly traded securities	7,181		—		—		7,181		842
Total	$	68,237	$	168,099	$	—	$	236,336	$	229,950

Contractual Maturities of Short-term Investments

Contractual maturities of short-term investments as of December 31, 2014 are as follows (in thousands):

	Estimated Fair Value
Within one year	$	46,336
Between one year and five years	12,117
Total short-term investments	$	58,453

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND NONCONTROLLING INTEREST (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings (Deficit)
Balances at Dec. 31, 2011	$ 286,894	$ 34	$ 591,122	$ (24,884)	$ (279,378)
Balances (shares) at Dec. 31, 2011		34,422
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock	2,808	1	2,807
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock (shares)		902
Share of Rhapsody equity transactions	1,718		1,718
Stock-based compensation	8,123		8,123
Other comprehensive income (loss)	(1,656)			(1,656)
Net income (loss)	44,841				44,841
Balances at Dec. 31, 2012	342,728	35	603,770	(26,540)	(234,537)
Balances (shares) at Dec. 31, 2012		35,324
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock	(607)	1	(608)
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock (shares)		509
Share of Rhapsody equity transactions	(463)		(463)
Stock-based compensation	7,468		7,468
Other comprehensive income (loss)	(21,155)			(21,155)
Net income (loss)	(58,990)				(58,990)
Balances at Dec. 31, 2013	268,981	36	610,167	(47,695)	(293,527)
Balances (shares) at Dec. 31, 2013		35,833
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock	405	0	405
Common stock issued for exercise of stock options, employee stock purchase plan, and vesting of restricted shares, net of tax payments from shares withheld upon vesting of restricted stock (shares)		266
Share of Rhapsody equity transactions	1,980		1,980
Stock-based compensation	5,204		5,204
Other comprehensive income (loss)	(7,557)			(7,557)
Net income (loss)	(71,815)				(71,815)
Balances at Dec. 31, 2014	$ 197,198	$ 36	$ 617,756	$ (55,252)	$ (365,342)
Balances (shares) at Dec. 31, 2014		36,099

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Allowance for Doubtful Accounts Receivable and Sales Returns (Tables)

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Activity in Allowance for Doubtful Accounts Receivable and Sales Returns

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

	Years ended December 31,
	2014			2013			2012
Balance, beginning of year	$	966		$	1,010		$	1,445
Addition (reduction) to allowance	433			(2		)	76
Amounts written off	—			(83		)	(529		)
Effects of foreign currency translation	(111		)	41			18
Balance, end of year	$	1,288		$	966		$	1,010

Activity in the allowance for sales returns (in thousands):

	Years ended December 31,
	2014			2013			2012
Balance, beginning of year	$	569		$	653		$	668
Addition (reduction) to allowance	(209		)	(64		)	153
Amounts written off	(6		)	(21		)	(168		)
Effects of foreign currency translation	—			1			—
Balance, end of year	$	354		$	569		$	653
Total, Allowance for Doubtful Accounts Receivable and Sales Returns	$	1,642		$	1,535		$	1,663

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Quarterly Information (Unaudited) (Details) (USD $)	3 Months Ended																12 Months Ended
	Dec. 31, 2014		Sep. 30, 2014		Jun. 30, 2014		Mar. 31, 2014		Dec. 31, 2013		Sep. 30, 2013		Jun. 30, 2013		Mar. 31, 2013		Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012
Quarterly Financial Information Disclosure [Abstract]
Net revenue	$ 35,506,000		$ 34,157,000		$ 40,825,000	[1]	$ 45,724,000		$ 50,595,000	[2]	$ 48,958,000		$ 49,850,000	[1]	$ 56,793,000		$ 156,212,000	[3]	$ 206,196,000	[3]	$ 258,842,000	[3]
Gross profit	17,625,000	[2]	15,229,000		20,039,000	[1]	37,518,000		30,519,000	[2]	29,968,000		30,331,000	[1]	36,287,000		90,411,000		127,105,000		155,111,000
Operating (loss) income	(20,682,000)	[2]	(20,763,000)		(18,832,000)	[1]	(8,876,000)		(14,441,000)	[2]	(28,437,000)		(16,504,000)	[1]	(11,426,000)		(69,153,000)		(70,808,000)		55,563,000
Net income (loss)	(20,838,000)	[2]	(22,178,000)		(21,029,000)	[1]	(7,770,000)		2,530,000	[2]	(31,375,000)		(18,471,000)	[1]	(11,674,000)		(71,815,000)		(58,990,000)		44,841,000
Basic net income (loss) (in dollars per share)	$ (0.58)	[2],[4]	$ (0.62)	[4]	$ (0.59)	[1],[4]	$ (0.22)	[4]	$ 0.07	[2],[4]	$ (0.88)	[4]	$ (0.52)	[1],[4]	$ (0.33)	[4]	$ (2.00)		$ (1.66)	[4]	$ 1.29
Diluted net income (loss) (in dollars per share)	$ (0.58)	[2],[4]	$ (0.62)	[4]	$ (0.59)	[1],[4]	$ (0.22)	[4]	$ 0.07	[2],[4]	$ (0.88)	[4]	$ (0.52)	[1],[4]	$ (0.33)	[4]	$ (2.00)	[4]	$ (1.66)	[4]	$ 1.28
Net gain on sale of other investments																					116,400,000
Extinguishment of liability							10,600,000										10,580,000		0		0
Investment [Line Items]
Gain on sale of equity and other investments, net																	2,371,000		21,389,000		5,072,000
Payments for litigation									11,500,000
LoEn Entertainment, Inc
Investment [Line Items]
Gain on sale of equity and other investments, net									$ 21,400,000										$ 21,400,000		$ 4,300,000

[1] In 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.

[2] In the quarter ended December 31, 2013, we sold our remaining shares of common stock in LoEn Entertainment for a net gain of $21.4 million, as described in further detail in Note 5.

[3] December 31, 2012 December 31, 2011 December 31, 2010Components of Cost of Revenue License Fees8,012 8,538 11,689Service Revenue68,369 70,553 92,042Net Revenue Costs76,381 79,091 103,731

[4] The sum of the quarterly net income per share amounts will not necessarily equal net income per share for the year due to the use of weighted average quarterly shares and the effects of rounding.

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Schedule of Components of Income (Loss) Before Income Taxes

Components of income (loss) before income taxes (in thousands):

	Years ended December 31,
	2014			2013			2012
United States operations	$	(67,186	)	$	(50,032	)	$	59,807
Foreign operations	(3,349		)	(4,055		)	(2,448		)
Income (loss) before income taxes	$	(70,535	)	$	(54,087	)	$	57,359

Schedule of Components of Income Tax Expense (Benefit)

Components of income tax expense (benefit) (in thousands):

	Years ended December 31,
	2014			2013			2012
Current:
United States federal	$	547		$	2,460		$	1,372
State and local	69			61			(2,957		)
Foreign	901			1,706			(6,221		)
Total current	1,517			4,227			(7,806		)
Deferred:
United States federal	21			(1,890		)	22,029
State and local	(40		)	51			556
Foreign	(218		)	2,515			(2,261		)
Total deferred	(237		)	676			20,324
Total income tax expense (benefit)	$	1,280		$	4,903		$	12,518

Schedule of Effective Income Tax Rate Reconciliation

Income tax expense differs from “expected” income tax expense (computed by applying the U.S. federal income tax rate of 35%) due to the following (in thousands):

	Years ended December 31,
	2014			2013			2012
United States federal tax expense (benefit) at statutory rate	$	(24,687	)	$	(18,930	)	$	20,076
State taxes, net of United States federal tax expense (benefit)	(1,083		)	(841		)	(1,098		)
Change in valuation allowance	27,759			25,046			2,136
Non-deductible stock compensation	270			415			341
Impact of non-U.S. jurisdictional tax rate difference	529			487			313
Research and development tax credit	(325		)	(1,632		)	(1,923		)
Increase (reversal) of unrecognized tax benefits	(901		)	671			(7,826		)
Non-U.S. withholding tax	393			1,805			471
Other	(675		)	(2,118		)	28
Total income tax expense (benefit)	$	1,280		$	4,903		$	12,518

Schedule of Net Deferred Tax Assets

Net deferred tax assets are comprised of the following (in thousands):

	December 31,
	2014			2013
Deferred tax assets:
United States federal net operating loss carryforwards	$	66,547		$	41,612
Deferred expenses	2,552			7,166
Research and development tax credit carryforwards	22,979			23,079
Alternative minimum tax credit carryforward	3,626			3,561
Net unrealized loss on investments	97			109
Accrued loss on excess office facilities	—			54
Stock-based compensation	11,398			12,225
State net operating loss carryforwards	8,400			7,392
Foreign net operating loss carryforwards	34,210			37,594
Deferred revenue	401			128
Equipment, software, and leasehold improvements	3,252			2,736
Intangibles	19			27
Other	4,332			4,489
Gross deferred tax assets	157,813			140,172
Less valuation allowance	149,474			128,865
Gross deferred tax assets, net of valuation allowance	$	8,339		$	11,307
Deferred tax liabilities:
Other intangible assets	$	(3,035	)	$	(3,761	)
Net unrealized gains and basis differences on investments	(4,226		)	(6,912		)
Other	(397		)	(560		)
Prepaid expenses	(1,360		)	(814		)
Gross deferred tax liabilities	(9,018		)	(12,047		)
Net deferred tax assets (liabilities)	$	(679	)	$	(740	)

Schedule of Unrecognized Tax Benefits

Reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits (in thousands):

	Years ended December 31,
	2014			2013			2012
Balance, beginning of year	$	4,505		$	3,978		$	16,721
Increases related to prior year tax positions	—			—			416
Decreases related to prior year tax positions	(196		)	(125		)	(94		)
Settlements with taxing authorities	—			—			(13,065		)
Increases related to current year tax positions	130			652			—
Expiration of the statute of limitations	(898		)	—			—
Balance, end of year	$	3,541		$	4,505		$	3,978

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Allowance for Doubtful Accounts Receivable and Sales Returns (Additional Information) (Detail) (USD $)	3 Months Ended											12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014		Mar. 31, 2014	Dec. 31, 2013		Sep. 30, 2013	Jun. 30, 2013		Mar. 31, 2013	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012
Concentration Risk [Line Items]
Net revenue	$ 35,506,000	$ 34,157,000	$ 40,825,000	[1]	$ 45,724,000	$ 50,595,000	[2]	$ 48,958,000	$ 49,850,000	[1]	$ 56,793,000	$ 156,212,000	[3]	$ 206,196,000	[3]	$ 258,842,000	[3]
Accounts Receivable | Company A
Concentration Risk [Line Items]
Number of major customers, accounts receivable												1		1
Percentage by major customer												21.00%		17.00%
Accounts Receivable | Company B
Concentration Risk [Line Items]
Number of major customers, accounts receivable												1
Percentage by major customer												15.00%
Revenue by Segment
Concentration Risk [Line Items]
Number of major customers, accounts receivable														1		1
Revenue by Segment | Company A
Concentration Risk [Line Items]
Number of major customers, accounts receivable												1
Mobile Entertainment
Concentration Risk [Line Items]
Significant customer revenue												31,900,000		26,400,000
Net revenue												79,901,000		81,181,000		100,318,000
Mobile Entertainment | Revenue by Segment
Concentration Risk [Line Items]
Percentage by major customer												20.00%		13.00%
RealPlayer Group
Concentration Risk [Line Items]
Net revenue												39,201,000		75,206,000		91,469,000
RealPlayer Group | Revenue by Segment
Concentration Risk [Line Items]
Percentage by major customer														13.00%		11.00%
Significant customer revenue																27,700,000
Net revenue														$ 27,000,000

[1] In 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.

[2] In the quarter ended December 31, 2013, we sold our remaining shares of common stock in LoEn Entertainment for a net gain of $21.4 million, as described in further detail in Note 5.

[3] December 31, 2012 December 31, 2011 December 31, 2010Components of Cost of Revenue License Fees8,012 8,538 11,689Service Revenue68,369 70,553 92,042Net Revenue Costs76,381 79,091 103,731

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Income Taxes (Net Deferred Tax Assets) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Deferred Tax Assets [Abstract]
United States federal net operating loss carryforwards	$ 66,547	$ 41,612
Deferred expenses	2,552	7,166
Research and development tax credit carryforwards	22,979	23,079
Alternative minimum tax credit carryforward	3,626	3,561
Net unrealized loss on investments	97	109
Accrued loss on excess office facilities	0	54
Stock-based compensation	11,398	12,225
State net operating loss carryforwards	8,400	7,392
Foreign net operating loss carryforwards	34,210	37,594
Deferred revenue	401	128
Equipment, software, and leasehold improvements	3,252	2,736
Intangibles	19	27
Other	4,332	4,489
Gross deferred tax assets	157,813	140,172
Less valuation allowance	149,474	128,865
Gross deferred tax assets, net of valuation allowance	8,339	11,307
Deferred Tax Liabilities [Abstract]
Other intangible assets	(3,035)	(3,761)
Net unrealized gains and basis differences on investments	(4,226)	(6,912)
Other	(397)	(560)
Prepaid expenses	(1,360)	(814)
Gross deferred tax liabilities	(9,018)	(12,047)
Net deferred tax assets (liabilities)	$ (679)	$ (740)

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 103,253	$ 151,235
Short-term investments	58,453	74,920
Trade accounts receivable, net of allowances	15,257	24,613
Deferred costs, current portion	702	1,601
Deferred tax assets, current portion	652	306
Prepaid expenses and other current assets	8,980	9,124
Total current assets	187,297	261,799
Equipment, software, and leasehold improvements, at cost:
Equipment and software	74,100	86,721
Leasehold improvements	3,590	3,482
Total equipment, software, and leasehold improvements	77,690	90,203
Less accumulated depreciation and amortization	61,442	67,031
Net equipment, software, and leasehold improvements	16,248	23,172
Restricted cash equivalents and investments	3,000	3,000
Equity method investment	10,000	12,473
Available for sale securities	2,676	7,181
Other assets	2,299	2,332
Deferred costs, non-current portion	316	946
Deferred tax assets, net, non-current portion	999	1,409
Other intangible assets, net	10,109	12,993
Goodwill	17,355	17,476
Total assets	250,299	342,781
Current liabilities:
Accounts payable	18,653	19,987
Accrued and other current liabilities	25,286	41,893
Deferred tax liabilities, net, current portion	1,628	899
Deferred revenue, current portion	5,301	7,498
Total current liabilities	50,868	70,277
Deferred revenue, non-current portion	235	166
Deferred rent	1,215	1,318
Deferred tax liabilities, net, non-current portion	702	1,556
Other long-term liabilities	81	483
Total liabilities	53,101	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 36,099 shares in 2014 and 35,833 shares in 2013	36	36
Additional paid-in capital	617,756	610,167
Accumulated other comprehensive loss	(55,252)	(47,695)
Retained deficit	(365,342)	(293,527)
Total shareholders’ equity	197,198	268,981
Total liabilities and shareholders’ equity	250,299	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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Description of Business and Summary of Significant Accounting Policies (Narrative) (Detail) (USD $)	0 Months Ended	3 Months Ended		12 Months Ended
	Aug. 23, 2011	Jun. 30, 2012	Mar. 31, 2011	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2014	Mar. 31, 2010	Mar. 30, 2010
2012 Sale of Patents and Other Technology Assets to Intel Corporation
Sale of patents and other technology assets		$ 120,000,000
Net gain on sale of other investments						116,400,000
2011 Special Dividend and Reverse Stock Split
Reverse stock split, conversion ratio	0.25
Depreciation and Amortization
Depreciation expense				8,500,000	14,300,000	12,900,000
Equity Method Investments
Equity method investment				10,000,000	12,473,000
Deferred Costs
Impairment of ongoing project, deferred costs			700,000
Advertising Expense
Advertising expense				23,100,000	30,600,000	31,700,000
Rhapsody America LLC
2010 Rhapsody Restructuring Transaction
Percentage of ownership interest in Rhapsody				43.00%			45.00%	47.00%	51.00%
Equity Method Investments
Liquidation preference				10,000,000
Equity method investment				$ 10,000,000	$ 12,500,000
Equipment and Software | Minimum
Depreciation and Amortization
Useful life				3 years
Equipment and Software | Maximum
Depreciation and Amortization
Useful life				5 years

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Statement of Cash Flows [Abstract]
Net income (loss)	$ (71,815)	$ (58,990)	$ 44,841
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	11,959	18,748	16,959
Stock-based compensation	5,204	7,468	8,123
Loss (gain) on asset disposal	0	0	2,509
Equity in net loss of Rhapsody	4,452	6,268	5,709
Lease exit and related charges (gains)	668	1,421	3,290
Deferred income taxes, net	(237)	676	20,324
Gain on sale of patent and other technology assets, net of costs of $3,647	0	0	(116,353)
Gain on sale of available for sale securities	(2,371)	(21,389)	(5,072)
Realized translation gain	(48)	(571)	(1,966)
Extinguishment of liability	(10,580)	0	0
Other	0	51	0
Net change in certain operating assets and liabilities:
Trade accounts receivable	8,732	8,442	11,163
Deferred costs, prepaid expenses and other assets	1,982	8,112	(986)
Accounts payable	(769)	321	549
Accrued and other liabilities	(7,421)	(20,436)	(22,403)
Net cash provided by (used in) operating activities	(60,244)	(49,879)	(33,313)
Cash flows from investing activities:
Purchases of equipment, software, and leasehold improvements	(2,460)	(7,727)	(7,170)
Proceeds from sale of patents and other technology assets, net of costs of $3,647	0	0	116,353
Proceeds from sale of available for sale securities	2,754	29,153	7,261
Purchases of short-term investments	(81,216)	(131,690)	(116,963)
Proceeds from sales and maturities of short-term investments	97,683	164,986	87,487
Decrease in restricted cash equivalents and investments	0	10,000	167
Increase in restricted cash equivalents and investments	0	(3,000)	0
Acquisitions of businesses, net of cash acquired	(733)	(22,480)	0
Other	(467)	0	0
Net cash provided by (used in) investing activities	15,561	39,242	87,135
Cash flows from financing activities:
Proceeds from issuance of common stock (stock options and stock purchase plan)	812	594	3,802
Tax payments from shares withheld upon vesting of restricted stock	(407)	(1,201)	(995)
Payment of contingent consideration	(1,042)	(828)	0
Net cash provided by (used in) financing activities	(637)	(1,435)	2,807
Effect of exchange rate changes on cash and cash equivalents	(2,662)	109	236
Net increase (decrease) in cash and cash equivalents	(47,982)	(11,963)	56,865
Cash and cash equivalents, beginning of year	151,235	163,198	106,333
Cash and cash equivalents, end of year	103,253	151,235	163,198
Supplemental disclosure of cash flow information:
Cash received from income tax refunds	654	8,405	456
Cash paid for income taxes	1,882	4,600	3,296
Non-cash investing activities:
Increase (decrease) in accrued purchases of equipment, software, and leasehold improvements	$ (297)	$ 335	$ 212

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Restructuring Charges (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012 contract
Restructuring Cost and Reserve [Line Items]
Number of service contracts assigned to third parties			2
Costs incurred and charged to expense	$ 4,992	$ 5,765	$ 15,225
Restructuring Reserve [Roll Forward]
Accrued liability beginning balance	756	2,431	131
Costs incurred and charged to expense	4,992	3,961	11,929
Cash payments	(5,299)	(5,636)	(9,629)
Accrued liability ending balance	449	756	2,431
Employee Separation Costs
Restructuring Cost and Reserve [Line Items]
Costs incurred and charged to expense	4,992	3,961	9,052
Restructuring Reserve [Roll Forward]
Accrued liability beginning balance	756	731	131
Costs incurred and charged to expense	4,992	3,961	8,300
Cash payments	(5,299)	(3,936)	(7,700)
Accrued liability ending balance	449	756	731
Contract Assignment Costs
Restructuring Cost and Reserve [Line Items]
Costs incurred and charged to expense	0	0	3,629
Restructuring Reserve [Roll Forward]
Accrued liability beginning balance	0	1,700	0
Costs incurred and charged to expense	0	0	3,629
Cash payments	0	(1,700)	(1,929)
Accrued liability ending balance	0	0	1,700
Asset Related and Other Costs
Restructuring Cost and Reserve [Line Items]
Costs incurred and charged to expense	$ 0	$ 1,804	$ 2,544

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Accrued and Other Current Liabilities (Tables)

12 Months Ended

Dec. 31, 2014

Payables and Accruals [Abstract]

Accrued and Other Liabilities

Accrued and other current liabilities (in thousands):

	December 31, 2014		December 31, 2013
Royalties and other fulfillment costs	$	4,868	$	16,467
Employee compensation, commissions and benefits	7,711		10,060
Sales, VAT and other taxes payable	5,896		7,237
Other	6,811		8,129
Total accrued and other current liabilities	$	25,286	$	41,893

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Employee Stock and Benefit Plans (Restricted Stock Unit and Award Activity) (Details) (Restricted Stock Unit, USD $) Share data in Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Restricted Stock Unit
Number of Shares [Roll Forward]
Nonvested shares, beginning of year (in shares)	490	1,249	463
Granted (in shares)	159	232	1,536
Vested (in shares)	(193)	(581)	(437)
Forfeited/Canceled (in shares)	(56)	(410)	(313)
Nonvested shares, end of year (in shares)	400	490	1,249
Weighted Average Grant Date Fair Value [Roll Forward]
Nonvested shares, beginning of year (in dollars per share)	$ 7.80	$ 8.52	$ 9.42
Granted (in dollars per share)	$ 7.60	$ 7.18	$ 8.70
Vested (in dollars per share)	$ 8.35	$ 9.13	$ 9.47
Forfeited/Canceled (in dollars per share)	$ 7.73	$ 7.74	$ 9.42
Nonvested shares, beginning of year (in dollars per share)	$ 7.47	$ 7.80	$ 8.52
Total Fair Value of Vested Awards
Total fair value of vested awards	$ 1,608	$ 4,438	$ 4,106
Additional Information
Aggregate intrinsic value, outstanding	$ 2,800,000
Weighted average remaining contractual term	2 years

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Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Note 14. Income Taxes

Components of income (loss) before income taxes (in thousands):

	Years ended December 31,
	2014			2013			2012
United States operations	$	(67,186	)	$	(50,032	)	$	59,807
Foreign operations	(3,349		)	(4,055		)	(2,448		)
Income (loss) before income taxes	$	(70,535	)	$	(54,087	)	$	57,359

Components of income tax expense (benefit) (in thousands):

	Years ended December 31,
	2014			2013			2012
Current:
United States federal	$	547		$	2,460		$	1,372
State and local	69			61			(2,957		)
Foreign	901			1,706			(6,221		)
Total current	1,517			4,227			(7,806		)
Deferred:
United States federal	21			(1,890		)	22,029
State and local	(40		)	51			556
Foreign	(218		)	2,515			(2,261		)
Total deferred	(237		)	676			20,324
Total income tax expense (benefit)	$	1,280		$	4,903		$	12,518

Income tax expense differs from “expected” income tax expense (computed by applying the U.S. federal income tax rate of 35%) due to the following (in thousands):

	Years ended December 31,
	2014			2013			2012
United States federal tax expense (benefit) at statutory rate	$	(24,687	)	$	(18,930	)	$	20,076
State taxes, net of United States federal tax expense (benefit)	(1,083		)	(841		)	(1,098		)
Change in valuation allowance	27,759			25,046			2,136
Non-deductible stock compensation	270			415			341
Impact of non-U.S. jurisdictional tax rate difference	529			487			313
Research and development tax credit	(325		)	(1,632		)	(1,923		)
Increase (reversal) of unrecognized tax benefits	(901		)	671			(7,826		)
Non-U.S. withholding tax	393			1,805			471
Other	(675		)	(2,118		)	28
Total income tax expense (benefit)	$	1,280		$	4,903		$	12,518

Net deferred tax assets are comprised of the following (in thousands):

	December 31,
	2014			2013
Deferred tax assets:
United States federal net operating loss carryforwards	$	66,547		$	41,612
Deferred expenses	2,552			7,166
Research and development tax credit carryforwards	22,979			23,079
Alternative minimum tax credit carryforward	3,626			3,561
Net unrealized loss on investments	97			109
Accrued loss on excess office facilities	—			54
Stock-based compensation	11,398			12,225
State net operating loss carryforwards	8,400			7,392
Foreign net operating loss carryforwards	34,210			37,594
Deferred revenue	401			128
Equipment, software, and leasehold improvements	3,252			2,736
Intangibles	19			27
Other	4,332			4,489
Gross deferred tax assets	157,813			140,172
Less valuation allowance	149,474			128,865
Gross deferred tax assets, net of valuation allowance	$	8,339		$	11,307
Deferred tax liabilities:
Other intangible assets	$	(3,035	)	$	(3,761	)
Net unrealized gains and basis differences on investments	(4,226		)	(6,912		)
Other	(397		)	(560		)
Prepaid expenses	(1,360		)	(814		)
Gross deferred tax liabilities	(9,018		)	(12,047		)
Net deferred tax assets (liabilities)	$	(679	)	$	(740	)

Income tax receivables were $0.1 million and $0.4 million at December 31, 2014 and 2013, respectively.

In 2014, we continued to record a valuation allowance on the deferred tax assets that we believe are not more likely than not to be realized. The net change in valuation allowance was a $20.6 million increase and a $38.1 million increase during the years ended December 31, 2014 and 2013, respectively.

We maintain a valuation allowance of $149.5 million for our deferred tax assets due to uncertainty regarding their realization as of December 31, 2014. The net increase in the valuation allowance since December 31, 2013 of $20.6 million was the result of an increase in current year deferred tax assets for which the Company maintains a valuation allowance.

RealNetworks' U.S. federal net operating loss carryforwards totaled $190.1 million and $118.9 million at December 31, 2014 and 2013, respectively. The increase is mainly due to the current year U.S. taxable loss. The remaining net operating loss carryforwards as of December 31, 2014 are from the U.S. taxable losses in 2010, 2011 and 2013 and from acquired subsidiaries that are limited under Internal Revenue Code Section 382. These net operating loss carryforwards expire between 2024 and 2034.

RealNetworks' alternative minimum tax credit carryforward remained at $3.6 million from December 31, 2013 to December 31, 2014. The alternative minimum tax credit can be carried forward indefinitely.

RealNetworks' U.S. federal research and development tax credit carryforward totaled $23.0 million and $23.1 million at December 31, 2014 and 2013, respectively. The research and development credit carryforwards expire between 2020 and 2034.

As of December 31, 2014 and 2013, we had $3.5 million and $4.5 million of unrecognized tax benefits, respectively. The decrease in unrecognized tax benefits is due to the expiration of the statute of limitations. As of December 31, 2014, there are no unrecognized tax benefits remaining that would affect our effective tax rate if recognized, as the offset would increase the valuation allowance. The total amount of unrecognized tax benefits that would affect our effective tax rate if recognized was $0.4 million in December 31, 2013.

As of December 31, 2014, we have no accrued interest or penalties related to uncertain tax positions. As of December 31, 2013, we had approximately $0.1 million of accrued interest and penalties related to uncertain tax positions. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

Reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits (in thousands):

	Years ended December 31,
	2014			2013			2012
Balance, beginning of year	$	4,505		$	3,978		$	16,721
Increases related to prior year tax positions	—			—			416
Decreases related to prior year tax positions	(196		)	(125		)	(94		)
Settlements with taxing authorities	—			—			(13,065		)
Increases related to current year tax positions	130			652			—
Expiration of the statute of limitations	(898		)	—			—
Balance, end of year	$	3,541		$	4,505		$	3,978

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Restructuring Charges (Tables)

12 Months Ended

Dec. 31, 2014

Restructuring and Related Activities [Abstract]

Schedule of Restructuring Charges by Type of Cost

	By Type of Cost
	Employee Separation Costs		Contract Assignment Costs		Asset Related and Other Costs		Total
Costs incurred and charged to expense for the year ended December 31, 2014	$	4,992	$	—	$	—	$	4,992
Costs incurred and charged to expense for the year ended December 31, 2013	$	3,961	$	—	$	1,804	$	5,765
Costs incurred and charged to expense for the year ended December 31, 2012	$	9,052	$	3,629	$	2,544	$	15,225

Schedule of Restructuring Reserve by Type of Cost

Changes to the accrued restructuring liability (which is included in Accrued and other current liabilities) for 2014, 2013 and 2012, (in thousands):

	By Type of Cost
	Employee Separation Costs			Contract Assignment Costs			Total
Accrued liability as of December 31, 2011	$	131		$	—		$	131
Costs incurred and charged to expense for the year ended December 31, 2012, excluding non-cash charges	8,300			3,629			11,929
Cash payments	(7,700		)	(1,929		)	(9,629		)
Accrued liability as of December 31, 2012	731			1,700			2,431
Costs incurred and charged to expense for the year ended December 31, 2013	3,961			—			3,961
Cash payments	(3,936		)	(1,700		)	(5,636		)
Accrued liability as of December 31, 2013	756			—			756
Costs incurred and charged to expense for the year ended December 31, 2014	4,992			—			4,992
Cash payments	(5,299		)	—			(5,299		)
Accrued liability as of December 31, 2014	$	449		$	—		$	449

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 16. Commitments and Contingencies

Commitments.    We have commitments for future payments related to office facilities leases. We lease office facilities under various operating leases expiring through 2024. Future minimum payments as of December 31, 2014 are as follows (in thousands):

	Office Leases
2015	$	6,667
2016	4,741
2017	3,179
2018	2,721
2019	3,186
Thereafter	15,883
Total minimum payments	$	36,377

Of the total office lease future minimum payments, $0.2 million is recorded in accrued lease exit and related charges at December 31, 2014.

Rent expense during the years ended December 31, 2014, 2013, and 2012, was $6.8 million, $8.3 million, and $9.1 million, respectively. These amounts are net of sublease income of $0.2 million, $0.8 million and $1.0 million in each of the years ended December 31,2014, 2013 and 2012.

Litigation. In October 2013, we executed settlement agreements relating to certain outstanding litigation matters; specifically, the matters brought against us by VoiceAge Corporation and Callertone Innovations, Inc. which are more fully described in our 2013 Annual Report on Form 10-K. During the fourth quarter of 2013, we paid an aggregate of $11.5 million, representing our total obligation under these settlements.

We 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.

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Employee Stock and Benefit Plans (Retirement Savings Plan Narrative) (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Matching contribution percentage	50.00%
Maximum contributions per employee percentage	3.00%
Contribution amount	$ 0.7	$ 0.8	$ 1.0

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Statement of Cash Flows [Abstract]
Costs related to gain on sale of patent and other technology assets, net of costs	$ 0	$ 0	$ 3,647

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized	250,000	250,000
Common stock, issued	36,099	35,833
Common stock, outstanding	36,099	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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Accrued and Other Current Liabilities

12 Months Ended

Dec. 31, 2014

Payables and Accruals [Abstract]

Accrued and Other Current Liabilities

Note 9. Accrued and Other Current Liabilities

Accrued and other current liabilities (in thousands):

	December 31, 2014		December 31, 2013
Royalties and other fulfillment costs	$	4,868	$	16,467
Employee compensation, commissions and benefits	7,711		10,060
Sales, VAT and other taxes payable	5,896		7,237
Other	6,811		8,129
Total accrued and other current liabilities	$	25,286	$	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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Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Jan. 30, 2015	Jun. 30, 2014
Document and Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
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		36,102,915
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Public Float			$ 176

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Restructuring Charges

12 Months Ended

Dec. 31, 2014

Restructuring and Related Activities [Abstract]

Restructuring Charges

Note 10. Restructuring Charges

Restructuring and other charges in 2014, 2013 and 2012 consist of costs associated with the ongoing reorganization of our business operations and our ongoing expense re-alignment efforts. The expense amounts in all three years primarily relate to severance costs due to workforce reductions and are classified as Employee Separation Costs in the table below.

We also incurred restructuring charges during 2013 related to the relocation of our Seattle headquarters totaling $1.8 million, which is classified as Asset Related and Other Costs in the table below. For details on other costs associated with the termination of our Seattle headquarters lease see Note 11, Lease exit and related charges.

In 2012 we assigned two of our existing domestic carrier SaaS service contracts to a third party, resulting in contract assignment costs of $3.6 million and asset related and other costs of $2.5 million.

Details of restructuring charges for the years ended December 31, 2014, 2013, and 2012 are shown in the table below (in thousands):

	By Type of Cost
	Employee Separation Costs		Contract Assignment Costs		Asset Related and Other Costs		Total
Costs incurred and charged to expense for the year ended December 31, 2014	$	4,992	$	—	$	—	$	4,992
Costs incurred and charged to expense for the year ended December 31, 2013	$	3,961	$	—	$	1,804	$	5,765
Costs incurred and charged to expense for the year ended December 31, 2012	$	9,052	$	3,629	$	2,544	$	15,225

Changes to the accrued restructuring liability (which is included in Accrued and other current liabilities) for 2014, 2013 and 2012, (in thousands):

	By Type of Cost
	Employee Separation Costs			Contract Assignment Costs			Total
Accrued liability as of December 31, 2011	$	131		$	—		$	131
Costs incurred and charged to expense for the year ended December 31, 2012, excluding non-cash charges	8,300			3,629			11,929
Cash payments	(7,700		)	(1,929		)	(9,629		)
Accrued liability as of December 31, 2012	731			1,700			2,431
Costs incurred and charged to expense for the year ended December 31, 2013	3,961			—			3,961
Cash payments	(3,936		)	(1,700		)	(5,636		)
Accrued liability as of December 31, 2013	756			—			756
Costs incurred and charged to expense for the year ended December 31, 2014	4,992			—			4,992
Cash payments	(5,299		)	—			(5,299		)
Accrued liability as of December 31, 2014	$	449		$	—		$	449

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Segment Information (Revenue by Geographic Region) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended											12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014		Mar. 31, 2014	Dec. 31, 2013		Sep. 30, 2013	Jun. 30, 2013		Mar. 31, 2013	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012
Geographic Reporting Disclosure [Line Items]
Revenue	$ 35,506	$ 34,157	$ 40,825	[1]	$ 45,724	$ 50,595	[2]	$ 48,958	$ 49,850	[1]	$ 56,793	$ 156,212	[3]	$ 206,196	[3]	$ 258,842	[3]
United States
Geographic Reporting Disclosure [Line Items]
Revenue												61,660		90,250		117,844
Europe
Geographic Reporting Disclosure [Line Items]
Revenue												26,575		38,155		56,473
Republic of Korea
Geographic Reporting Disclosure [Line Items]
Revenue												39,852		46,601		40,467
Rest of World
Geographic Reporting Disclosure [Line Items]
Revenue												$ 28,125		$ 31,190		$ 44,058

[1] In 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.

[2] In the quarter ended December 31, 2013, we sold our remaining shares of common stock in LoEn Entertainment for a net gain of $21.4 million, as described in further detail in Note 5.

[3] December 31, 2012 December 31, 2011 December 31, 2010Components of Cost of Revenue License Fees8,012 8,538 11,689Service Revenue68,369 70,553 92,042Net Revenue Costs76,381 79,091 103,731

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012
Income Statement [Abstract]
Net revenue	$ 156,212	[1]	$ 206,196	[1]	$ 258,842	[1]
Cost of revenue	76,381	[2]	79,091	[2]	103,731	[2]
Extinguishment of liability	10,580		0		0
Gross profit	90,411		127,105		155,111
Sale of patents and other technology assets, net of costs	0		0		116,353
Operating expenses:
Research and development	52,765		60,880		63,194
Sales and marketing	66,926		80,011		90,301
General and administrative	34,001		36,643		43,891
Restructuring and other charges	4,992		5,765		15,225
Lease exit and related charges	880		3,089		3,290
Loss on litigation settlements	0		11,525		0
Total operating expenses	159,564		197,913		215,901
Operating (loss) income	(69,153)		(70,808)		55,563
Other income (expenses):
Interest income, net	556		1,133		1,192
Gain on sale of equity and other investments, net	2,371		21,389		5,072
Equity in net loss of Rhapsody investment	(4,452)		(6,268)		(5,709)
Other income (expense), net	143		467		1,241
Total other income (expenses), net	(1,382)		16,721		1,796
Income (loss) before income taxes	(70,535)		(54,087)		57,359
Income tax expense (benefit)	1,280		4,903		12,518
Net income (loss)	(71,815)		(58,990)		44,841
Basic net income (loss) (in dollars per share)	$ (2.00)		$ (1.66)	[3]	$ 1.29
Diluted net income (loss) (in dollars per share)	$ (2.00)	[3]	$ (1.66)	[3]	$ 1.28
Shares used to compute basic net income (loss) per share	35,947		35,553		34,873
Shares used to compute diluted net income (loss) per share	35,947		35,553		35,122
Comprehensive income (loss):
Unrealized investment holding gains (losses), net of reclassification adjustments	(4,145)		(20,288)		(633)
Foreign currency translation adjustments, net of reclassification adjustments	(3,412)		(867)		(1,023)
Total other comprehensive income (loss)	(7,557)		(21,155)		(1,656)
Net income (loss)	(71,815)		(58,990)		44,841
Comprehensive income (loss)	$ (79,372)		$ (80,145)		$ 43,185

[1] December 31, 2012 December 31, 2011 December 31, 2010Components of Cost of Revenue License Fees8,012 8,538 11,689Service Revenue68,369 70,553 92,042Net Revenue Costs76,381 79,091 103,731

[2] December 31, 2013 December 31, 2012 December 31, 2011Components of Revenue License Fees28,308 43,709 56,640Service Revenue127,904 162,487 202,202Net Revenue156,212 206,196 258,842

[3] The sum of the quarterly net income per share amounts will not necessarily equal net income per share for the year due to the use of weighted average quarterly shares and the effects of rounding.

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Rhapsody Joint Venture

12 Months Ended

Dec. 31, 2014

Equity Method Investments and Joint Ventures [Abstract]

Rhapsody Joint Venture

Rhapsody Joint Venture

As of December 31, 2014 we owned approximately 43% 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 transaction, RealNetworks contributed $18.0 million in cash, the Rhapsody brand and certain other assets, including content licenses, in exchange for shares of convertible preferred stock of Rhapsody, carrying a $10.0 million preference upon certain liquidation events.

In the fourth quarter of 2014, Rhapsody issued common stock to a new strategic partner which decreased our equity interest from approximately 45% to approximately 43%.

We recorded our share of losses in the operations of Rhapsody of $4.5 million, $6.3 million, and $5.7 million for the years ended December 31, 2014, 2013 and 2012, 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, which is impacted by Rhapsody equity transactions, below $10.0 million, unless Rhapsody's book value is reduced below $10.0 million. The carrying value of our Rhapsody investment was $10.0 million and $12.5 million at December 31, 2014 and 2013, respectively.

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

	Year ended December 31, 2014			Year ended December 31, 2013			Year ended December 31, 2012
Net revenue	$	173,484		$	140,596		$	143,674
Gross profit	32,145			34,141			36,260
Net loss	(21,336		)	(14,663		)	(12,228		)

	As of December 31, 2014		As of December 31, 2013
Current assets	$	47,021	$	31,245
Non-current assets	20,616		17,305
Current liabilities	65,458		46,458
Non-current liabilities	16,487		—

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Acquisitions

12 Months Ended

Dec. 31, 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 are evaluated annually in our fourth quarter for impairment, or more frequently, if circumstances indicate an impairment may exist. The remaining $3.5 million included developed game technology and existing customer relationships, and is being amortized over their estimated 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. This acquisition has enhanced 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 are being amortized over their estimated 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, 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 has helped us accelerate our growth initiatives within the Mobile Entertainment segment.

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Earnings (Loss) Per Share

12 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share

Note 15. Earnings (Loss) Per Share

Basic and diluted net income (loss) per share (EPS) (in thousands, except per share data):

	Years ended December 31,
	2014			2013			2012
Net income (loss)	$	(71,815	)	$	(58,990	)	$	44,841
Weighted average common shares outstanding used to compute basic EPS	35,947			35,553			34,873
Dilutive effect of stock based awards	—			—			249
Weighted average common shares outstanding used to compute diluted EPS	35,947			35,553			35,122
Basic EPS	$	(2.00	)	$	(1.66	)	$	1.29
Diluted EPS	$	(2.00	)	$	(1.66	)	$	1.28

Approximately 6.3 million, 4.6 million, and 5.1 million shares of potentially issuable shares from stock awards were excluded from the calculation of diluted EPS for the years ended December 31, 2014, 2013, and 2012, respectively, because of their antidilutive effect.

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Loss on Exit and Related Charges

12 Months Ended

Dec. 31, 2014

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

Loss on Exit and Related Charges

Note 11. Lease Exit and Related Charges

As a result of the reduction in use of RealNetworks' office space, primarily in our former corporate headquarters in Seattle, Washington, and certain other locations, losses have been recognized representing rent and contractual operating expenses over the remaining life of the leases, and related write-downs of leasehold improvements to their estimated fair value.

In 2013, we entered into a new lease in a new location for our Seattle headquarters and concurrently entered into an amendment to our then-current headquarters office lease that provided for an early termination of such lease. The new Seattle building lease is for an initial term of 11 years and we have the option to extend the lease for two additional five-year terms, with certain increases in base rent. The early termination of our former Seattle headquarters office lease in 2013 resulted in us paying the landlord $6.5 million in fees in 2013.

Changes to the accrued loss on excess office facilities (in thousands):

	Years Ended December 31,
	2014			2013			2012
Accrued loss, beginning of year	$	254		$	4,213		$	2,747
Additions and adjustments to the lease loss accrual, including sublease income estimate revision, and related asset write-downs	668			1,421			3,290
Less write-down of leasehold improvements	—			—			(496		)
Less amounts paid, net of sublease income	(688		)	(5,380		)	(1,328		)
Accrued loss, end of year	234			254			4,213
Less current portion (included in Accrued and other current liabilities)	(234		)	(254		)	(2,463		)
Accrued loss, non-current portion (included in Other long term liabilities)	$	—		$	—		$	1,750

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Other Intangible Assets

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Other Intangible Assets

Note 7. Other Intangible Assets

Other intangible assets (in thousands):

		As of December 31,
		2014						2013
		Gross Amount		Accumulated Amortization		Net		Gross Amount		Accumulated Amortization		Net
Amortizing intangible assets:
	Customer relationships	$	33,853	$	31,643	$	2,210	$	35,156	$	31,262	$	3,894
	Developed technology	28,261		25,699		2,562		29,097		25,039		4,058
	Patents, trademarks and tradenames	3,817		3,528		289		4,021		3,627		394
	Service contracts	6,312		5,764		548		5,679		5,532		147
		72,243		66,634		5,609		73,953		65,460		8,493
Non-amortizing intangible assets:
	Trademarks and tradenames	4,500		—		4,500		4,500		—		4,500
	Total	$	76,743	$	66,634	$	10,109	$	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.

Amortization expense related to other intangible assets during the years ended December 31, 2014, 2013, and 2012 was $3.4 million, $4.4 million, and $4.1 million, respectively.

Estimated future amortization of other intangible assets (in thousands):

2015	$	2,654
2016	1,724
2017	856
2018	375
Total	$	5,609

No impairments of other intangible assets were recognized in 2014, 2013 or 2012.

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Loss on Exit and Related Charges (Changes to Accrued Loss on Excess Office Facilities) (Detail) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013 term	Dec. 31, 2012
Disclosure Changes To Accrued Loss On Excess Office Facilities [Abstract]
Leases term		11 years
Number of extensions on lease		2
Lease extension term		5 years
Cash paid for contract termination fees		$ 6,500,000
Accrued Loss on Excess Office Facilities [Roll Forward]
Accrued loss, beginning of year	254,000	4,213,000	2,747,000
Additions and adjustments to the lease loss accrual, including sublease income estimate revision, and related asset write-downs	668,000	1,421,000	3,290,000
Less write-down of leasehold improvements	0	0	(496,000)
Less amounts paid, net of sublease income	(688,000)	(5,380,000)	(1,328,000)
Accrued loss, end of year	234,000	254,000	4,213,000
Less current portion (included in Accrued and other current liabilities)	(234,000)	(254,000)	(2,463,000)
Accrued loss, non-current portion	$ 0	$ 0	$ 1,750,000

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Fair Value Measurements

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

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

	Fair Value Measurements as of								Amortized Cost as of
	December 31, 2014								December 31, 2014
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash	$	30,105	$	—	$	—	$	30,105	$	30,105
Money market funds	11,629		—		—		11,629		11,630
Corporate notes and bonds	—		61,519		—		61,519		61,520
Total cash and cash equivalents	41,734		61,519		—		103,253		103,255
Short-term investments:
Corporate notes and bonds	—		51,453		—		51,453		51,438
U.S. government agency securities	7,000		—		—		7,000		7,000
Total short-term investments	7,000		51,453		—		58,453		58,438
Restricted cash equivalents and investments	—		3,000		—		3,000		3,000
Equity investments in publicly traded securities	2,676		—		—		2,676		428
Total	$	51,410	$	115,972	$	—	$	167,382	$	165,121

	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 investments in publicly traded securities	7,181		—		—		7,181		842
Total	$	68,237	$	168,099	$	—	$	236,336	$	229,950

Restricted cash equivalents and investments as of December 31, 2014 and 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 2014, 2013, and 2012 were not significant. Gross unrealized gains and gross unrealized losses on short-term investment securities as of December 31, 2014 and 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 December 31, 2014 are as follows (in thousands):

	Estimated Fair Value
Within one year	$	46,336
Between one year and five years	12,117
Total short-term investments	$	58,453

Our equity investment in a publicly traded company as of December 31, 2014 and 2013 consisted of J-Stream Inc., a Japanese media services company. This equity investment is accounted for as available for sale. In 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, reported in Other income (expense), net, in the consolidated statement of operations.

In 2013 and 2012 we sold shares of common stock in LoEn Entertainment, Inc., a Korean digital music distribution company. The 2013 sales resulted in cash proceeds of $29.2 million, net of transaction costs, and a total pre-tax gain of $21.4 million. The 2012 sales resulted in net cash proceeds of $6.4 million and a total pre-tax gain of $4.3 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).

See Note 11, Lease Exit and Related Charges, for a discussion of the losses related to reductions in the use of RealNetworks' office space.

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Allowance for Doubtful Accounts Receivable and Sales Returns

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Allowance for Doubtful Accounts Receivable and Sales Returns

Note 6. Allowance for Doubtful Accounts Receivable and Sales Returns

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

	Years ended December 31,
	2014			2013			2012
Balance, beginning of year	$	966		$	1,010		$	1,445
Addition (reduction) to allowance	433			(2		)	76
Amounts written off	—			(83		)	(529		)
Effects of foreign currency translation	(111		)	41			18
Balance, end of year	$	1,288		$	966		$	1,010

Activity in the allowance for sales returns (in thousands):

	Years ended December 31,
	2014			2013			2012
Balance, beginning of year	$	569		$	653		$	668
Addition (reduction) to allowance	(209		)	(64		)	153
Amounts written off	(6		)	(21		)	(168		)
Effects of foreign currency translation	—			1			—
Balance, end of year	$	354		$	569		$	653
Total, Allowance for Doubtful Accounts Receivable and Sales Returns	$	1,642		$	1,535		$	1,663

One customer accounted for 21% and one other customer accounted for 15% of trade accounts receivable as of December 31, 2014. One customer accounted for 17% of trade accounts receivable as of December 31, 2013.

One customer accounted for approximately 20% or $31.9 million, of consolidated revenue during the year ended December 31, 2014, in our Mobile Entertainment segment.

One customer accounted for 13%, or $27.0 million, of consolidated revenue during the year ended December 31, 2013, in our RealPlayer and Games segments. One other customer accounted for 13%, or $26.4 million, of consolidated revenue during the year ended December 31, 2013, in our Mobile Entertainment segment.

One customer accounted for 11%, or $27.7 million, of consolidated revenue during the year ended December 31, 2012, in our RealPlayer and Games segments.

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Goodwill

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Note 8. Goodwill

Changes in goodwill (in thousands):

	December 31,
	2014			2013
Balance, beginning of year
Goodwill	$	328,129		$	316,962
Accumulated impairment losses	(310,653		)	(310,653		)
	17,476			6,309
Increases due to current year acquisitions	460			11,463
Effects of foreign currency translation	(581		)	(296		)
	(121		)	11,167
Balance, end of year
Goodwill	328,008			328,129
Accumulated impairment losses	(310,653		)	(310,653		)
	$	17,355		$	17,476

Goodwill by segment (in thousands):

	December 31,
	2014		2013
RealPlayer Group	$	985	$	580
Mobile Entertainment	1,976		2,119
Games	14,394		14,777
Total goodwill	$	17,355	$	17,476

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. For the 2013 year increases in goodwill, see Note 3, Acquisitions, for details on our acquisitions of Slingo, a social casino games business and Muzicall, a ringback tone business.

No impairments of goodwill were recorded in 2014, 2013, or 2012.

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Employee Stock and Benefit Plans (Weighted-Average Assumptions Used to Determine Fair Value of Options Granted) (Detail)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Expected dividend yield	0.00%	0.00%	0.00%
Risk-free interest rate	1.40%	0.86%	0.50%
Expected term	4 years 6 months	4 years 3 months	4 years 2 months
Volatility	41.00%	48.00%	58.00%

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Employee Stock and Benefit Plans (Stock Option Activity) (Details) (Stock Options, USD $) In Millions, except Share data in Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Stock Options
Options Outstanding, Number of Shares [Roll Forward]
Number of shares, beginning balance	6,625	4,534	6,365
Number of shares, Options granted at common stock price	2,036	3,578	1,422
Number of shares, Options exercised	(44)	(24)	(466)
Number of shares, Options cancelled	(1,893)	(1,463)	(2,787)
Number of shares, ending balance	6,724	6,625	4,534
Number of shares, Exercisable	2,601
Number of shares, Vested and expected to vest	5,982
Options Outstanding, Weighted Average Exercise Price [Roll Forward]
Weighted average exercise price, beginning balance (in dollars per share)	$ 10.21	$ 14.07	$ 14.24
Weighted average exercise price, Options granted at common stock price (in dollars per share)	$ 7.44	$ 7.56	$ 8.29
Weighted average exercise price, Options exercised (in dollars per share)	$ 7.26	$ 5.56	$ 6.61
Weighted average exercise price, Options canceled (in dollars per share)	$ 14.47	$ 15.76	$ 12.76
Weighted average exercise price, ending balance (in dollars per share)	$ 8.19	$ 10.21	$ 14.07
Weighted average exercise price, exercisable (in dollars per share)	$ 9.19
Weighted average exercise price, vested and expected to vest (in dollars per share)	$ 8.26
Weighted Average Fair Value Grant
Weighted average fair value grant, Options granted at common stock prrice (in dollars per share)	$ 2.51	$ 2.93	$ 3.71
Options, Additional Information
Weighted average remaining contractual life, outstanding	5 years 2 months 18 days
Weighted average remaining contractual life, exercisable	3 years 10 months 12 days
Weighted average remaining contractual life, vested and expected to vest	5 years 1 month 1 day
Intrinsic value, options outstanding	$ 0.2
Intrinsic value, options exercisable	0.1
Intrinsic value, options vested and expected to vest	0.2
Intrinsic value, options exercised		$ 0.1	$ 1.0

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Employee Stock and Benefit Plans (Equity Compensation Plans Narrative) (Details) (USD $) Share data in Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock reserved for future issuance	7.0
Capital shares reserved for future issuance	0.5
Total stock-based compensation expense	$ 5,204,000	$ 7,468,000	$ 8,123,000
Total unrecognized compensation cost	$ 10,500,000
Total unrecognized compensation cost, expected recognition period (in years)	3 years
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
Stock Options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period	7 years
Restricted Stock | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	2 years
Restricted Stock | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
2005 Plan | Restricted Stock Unit
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Factor for increase	1.6

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Goodwill (Tables)

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in Goodwill

Changes in goodwill (in thousands):

	December 31,
	2014			2013
Balance, beginning of year
Goodwill	$	328,129		$	316,962
Accumulated impairment losses	(310,653		)	(310,653		)
	17,476			6,309
Increases due to current year acquisitions	460			11,463
Effects of foreign currency translation	(581		)	(296		)
	(121		)	11,167
Balance, end of year
Goodwill	328,008			328,129
Accumulated impairment losses	(310,653		)	(310,653		)
	$	17,355		$	17,476

Goodwill Assigned by Segments

Goodwill by segment (in thousands):

	December 31,
	2014		2013
RealPlayer Group	$	985	$	580
Mobile Entertainment	1,976		2,119
Games	14,394		14,777
Total goodwill	$	17,355	$	17,476

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Fair Value Measurements (Additional Information) (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended			3 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Proceeds from sale of equity and other investments	$ (2,754)	$ (29,153)	$ (7,261)
Gain on sale of equity and other investments, net	2,371	21,389	5,072
J-Stream, Inc.
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Proceeds from sale of equity and other investments	(2,800)
Gain on sale of equity and other investments, net	2,400
LoEn Entertainment, Inc
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Proceeds from sale of equity and other investments		(29,200)	(6,400)
Gain on sale of equity and other investments, net		$ 21,400	$ 4,300	$ 21,400

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Employee Stock and Benefit Plans

12 Months Ended

Dec. 31, 2014

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

Employee Stock and Benefit Plans

Note 13. Employee Stock and Benefit Plans

Equity Compensation Plans.  Under our equity incentive plans we may grant various types of equity awards to employees and Directors. We have granted time-vest and performance-vest stock options and time-vest and performance-vest restricted stock. Generally, options vest based on continuous employment, over a four-year period. The options generally expire seven years from the date of grant and are exercisable at the market value of the common stock at the grant date. Time-vest restricted stock awards generally vest based on continuous employment over a two or four-year period. Performance-based awards vest if the specified performance targets are met and the grantee remains employed over the required period. The performance targets for these awards are generally based on the achievement of company-specific financial results. For these performance-based awards, expense is recognized when it is probable the performance goal will be achieved. We have also issued market-based performance stock options to certain employees. These awards vest if the market condition is met and the grantee remains employed over the requisite service period.

We issue new shares of common stock upon exercise of stock options and the vesting of restricted stock. As of December 31, 2014 there were 7.0 million shares of common stock authorized for future equity awards. Each restricted stock unit granted reduces and each restricted stock unit forfeited or canceled increases the shares available for future grant by a factor of 1.6 shares. Each stock option granted reduces and each stock option forfeited or canceled increases the shares available for future grant by a factor of one share. We also have an employee stock purchase plan, under which 0.5 million shares of common stock are authorized for future issuance as of December 31, 2014.

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

	Years Ended December 31,
	2014		2013		2012
Total stock-based compensation expense	$	5,204	$	7,468	$	8,123

The total stock-based compensation amounts disclosed above are recorded in their respective line items within operating expenses in the consolidated statement of operations. No stock-based compensation was capitalized as part of the cost of an asset as of December 31, 2014, 2013, or 2012. As of December 31, 2014, we had $10.5 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 three years.

As discussed in Note 1, Description of Business and Summary of Significant Accounting Policies - Stock-Based Compensation, the valuation models for stock option awards require various highly judgmental assumptions. The assumption for the expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, including the contractual terms, vesting schedules, and expectations of future employee behavior. Expected stock price volatility is based on historical volatility of our common stock for the related expected term. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with a term equivalent to the expected term of the stock options. The dividend yield is estimated at zero because we do not currently anticipate paying dividends in the foreseeable future.

The fair value of options granted used the following weighted average assumptions:

	Years ended December 31,
	2014		2013		2012
Expected dividend yield	—	%	—	%	—	%
Risk-free interest rate	1.40	%	0.86	%	0.50	%
Expected term (years)	4.5		4.3		4.2
Volatility	41	%	48	%	58	%

Restricted stock unit and award activity was as follows (shares are in thousands):

	Shares		Weighted Average Grant Date Fair Value Per Share		Total Grant Date Fair Value of Vested Awards (000's)
Nonvested shares, December 31, 2011	463		$	9.42
Granted	1,536		8.70
Vested	(437	)	9.47		$	4,106
Forfeited/Canceled	(313	)	9.42
Nonvested shares, December 31, 2012	1,249		$	8.52
Granted	232		7.18
Vested	(581	)	9.13		$	4,438
Forfeited/Canceled	(410	)	7.74
Nonvested shares, December 31, 2013	490		$	7.80
Granted	159		7.60
Vested	(193	)	8.35		$	1,608
Forfeited/Canceled	(56	)	7.73
Nonvested shares, December 31, 2014	400		$	7.47

At December 31, 2014 the aggregate intrinsic value of restricted stock awards was $2.8 million and the weighted average remaining contractual term was approximately 2 years.

Stock option activity (shares are in thousands):

	Options Outstanding				Weighted Average Grant Date Fair Value
	Number of Shares		Weighted Average Exercise Price
Outstanding, December 31, 2011	6,365		$	14.24
Options granted at common stock price	1,422		8.29		$	3.71
Options exercised	(466	)	6.61
Options cancelled	(2,787	)	12.76
Outstanding, December 31, 2012	4,534		$	14.07
Options granted at common stock price	3,578		7.56		$	2.93
Options exercised	(24	)	5.56
Options cancelled	(1,463	)	15.76
Outstanding, December 31, 2013	6,625		$	10.21
Options granted at common stock price	2,036		7.44		$	2.51
Options exercised	(44	)	7.26
Options cancelled	(1,893	)	14.47
Outstanding, December 31, 2014	6,724		$	8.19
Exercisable, December 31, 2014	2,601		$	9.19
Vested and expected to vest, December 31, 2014	5,982		$	8.26

In 2014 we granted 400,000 market-based stock options, which are included in the stock option tables above.

As of December 31, 2014, the weighted average remaining contractual life of the options was as follows: outstanding options 5.2 years; exercisable options 3.9 years; and vested and expected to vest options 5.1 years.

As of December 31, 2014, the aggregate intrinsic value of the options was as follows: outstanding options $0.2 million; exercisable options $0.1 million; and vested and expected to vest options $0.2 million.

The aggregate intrinsic value of stock options exercised in 2014 was insignificant. The aggregate intrinsic value of stock options exercised in 2013 and 2012 was, $0.1 million and $1.0 million.

Employee Stock Purchase Plan.    Our Employee Stock Purchase Plan (ESPP) allows an eligible employee to purchase shares of our common stock at a price equal to 85 percent of the fair market value of the common stock at the end of the semi-annual offering periods, subject to certain limitations. Under the ESPP, 78,500, 71,600, and 102,700 shares were purchased during the years ended December 31, 2014, 2013 and 2012, respectively.

Retirement Savings Plan.    We have a salary deferral plan (401(k) Plan) that covers substantially all employees. Eligible employees may contribute a portion of their eligible compensation to the plan up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws. During the years ended December 31, 2014, 2013, and 2012, we matched 50% of the first three percent of participating employees’ contributions, and contributed $0.7 million, $0.8 million, and $1.0 million, respectively, in matching contributions. We can terminate the matching contributions at our discretion. We have no other post-employment or post-retirement benefit plans.

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Segment Information

12 Months Ended

Dec. 31, 2014

Segment Reporting [Abstract]

Segment Information

Note 18. Segment Information

We have three reportable segments: (1) RealPlayer Group, which includes our new RealPlayer Cloud product, our RealPlayer media player software and related products, and our SuperPass service; (2) Mobile Entertainment, which includes our SaaS services, our LISTEN product and to a lesser degree, 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 are reported as corporate items. Also reported as corporate items were the 2014 extinguishment of the liability associated with our historical musical business, the 2013 loss on litigation settlements, and in 2012, the sale of patent and other technology assets, net of costs.     

RealNetworks reports the three reportable segments based on factors such as how we manage our operations and how our Chief Operating Decision Maker reviews results. Our Chief Operating Decision Maker is considered to be the CEO Staff (CEOS), which includes the Chief Executive Officer, Chief Financial Officer, our Presidents and General Counsel. The CEOS reviews financial information presented on both a consolidated basis and on a business segment basis. The accounting policies used to derive segment results are the same as those described in Note 1, Description of Business and Summary of Significant Accounting Policies.

Segment results for the years ended December 31, 2014, 2013 and 2012 were as follows (in thousands):

RealPlayer Group

	2014			2013			2012
Revenue	$	39,201		$	75,206		$	91,469
Cost of revenue	14,508			16,220			21,544
Gross profit	24,693			58,986			69,925
Operating expenses	55,742			60,484			55,223
Operating income (loss)	$	(31,049	)	$	(1,498	)	$	14,702

Mobile Entertainment

	2014			2013			2012
Revenue	$	79,901		$	81,181		$	100,318
Cost of revenue	50,399			47,608			57,670
Gross profit	29,502			33,573			42,648
Operating expenses	33,325			35,839			52,614
Operating income (loss)	$	(3,823	)	$	(2,266	)	$	(9,966	)

Games

	2014			2013			2012
Revenue	$	37,110		$	49,809		$	67,055
Cost of revenue	11,074			13,359			21,828
Gross profit	26,036			36,450			45,227
Operating expenses	37,170			47,177			51,890
Operating income (loss)	$	(11,134	)	$	(10,727	)	$	(6,663	)

Corporate

	2014			2013			2012
Cost of revenue	$	400		$	1,904		$	2,689
Extinguishment of liability	(10,580		)	—			—
Gain on sale of patents and other technology assets, net of costs	—			—			116,353
Operating expenses	33,327			54,413			56,174
Operating income (loss)	$	(23,147	)	$	(56,317	)	$	57,490

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

	Years ended December 31,
	2014		2013		2012
United States	$	61,660	$	90,250	$	117,844
Europe	26,575		38,155		56,473
Republic of Korea	39,852		46,601		40,467
Rest of the World	28,125		31,190		44,058
Total	$	156,212	$	206,196	$	258,842

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

	December 31,
	2014		2013		2012
United States	$	33,421	$	40,347	$	27,915
Europe	6,696		8,280		2,350
Republic of Korea	547		936		2,463
Rest of the World	3,048		4,078		6,172
Total long-lived assets	$	43,712	$	53,641	$	38,900

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Fair Value Measurements (Financial Assets Measured at Fair Value on a Recurring Basis) (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	$ 167,382	$ 236,336
Amortized Cost	165,121	229,950
Cash and Cash Equivalents
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	103,253	151,235
Amortized Cost	103,255	151,236
Cash and Cash Equivalents | Cash
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	30,105	46,978
Amortized Cost	30,105	46,978
Cash and Cash Equivalents | Money market mutual funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	11,629	26,914
Amortized Cost	11,630	26,914
Cash and Cash Equivalents | Corporate notes and bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	61,519	77,043
Amortized Cost	61,520	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	58,453	74,920
Amortized Cost	58,438	74,872
Short-term Investments | Corporate notes and bonds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	51,453	59,766
Amortized Cost	51,438	59,713
Short-term Investments | U.S. government agency securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	7,000	15,154
Amortized Cost	7,000	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 Investments | Equity investments in publicly traded securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	2,676	7,181
Amortized Cost	428	842
Level 1
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	51,410	68,237
Level 1 | Cash and Cash Equivalents
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	41,734	46,979
Level 1 | Cash and Cash Equivalents | Cash
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	30,105	46,978
Level 1 | Cash and Cash Equivalents | Money market mutual funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	11,629	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	7,000	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	7,000	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 Investments | Equity investments in publicly traded securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	2,676	7,181
Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	115,972	168,099
Level 2 | Cash and Cash Equivalents
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	61,519	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 mutual funds
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	0	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	61,519	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	51,453	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	51,453	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	0	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 Investments | Equity investments in publicly traded securities
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 mutual 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 Investments | Equity investments in publicly traded securities
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Financial assets fair value	$ 0	$ 0

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Earnings (Loss) Per Share (Tables)

12 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Calculation of Basic and Diluted Earnings Per Share

Basic and diluted net income (loss) per share (EPS) (in thousands, except per share data):

	Years ended December 31,
	2014			2013			2012
Net income (loss)	$	(71,815	)	$	(58,990	)	$	44,841
Weighted average common shares outstanding used to compute basic EPS	35,947			35,553			34,873
Dilutive effect of stock based awards	—			—			249
Weighted average common shares outstanding used to compute diluted EPS	35,947			35,553			35,122
Basic EPS	$	(2.00	)	$	(1.66	)	$	1.29
Diluted EPS	$	(2.00	)	$	(1.66	)	$	1.28

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012
Components of net revenue:
License fees	$ 28,308		$ 43,709		$ 56,640
Service revenue	127,904		162,487		202,202
Net revenue	156,212	[1]	206,196	[1]	258,842	[1]
Components of cost of revenue:
License fees	8,012		8,538		11,689
Service revenue	68,369		70,553		92,042
Cost of revenue	$ 76,381	[2]	$ 79,091	[2]	$ 103,731	[2]

[1] December 31, 2012 December 31, 2011 December 31, 2010Components of Cost of Revenue License Fees8,012 8,538 11,689Service Revenue68,369 70,553 92,042Net Revenue Costs76,381 79,091 103,731

[2] December 31, 2013 December 31, 2012 December 31, 2011Components of Revenue License Fees28,308 43,709 56,640Service Revenue127,904 162,487 202,202Net Revenue156,212 206,196 258,842

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Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2014

Accounting Changes and Error Corrections [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (FASB) issued a new standard, "Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern". This standard provides guidance around management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. The new guidance is effective for all annual and interim periods ending after December 15, 2016. We are currently evaluating the impact, if any, the adoption of this standard will have on our consolidated financial statements.

In May 2014, the 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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Accrued and Other Current Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Accounts Payable and Accrued Liabilities, Current [Abstract]
Royalties and other fulfillment costs		$ 4,868	$ 16,467
Employee compensation, commissions and benefits		7,711	10,060
Sales, VAT and other taxes payable		5,896	7,237
Other		6,811	8,129
Total accrued and other current liabilities		25,286	41,893
Extinguishment of liability	$ 10,600	$ 10,580	$ 0	$ 0

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Related Party Transactions (Additional Information) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013	Dec. 31, 2008
LoEn Entertainment, Inc
Related Party Transaction [Line Items]
Revenue from related party	$ 26.4	$ 18.1
Percentage of acquire outstanding shares of LoEn Entertainment, Inc.			9.00%	11.00%
Rhapsody America LLC
Related Party Transaction [Line Items]
Revenue from related party	$ 0.5	$ 0.8

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Income Taxes (Components of Income (Loss) Before Income Taxes) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income (Loss) from Continuing Operations [Abstract]
United States operations	$ (67,186)	$ (50,032)	$ 59,807
Foreign operations	(3,349)	(4,055)	(2,448)
Income (loss) before income taxes	$ (70,535)	$ (54,087)	$ 57,359

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Related Party Transactions

12 Months Ended

Dec. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Note 19. Related Party Transactions

Transactions with Rhapsody. See Note 4, 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. During the years ended December 31,2013, and 2012 we charged Rhapsody $0.5 million and $0.8 million, respectively, for the support services.

Transactions with LoEn Entertainment, Inc. In 2008, RealNetworks acquired, at market prices, approximately 11% of the common shares of LoEn Entertainment, Inc., whose shares are traded on the Korean Securities Dealers Automated Quotations. In November 2013, we sold all of our remaining shares of common stock in LoEn, which equaled approximately 9% of the outstanding shares as of September 30, 2013, as discussed in more detail in Note 5, Fair Value Measurements. Our investment in LoEn was treated as an available for sale investment and was marked-to-market each period with resulting unrealized gains or losses recognized in AOCI. During the years ended December 31,2013, and 2012, we recorded revenue from LoEn of $26.4 million and $18.1 million, respectively. Revenue consisted primarily of sales of application service provider services, which include sales of ringback tones, music on demand, video on demand, and intercarrier messaging services.

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Income Taxes (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax [Line Items]
Income tax receivables	$ 100,000	$ 400,000
Valuation Allowance [Abstract]
Valuation allowance	149,474,000	128,865,000
Change in valuation allowance	20,600,000	38,100,000
Alternative minimum tax credit carryforward	3,626,000	3,561,000
Research and development tax credit carryforwards	22,979,000	23,079,000
Income Tax Uncertainties [Abstract]
Unrecognized tax benefits	3,541,000	4,505,000	3,978,000	16,721,000
Decrease in unrecognized tax benefits due to a lapse of the applicable statute of limitations	898,000	0	0
Unrecognized tax benefits that would impact effective tax rate	400,000	400,000
Income Tax Examination [Abstract]
Accrued interest and penalties related to uncertain tax positions		100,000
Internal Revenue Service (IRS)
Valuation Allowance [Abstract]
Operating loss carryforwards	$ 190,100,000	$ 118,900,000

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Shareholders Equity Shareholders Equity (Tables)

12 Months Ended

Dec. 31, 2014

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

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

		Years Ended December 31,
		2014			2013			2012
Investments
	Accumulated other comprehensive income (loss), beginning of period	$	6,397		$	26,685		$	27,318
	Unrealized gains (losses), net of tax effects of $0, $(54) and $0	(1,774		)	2,121			3,313
	Reclassification adjustments for losses (gains) included in other income (expense), net of tax effects of $4, $(800) and $0	(2,371		)	(22,409		)	(3,946		)
	Net current period other comprehensive income	(4,145		)	(20,288		)	(633		)
	Accumulated other comprehensive income (loss) balance, end of period	$	2,252		$	6,397		$	26,685
Foreign currency translation
	Accumulated other comprehensive income (loss), beginning of period	$	(54,092	)	$	(53,225	)	$	(52,202	)
	Translation adjustments	(3,364		)	(296		)	943
	Reclassification adjustments for losses (gains) included in other income (expense)	(48		)	(571		)	(1,966		)
	Net current period other comprehensive income	(3,412		)	(867		)	(1,023		)
	Accumulated other comprehensive loss balance, end of period	$	(57,504	)	$	(54,092	)	$	(53,225	)
Total accumulated other comprehensive income (loss), end of period		$	(55,252	)	$	(47,695	)	$	(26,540	)

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Shareholders’ Equity

12 Months Ended

Dec. 31, 2014

Equity [Abstract]

Shareholders’ Equity

Note 12. Shareholders’ Equity

Accumulated Other Comprehensive Income (Loss)

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

		Years Ended December 31,
		2014			2013			2012
Investments
	Accumulated other comprehensive income (loss), beginning of period	$	6,397		$	26,685		$	27,318
	Unrealized gains (losses), net of tax effects of $0, $(54) and $0	(1,774		)	2,121			3,313
	Reclassification adjustments for losses (gains) included in other income (expense), net of tax effects of $4, $(800) and $0	(2,371		)	(22,409		)	(3,946		)
	Net current period other comprehensive income	(4,145		)	(20,288		)	(633		)
	Accumulated other comprehensive income (loss) balance, end of period	$	2,252		$	6,397		$	26,685
Foreign currency translation
	Accumulated other comprehensive income (loss), beginning of period	$	(54,092	)	$	(53,225	)	$	(52,202	)
	Translation adjustments	(3,364		)	(296		)	943
	Reclassification adjustments for losses (gains) included in other income (expense)	(48		)	(571		)	(1,966		)
	Net current period other comprehensive income	(3,412		)	(867		)	(1,023		)
	Accumulated other comprehensive loss balance, end of period	$	(57,504	)	$	(54,092	)	$	(53,225	)
Total accumulated other comprehensive income (loss), end of period		$	(55,252	)	$	(47,695	)	$	(26,540	)

Preferred Stock.    Each share of Series A preferred stock entitles the holder to one thousand votes and dividends equal to one thousand times the aggregate per share amount of dividends declared on the common stock. There are no shares of Series A preferred stock outstanding.

Undesignated preferred stock will have rights and preferences that are determinable by the Board of Directors if and when determination of a new series of preferred stock has been established.