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		—