Rhapsody Joint Venture

6 Months Ended

Jun. 30, 2015

Equity Method Investments and Joint Ventures [Abstract]



Note 4	Rhapsody Joint Venture

As of June 30, 2015 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.

Following certain restructuring transactions effective March 31, 2010, we began accounting for our investment in Rhapsody using the equity method of accounting. As part of the 2010 restructuring transactions, RealNetworks contributed $18.0 million in cash, the Rhapsody brand and certain other assets, including content licenses, in exchange for shares of convertible preferred stock of Rhapsody, carrying a $10.0 million preference upon certain liquidation events.

We recorded our share of losses of Rhapsody of $6.9 million and $13.1 million for the quarters and six months ended June 30, 2015, and $1.8 million and $2.6 million for the quarters and six months ended June 30, 2014. Because of the $10.0 million liquidation preference on the preferred stock we hold in Rhapsody, under the equity method of accounting we did 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, until Rhapsody's book value was reduced below $10.0 million which occurred in the first quarter of 2015. As of June 30, 2015, the carrying value of our Rhapsody equity investment is zero, as we do not record any share of Rhapsody losses that would reduce our carrying value of Rhapsody below zero unless we commit to provide financial support for Rhapsody.

In March 2015, RealNetworks extended a $5.0 million loan to Rhapsody, as did the other 43% owner of Rhapsody. The loans have original maturity dates of June 2018 or earlier if Rhapsody's certain loan to an external strategic partner is repaid in full. During June 2015, Rhapsody's external strategic partner repaid half of its loan to Rhapsody and the maturity date of the second half was extended to August 2015. The loans to Rhapsody bear interest at the greater of prime plus 5.25% or 9% per annum, and interest accrues and is due upon final maturity. As of June 30, 2015, RealNetworks accrued $0.1 million of interest income on the loan which is included in Interest income, net on the unaudited condensed consolidated statements of operations and comprehensive income (loss). The interest receivable is included in Investment in and advances to Rhapsody on the unaudited condensed consolidated balance sheet. In April 2015, RealNetworks and the other 43% owner of Rhapsody each provided a $5.0 million guaranty to Rhapsody's senior secured lender, related to the senior lender's loans to Rhapsody, which mature in April 2018. The guaranties were released in June 2015 upon the partial repayment of Rhapsody's loan by the external strategic partner.

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



	Quarters Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net revenue	$	50,063		$	42,427		$	96,387		$	84,430
Gross profit	7,753			7,870			15,843			16,991
Net loss	(12,061		)	(4,717		)	(20,985		)	(6,347		)