

Note 4.	Rhapsody Joint Venture

As of December 31, 2016 we owned approximately 42% 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 $6.5 million, $14.5 million, and $4.5 million for the years ended December 31, 2016, 2015 and 2014, respectively. Because of the $10.0 million liquidation preference on the preferred stock we hold in Rhapsody, under the equity method of accounting we 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 December 31, 2015, the carrying value of our Rhapsody equity investment was zero, as we did not have further commitment to provide future support to Rhapsody. Unless we commit to provide future financial support to Rhapsody, we do not record our share of Rhapsody losses that would reduce our carrying value of Rhapsody below zero, and instead we track those suspended losses separately.

In December 2016, RealNetworks entered into an agreement to loan up to $5 million to Rhapsody for general operating purposes, as did the other 42% owner of Rhapsody, Columbus Nova. In December, $3.5 million of the loan was made by each lender. Both loans contain an additional commitment to loan to Rhapsody the remaining $1.5 million of the $5 million total at its request, during any point from January 1, 2017 to January 31, 2017. As of December 31, 2016, this additional commitment was reflected on our consolidated balance sheets as Commitment to Rhapsody. Both parties subsequently funded the remaining $1.5 million commitment on January 24, 2017. The loans are subordinate to all existing loans, and bear an interest rate of 10% per annum, which accretes into the outstanding principal balance and will be due at the December 7, 2017 maturity date. We have recognized previously suspended Rhapsody losses, which we have discussed above, up to the full $5.0 million funding commitment in the Equity in net loss of Rhapsody investment line item in our consolidated statements of operations.

In March 2015, RealNetworks extended a $5.0 million loan to Rhapsody, as did the other 42% owner of Rhapsody. The loans had original maturity dates of June 2018, or earlier, if Rhapsody's certain loan to an external strategic partner was repaid in full. The loans to Rhapsody bore interest at the greater of prime plus 5.25% or 9% per annum. During 2015, Rhapsody's external strategic partner repaid its loan to Rhapsody and Rhapsody then repaid its loan to us and the other 42% owner in full. Under the loan, Rhapsody paid us approximately $0.2 million of interest in 2015.

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



	Year ended December 31, 2016			Year ended December 31, 2015			Year ended December 31, 2014
Net revenue	$	208,085		$	201,987		$	173,484
Gross profit	38,407			32,761			32,145
Net loss	(14,913		)	(35,479		)	(21,336		)



	As of December 31, 2016		As of December 31, 2015
Current assets	$	55,831	$	53,274
Non-current assets	18,273		20,520
Current liabilities	104,906		92,794
Non-current liabilities	20,238		20,295