Segment Information

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segment Information

Note 18. Segment Information

In the first quarter of 2016, we reorganized the management of our business and as a result, we now report three segments: (1) Consumer Media, which includes our PC-based RealPlayer products, including RealPlayer Plus and related products and intellectual property licensing; (2) Mobile Services, which includes our SaaS services and our RealTimes® product that is primarily sold through mobile carriers; and (3) Games, which includes all our games-related businesses, including sales of mobile games, sales of games licenses, online games subscription services, advertising on games sites and social network sites, and microtransactions from online and social games..

We allocate to our reportable segments certain corporate expenses which are directly attributable to supporting the businesses, including but 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. Also reported in our corporate segment are restructuring, lease exit and related charges, as well as stock compensation charges, and the 2014 extinguishment of the liability associated with our historical musical business. Concurrent with the first quarter of 2016 segment change described above, we also changed our corporate expense allocation methodology to increase accountability, resulting in an increase in costs allocated to the Consumer Media and Mobile Services business.

RealNetworks reports the three reportable segments based on factors such as how we manage our operations and how our Chief Operating Decision Maker (CODM) reviews results. The CODM 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.

The historical financial information presented has been recast to reflect the new segments and the new corporate expense presentation. Segment results for the years ended December 31, 2016, 2015 and 2014 were as follows (in thousands):

Consumer Media

	2016			2015			2014
Revenue	$	25,051		$	28,613		$	39,121
Cost of revenue	7,074			13,257			13,466
Gross profit	17,977			15,356			25,655
Operating expenses	18,399			26,526			41,950
Operating income (loss)	$	(422	)	$	(11,170	)	$	(16,295	)

Mobile Services

	2016			2015			2014
Revenue	$	70,278		$	65,935		$	79,981
Cost of revenue	50,026			47,834			52,193
Gross profit	20,252			18,101			27,788
Operating expenses	34,439			44,311			53,527
Operating income (loss)	$	(14,187	)	$	(26,210	)	$	(25,739	)

Games

	2016			2015			2014
Revenue	$	25,139		$	30,748		$	37,110
Cost of revenue	7,919			9,291			11,074
Gross profit	17,220			21,457			26,036
Operating expenses	19,644			29,086			37,170
Operating income (loss)	$	(2,424	)	$	(7,629	)	$	(11,134	)

Corporate

	2016			2015			2014
Cost of revenue	$	(51	)	$	(85	)	$	(352	)
Extinguishment of liability	—			—			(10,580		)
Operating expenses	20,192			24,263			26,917
Operating income (loss)	$	(20,141	)	$	(24,178	)	$	(15,985	)

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,
	2016		2015		2014
United States	$	41,505	$	46,893	$	61,660
Europe	13,700		15,166		26,575
Republic of Korea	43,236		37,832		39,852
Rest of the World	22,027		25,405		28,125
Total	$	120,468	$	125,296	$	156,212

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

	December 31,
	2016		2015		2013
United States	$	13,052	$	16,821	$	33,421
Europe	3,920		4,898		6,696
Republic of Korea	168		282		547
Rest of the World	1,909		2,015		3,048
Total long-lived assets	$	19,049	$	24,016	$	43,712