Segment Information

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Segment Information

Note 17 Segment Information

We manage our business and report revenue and operating income (loss) in 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 of our low-margin music on demand product, ringback tones, intercarrier messaging services, and our RealTimes® product; 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 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. Remaining expenses, which are not directly attributable to supporting the business, are reported as corporate items. Also reported in our corporate segment are restructuring charges, lease exit and related charges, as well as stock compensation charges.

RealNetworks reports 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, in the 10-K.

Segment results for the quarters and six months ended June 30, 2017 and 2016 (in thousands):

Consumer Media

	Quarter Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Revenue	$	6,951	$	6,400	$	12,620	$	12,126
Cost of revenue	1,159		1,561		2,564		3,978
Gross profit	5,792		4,839		10,056		8,148
Operating expenses	3,730		4,293		7,740		9,669
Operating income (loss)	$	2,062	$	546	$	2,316	$	(1,521	)

Mobile Services

	Quarter Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenue	$	19,227		$	17,297		$	38,311		$	33,762
Cost of revenue	13,429			12,404			27,343			23,321
Gross profit	5,798			4,893			10,968			10,441
Operating expenses	6,705			8,784			14,824			18,578
Operating income (loss)	$	(907	)	$	(3,891	)	$	(3,856	)	$	(8,137	)

Games

	Quarter Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenue	$	6,934		$	6,037		$	12,757		$	12,076
Cost of revenue	2,679			1,817			4,616			3,662
Gross profit	4,255			4,220			8,141			8,414
Operating expenses	5,090			4,725			10,037			10,020
Operating income (loss)	$	(835	)	$	(505	)	$	(1,896	)	$	(1,606	)

Corporate

	Quarter Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Cost of revenue	$	23		$	(84	)	$	60		$	(91	)
Operating expenses	2,959			3,871			7,254			11,243
Operating income (loss)	$	(2,982	)	$	(3,787	)	$	(7,314	)	$	(11,152	)

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):

	Quarter Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
United States	$	10,889	$	10,354	$	20,629	$	20,737
Europe	3,205		3,330		6,399		6,714
Republic of Korea	12,119		10,411		24,972		19,645
Rest of the World	6,899		5,639		11,687		10,868
Total net revenue	$	33,112	$	29,734	$	63,687	$	57,964

Long-lived assets (which consist of equipment, software, leasehold improvements, other intangible assets, and goodwill) by geographic region (in thousands) are as follows:

	June 30, 2017		December 31, 2016
United States	$	12,455	$	13,052
Europe	3,683		3,920
Republic of Korea	128		168
Rest of the World	1,648		1,909
Total long-lived assets	$	17,914	$	19,049