8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): February 9, 2010

RealNetworks, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Washington	0-23137	91-1628146
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
2601 Elliott Avenue, Suite 1000, Seattle, Washington		98121
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: (206) 674-2700

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On February 9, 2010, RealNetworks, Inc. ("Real" or "RealNetworks"), RealNetworks Digital Music of California, Inc., a wholly owned subsidiary of Real, MTV Networks, a division of Viacom International Inc. ("MTVN"), DMS Holdco, a wholly owned subsidiary of Viacom International Inc., and Rhapsody America LLC, a Delaware limited liability company ("Rhapsody") and joint venture formed by Real and MTVN (together with the other parties listed above, the "Parties"), entered into a Transaction, Contribution and Purchase Agreement (the "Transaction Agreement"), which contemplates a restructuring of Rhapsody. Real and MTVN formed Rhapsody in August 2007 to jointly own and operate a business-to-consumer digital audio music service. Real currently owns 51% of the equity of Rhapsody and Viacom owns the remaining 49%.

At the closing of the transactions contemplated by the Transaction Agreement, Rhapsody will be converted from a limited liability company to a corporation, and the Parties expect that Real and MTVN and one or more minority stockholders will hold the outstanding shares of Rhapsody such that Real and MTVN will own slightly less than 50%, but an equal amount, of such outstanding shares. Real will contribute $18 million in cash, the Rhapsody brand and certain other assets in exchange for shares of convertible preferred stock of Rhapsody, carrying a $10 million preference upon certain liquidation events. A portion of Real’s cash contribution is to repurchase the international radio business that was previously contributed to Rhapsody. MTVN will contribute a $33 million advertising commitment in exchange for shares of common stock of Rhapsody, and MTVN’s previous obligation to provide advertising of approximately $111 million as of December 31, 2009 will be cancelled. In addition, both the Stockholder Agreement, dated as of August 20, 2007, between Real and Viacom International Inc., on behalf of MTVN, and the Limited Liability Company Agreement, dated as of August 20, 2007, among the Part ies will be terminated, including the put and call rights held by Real and MTVN and MTVN’s rights to receive a preferred return in connection with the exercise of Real’s put right.

Real expects that the transactions contemplated by the Transaction Agreement will be completed late in the first quarter of 2010, subject to the satisfaction of customary closing conditions. At the closing, the Parties will enter into a Stockholder Agreement that contains provisions regarding the governance of Rhapsody, stock transfer restrictions and approval of certain corporate transactions. Rhapsody will be initially governed by a Board of Directors with two directors appointed by each of Real and MTVN and one independent director appointed by mutual agreement of Real and MTVN. At the closing of the transactions, the Parties will also amend certain existing agreements, including the expansion of the technology and intellectual property licenses from Real to Rhapsody relating to the core technologies for the Rhapsody audio digital music service to provide worldwide, perpetual licenses and certain rights for use of the core technologies in business-to-business audio music services.

Upon the completion of the transactions contemplated by the Transaction Agreement, Real expects that it will no longer consolidate Rhapsody’s financial results with Real’s consolidated financial statements.

A copy of the Transaction Agreement will be filed as an Exhibit to the Quarterly Report on Form 10-Q for the quarter ending March 31, 2010 to be filed by Real with the Securities and Exchange Commission.

Item 7.01 Regulation FD Disclosure.

A copy of the joint press release dated February 9, 2010 issued by Real and MTVN announcing, among other things, the transactions described in Item 1.01 of this report, is attached to this report as Exhibit 99.1. The attached exhibit is furnished to, but not filed with, the Securities and Exchange Commission.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit
Number Exhibit Description
99.1 Joint Press Release issued by RealNetworks, Inc. and Viacom International Inc. dated February 9, 2010

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	RealNetworks, Inc.
February 9, 2010	By:	Robert Kimball
		Name: Robert Kimball
		Title: President and Acting Chief Executive Officer

Exhibit Index

Exhibit No.	Description
99.1	Joint Press Release issued by RealNetworks, Inc. and Viacom International Inc. dated February 9, 2010

EX-99.1

REALNETWORKS AND VIACOM TO SEPARATE RHAPSODY
INTO INDEPENDENT COMPANY

SEATTLE and NEW YORK – February 9, 2010 – RealNetworks, Inc. (Nasdaq: RNWK) and MTV Networks, a division of Viacom International, Inc. (NYSE: VIA.A and VIA.B), today announced plans to restructure their digital music service joint venture, Rhapsody America LLC, into a newly formed corporation that will operate independently from its parent companies. RealNetworks, currently the majority owner and operator of Rhapsody, and Viacom will restructure their ownership and rights in the joint venture to provide the necessary intellectual property rights to launch the new company as an independent entity. RealNetworks will also contribute operating capital as part of the transaction. Under the terms of the restructuring, which is expected to close at the end of the first quarter, RealNetworks will no longer have operating control over the venture, and Rhapsody will have no single majority owner.

“Separating Rhapsody into its own independent company is a significant first step in making RealNetworks a more focused and profitable company,” said Robert Kimball, president and acting CEO for RealNetworks. “Rhapsody will be the largest pure play digital music service in the market. We have provided Rhapsody with the right team, and financial and intellectual property assets to succeed in the competitive market for digital music.”

Additional information about the deal is available from the Form 8-K filed by RealNetworks with the Securities and Exchange Commission today, http://investor.realnetworks.com/sec.cfm

For More Information:
Press
Bill Hankes, RealNetworks
206-892-6614
bhankes@real.com

Ryan Luckin, Rhapsody
206-892-6330
rluckin@real.com

Investors
Marj Charlier, RealNetworks
206-892-6718
mcharlier@real.com

ABOUT REALNETWORKS
RealNetworks, Inc. delivers digital entertainment services to consumers via PC, portable music player, home entertainment system or mobile phone. Real created the streaming media category in 1995 and has continued to lead the market with pioneering products and services, including: RealPlayer, the first mainstream media player to enable one-click downloading and recording of Internet video; the award-winning Rhapsody® digital music service, which delivers more than 1 billion songs per year; RealArcade®, one of the largest casual games destinations on the Web; and a variety of mobile entertainment services, such as ringback tones, offered to consumers through leading wireless carriers around the world. RealNetworks’ corporate information is located at www.realnetworks.com/company.

RealNetworks, RealPlayer, Rhapsody and RealArcade are trademarks or registered trademarks of RealNetworks, Inc.

ABOUT VIACOM
Viacom, consisting of BET Networks, MTV Networks and Paramount Pictures, is the world’s leading entertainment content company. It engages audiences on television, motion picture and digital platforms through many of the world’s best known entertainment brands, including MTV, VH1, CMT, Logo, Nickelodeon, Nick at Nite, Nick Jr., COMEDY CENTRAL, Spike TV, TV Land, BET, Rock Band, AddictingGames, Atom, Neopets, Shockwave and Paramount Pictures. Viacom’s global reach includes approximately 170 channels and 430 online properties in more than 160 countries and territories.

For more information about Viacom and its businesses, visit www.viacom.com.

ABOUT RHAPSODY
The Rhapsody® digital music service (www.rhapsody.com) gives consumers unlimited on-demand access to more than nine million songs, whether they’re listening on a laptop, mobile phone, television or home stereo system. Rhapsody allows consumers to access their music through more touch-points than any other digital music service, including mobile phones from Verizon Wireless, through Rhapsody applications on the Apple iPhone, iPod Touch and Android mobile platform and through devices from Vizio, HP, Sonos and Philips.

Forward Looking Statements: This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to the closing of the restructuring transaction and RealNetworks’ and Rhapsody’s ability to realize success and profitability from the restructuring transaction. More information about potential risk factors that could affect Real’s business and financial results is included in Real’s annual report on Form 10-K for the most recent year ended December 31, and its quarterly reports on Form 10-Q and, from time to time, in other reports filed by Real with the Securities and Exchange Commission. Actual results may differ materially from estimates under different assumptions or conditions. Real assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.