February 18, 2009, 12:00 AM

RealNetworks tunes in 7% growth in 2008 to $604.8 million

Online entertainment provider RealNetworks saw fiscal 2008 revenue grow 7% compared with the prior year, reaching $604.8 million. Games sales led the way, climbing 24% vs. fiscal 2007 to $134.6 million.

Mark Brohan

Research Director

Online entertainment provider RealNetworks Inc. thinks it has the right product mix to keep customers buying in a tough economy. The company saw fiscal 2008 revenue grow to $604.8 million, a 7%, or $37.2 million, increase compared with $567.6 million in the prior year.

Games sales led the way, climbing 24% to $134.6 million vs. $108.5 million in fiscal 2007. Music revenue was up by 8%, from $149.1 million in FY 2007 to $160.7 million in fiscal 2008, ended Dec. 31. Technology products and solutions and media software and services revenue was flat, with sales of $206.6 million and $102.9 million, respectively, for FY 2008. Technology products and applications include mobile music, video and ringtone sales to wireless networks.

“In spite of a difficult and turbulent macro-economic environment, RealNetworks delivered revenue in line with our fourth-quarter expectations,” says Rob Glaser, CEO of RealNetworks.

Despite record sales, RealNetworks logged a net loss of $243.9 million for the year, compared with net income of $48.3 million in FY 2007.

Most of the loss-$240.5 million-came from charges booked in the fourth quarter. Included in impairment costs were restructuring and other charges of $6.1 million to reflect a Q4 reduction in its workforce and the write-off of certain costs associated with the company’s plan to separate its games business from the parent company. By comparison, RealNetworks had income of $2.7 million in the fourth quarter of 2007.

Fourth quarter 2008 revenue declined 3% to $152.6 million compared with $156.9 million for the prior year quarter. Compared with Q4 2007, the revenue shakeout in RealNetworks’ business units included: a 9% increase in games revenue from $30.9 million to $33.7 million; an 8% increase in music sales from $40.5 million to $43.9 million; an 11% decrease in media software and services revenue from $25.6 million to $22.7 million; and a 13% decrease in technology products and solutions sales from $59.9 million to $52.4 million.

RealNetworks, No. 89 in the Internet Retailer Top 500 Guide, declined to provide specific guidance for the first quarter of 2009, citing the unsettled economy. But the company expects overall revenue to “decline sequentially and year over year. Compared with the year-earlier quarter, the company expects first-quarter music revenue to increase, games revenue to be flat, and revenue in media software and services and technology products and solutions to decline.”

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