Music, games drive RealNetworks growth

Cost of antitrust battle against Microsoft keeps the multimedia company at a small loss.

RealNetworks announced strong fourth-quarter financial results on Wednesday, driven by music revenue nearly triple the previous year's total and similarly healthy growth in its games business.

The company said it lost 1 cent per share on revenue of $72.5 million for the fourth quarter of 2004, compared with a 3-cent loss on revenue of $54.1 million in the same period a year earlier. Excluding the expenses of the company's antitrust litigation against Microsoft, the company said it earned a profit of a penny per share for the quarter.

The revenue figures showed clear evidence of the company's shift in focus over the past year toward the burgeoning music and online games markets, while older businesses such as Web video and software sales remained relatively flat.

"We're benefiting not just from our own focus, but from the growth of the (music and games) categories," said Dan Scheeran, senior vice president of RealNetworks' international division. "There's a nice tide there. It's lifted a lot of boats, and we're one of the biggest."

RealNetworks' financial snapshot shows a company in the midst of reinventing itself again, after many market twists and turns through 11 years of existence. Once a software company focused on selling services and products to businesses, it is now seeing financial payoffs through emphasizing its consumer content businesses.

The digital music business in particular is growing rapidly across the industry.

Apple Computer announced earlier in January that it had sold 250 million songs from its iTunes store, up from 200 million just five weeks earlier . Napster said in January that it had 270,000 subscribers to its service, a 50 percent jump compared with its previous fiscal quarter.

RealNetworks said it now has more than 700,000 subscribers to its music products, which include the Rhapsody service and a lower-priced online radio network, providing a total of $21.6 million in revenue for the quarter. At the close of 2003, the company had just over 350,000 subscribers, with music-related revenue of $7.9 million.

Games-related revenue grew from $3.9 million in the fourth quarter of 2003 to $10.1 million last quarter, the company said.

The company grouped its older video and consumer software businesses together, saying they earned $29.1 million last quarter, compared with $29.3 million in the fourth quarter of 2003.

For all of 2004, the company had revenue of $266.7 million, up nearly one-third from $202.4 million in 2003.

 

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