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RealNetworks lays off 9 percent in music division

Software company that operates the Rhapsody music subscription service trims staff amid declining accounts.

This post was updated at 1:40 p.m. PDT with RealNetworks' correction of the percentage of employees laid off.

Entertainment software company Real Networks laid off 12 employees within its music division or about 9 percent of the division staff, the company said Thursday.

The cuts come a week after RealNetworks reported marked decreases in the number of subscribers at its Rhapsody music subscription and online radio units.

Rhapsody, which is partly owned by Viacom's MTV Networks, lost 50,000 of its 800,000 subscribers over the past three months, RealNetworks said last week in its second-quarter earnings report.

In addition, a partnership with telecom company Comcast ended and that was blamed for a dramatic drop-off in RealNetworks' radio subscribers, from 1.2 million down to 75,000, the company reported. That's not a typo. When Comcast discontinued the service, more than 1.1 million no longer had access to Rhapsody.

RealNetworks' revenue for the second quarter fell 11.1 percent to $135.7 million, the Seattle-based company said.

RealNetworks CEO Rob Glaser said the slide in Rhapsody subscribers was partly due to a rise in the number of credit card defaults, which he said was likely brought on by the bad economy.

No matter what the reasons, Rhapsody's performance will not be welcomed news to for proponents of music subscription services. The sector is a favorite of many at the major record companies, but has failed to catch on.