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Real sees loss despite subscriber gains

RealNetworks says subscribers for its streaming news and entertainment services have topped 1 million, but revenue since last year has dipped.

RealNetworks said subscribers for its streaming news and entertainment services have topped 1 million, but it reported a first-quarter loss on slightly lower revenue.

The digital media delivery company on Tuesday reported a net loss of $2.8 million, or 2 cents per share, on revenue of $46.9 million. That compares with earnings of $1.05 million, or 1 cent per share, on revenue of $47.3 million in the same period in 2002. Revenue reported was for the three months ended March 31. Sequentially, revenue for the first quarter of 2003 was up 1 percent from the fourth quarter of 2002.

Financial analysts had expected Seattle-based RealNetworks to lose 2 cents per share in the first quarter, according to an estimate by First Call. RealNetworks had forecast a loss of 2 cents to 4 cents a share.

At the close of regular trading, RealNetworks shares were down 7 cents to $5.03. The earnings report was issued after the close of regular trading. In after-hours trading, the company's shares were up about 10 cents.

RealNetworks CEO Rob Glaser downplayed the slight loss by touting the company's milestone of 1 million subscribers, a first for a digital content and services company, he said.

"In the first quarter of 2003...we stabilized our technology business while continuing to grow our consumer subscription business," Glaser said in a statement. "To all of our media partners, distribution partners, and consumers, we say, 'thanks a million.'"

RealNetworks said it expects slight growth in the second quarter based on a boost in sales from subscriptions and system infrastructure. It forecast a net loss per share in the range of 1 cent to 3 cents, in accordance with Generally Accepted Accounting Principles, for the second quarter.

In the first quarter, RealNetworks reported lower revenue from advertising and software license fees from the comparable period a year ago. The company reported about $16.3 million in software license fees in the first quarter of 2003, compared with $24.4 million in 2002. Service revenue shot up to $29.2 million from $21.3 million last year; and advertising dropped to $1.4 million in the first quarter from $1.6 million last year.

"The story with RealNetworks remains fairly positive," said Michael Gartenberg, research director for Jupiter Research, a New York-based consultancy. "But it faces increased pressure on the infrastructure side from Microsoft, (which is) giving the bulk of the Windows Media 9 Series tools (away) in order to do things like promote sales (for) Windows Server 2003."

RealNetworks reported earnings days after it agreed to buy Listen.com, maker of the Rhapsody music subscription service. After the acquisition closes, most likely in the latter part of the second quarter, RealNetworks said it expects Listen to incur operating losses of about $1 million to $2 million per quarter in 2003, and decreasing thereafter.