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RealNetworks to spin off games business

RealNetworks is spinning off its games business into a separate company, with the possibility of an initial public offering.

The games business was the second-biggest revenue generator for RealNetworks during the first quarter, with $31.8 million in sales. Last year, the games business grew 26 percent and accounted for $108.5 million in sales.

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"RealNetworks was a pioneer and has been a leader in the casual games industry since we introduced RealArcade in 2001," said RealNetworks Chief Executive Rob Glaser in a news release. "We believe that spinning off our casual games business will give it the best opportunity to continue to flourish and lead."

The release does not say what the new company will be called, but a frequently asked questions sheet indicates that it most likely will be located in Seattle.

RealNetworks plans to make a decision about the spinoff and potential IPO by the end of the year, with the company writing that a separate company could more easily attract talent.

The company anticipates that spinning off its casual games business will result in two more flexible and focused companies. In addition, the separation will provide the games business an industry-specific currency for future acquisitions and enhance its ability to attract and retain the best talent in the industry.

Real also announced its first-quarter results, reporting revenue of $147.6 million and net income of $2.4 million.

RealNetworks has used some of its cash from the Microsoft antitrust settlement to invest heavily in games.

Here's a look at the acquisitions with links to the press releases:

2008:

  • Trymedia (Santa Clara, Calif.)

    2007

  • Game Trust (New York)

  • Atrativa (Sao Paulo, Brazil)

    2006

  • Zylom Media (Eindhoven, Netherlands)

    2005

  • Mr. Goodliving (Helsinki, Finland)

    2004

  • GameHouse (Seattle)

    UPDATE: I just chatted with FlowPlay's Derrick Morton, a former executive in RealNetworks' games business. He told me that a games spin off was a common topic of conversation among employees when he worked there.

    At times, he said employees in the games business felt like they "were fighting a losing battle" because their fortunes were tied to less profitable and slower growing products.

    "Certainly, among the staff there was always this what if scenario. What if we got spun off or there was a tracking stock or something so that the results of our activity and the success we are having was actually rewarded in some way," said Morton, the former general manager of mobile games at RealNetworks. "I definitely think it is a great move, for the games guys and for RealNetworks too."

    In many ways, Morton said that RealNetworks may be more valuable broken up. And he noted that RealNetworks may want to spin off its Rhapsody online music business as well.

    "If you valued the individual pieces, you probably would come up with a greater valuation than the whole company itself put together," he said.

    RealNetworks senior vice president Harold Zeitz tells P-I reporter Dan Richman that the company would do what was in the best interest of shareholders, but there's no plan at this time to shed additional business units.

  • Posted by at May 8, 2008 1:31 p.m.
    Category:
    Comments
    #126686

    Posted by 8bitjoystick at 5/8/08 1:54 p.m.

    Good. They have not had a hit… well ever.

    Seriously why is Real Networks even still in existance. My Step Brother used to be a programmer there but hasn't Microsoft, Apple, Adobe and MPEG killed them yet?

    #126697

    Posted by soulmusic at 5/8/08 2:14 p.m.

    Didn't PC magazine rate Real Networks as the worse crap on the internet?

    Do they tell you to build vintage bowling alleys in your corporate office BEFORE your company actaully makes a profit in Business school there mr. Glaser ?

    #126711

    Posted by unregistered user at 5/8/08 2:54 p.m.

    One more way for Glaser to make some big bucks, now that Real's stock is apparently permanently stuck at 6 (look at the charts since 2000).

    The games division is the only division that's had continued growth (everything else grows for a while then peters off). It's long been keeping everyone else afloat.

    Of course Real will net another huge windfall from the IPO, just like the MSFT settlement, which will then give it enough cash to discover their umpteenth new groundbreaking business model that justifies their continued existence.

    Blecch.

    #126737

    Posted by unregistered user at 5/8/08 3:38 p.m.

    Just one more excuse for Glaser to fire off one of his infamous emails about Jobs and austrian danish.

    You missed the boat, Rob, and have nothing but anti-trust claims left to prop up the embers. The only people who willingly use your product now are the same individuals who still use Netscape to download weather forecasts. Really, take the remaining money and toss it from the top of Westlake. The world will be a much better place.

    #126755

    Posted by soulmusic at 5/8/08 4:09 p.m.

    Rob Glaser = the Humanoid Chipmunk.

    Except Chipmunks have better business sense.

    #126757

    Posted by unregistered user at 5/8/08 4:11 p.m.

    The worst thing at RealNetworks. Rob Glaser

    the best thing at RealNetworks. Rob Glaser

    Shame Andrew Wright and the other early team members are long gone. Also, the story mentions the companies they bought, but doesn't mention the dead bodies behind them - like Nonstop Entertainment

    #126903

    Posted by Arty Ziff at 5/8/08 11:00 p.m.

    Does anyone actually willingly use Real for anything any more? It's "malware". Actually more like "crapware". Certainly "adware".

    #126984

    Posted by unregistered user at 5/9/08 8:11 a.m.

    The former Real exec makes the only point worth making - that Real itself is nothing. It's got a bunch of unrelated purchases and subsidiaries that probably suffer more than they gain by being lumped together.

    Some of which can't survive on their own and are merely husks that add a couple million to Real's revenue numbers (usually they are all that remains of some previously profitable business model that tanked, and Real just won't cut off the small revenue stream).

    Others, like games, can probably stand on their own, or make more sense as a product line in someone elses business.

    Either way, Real got a huge cash infusion when they went public, and another one from MSFT. That's allowed them to make some strategic purchases that keep them afloat. But there's no reason for RNWK to exist, unless you think of them as a holding company.

    #127080

    Posted by unregistered user at 5/9/08 1:54 p.m.

    honestly who uses RealPlayer anymore. no-one!

    I'm amazed they are still in business.

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