Exhibit 99.1
Pro Forma Consolidated Financial Information

Introduction

On March 31, 2010, the restructuring transactions contemplated by the Transaction, Contribution and Purchase Agreement dated February 9, 2010 among RealNetworks, Inc. (“Real” or “RealNetworks”), RealNetworks Digital Music of California, Inc., a wholly owned subsidiary of Real, MTV Networks, a division of Viacom International Inc. (“MTVN”), DMS Holdco Inc., a wholly owned subsidiary of MTVN, and Rhapsody America LLC , the joint venture formed by Real and MTVN (“Rhapsody,” together with the other parties listed above, the “Parties”), were completed. At the closing, Rhapsody was converted from a limited liability company to a corporation, and Real, MTVN and two minority stockholders hold the outstanding shares of Rhapsody such that MTVN owns 47.5%, Real owns slightly less than 47.5% of such outstanding shares and the minority stockholders own the remainder. Real contributed $18 million in cash, the Rhapsody brand and certain other assets, including content licenses, in exchange for shares of convertible preferred stock of Rhapsody, carrying a $10 million preference upon certain liquidation events. A portion of Real’s cash contribution was used to repurchase the international radio business that was previously contributed to Rhapsody by Real. MTVN contributed a $33 million advertising commitment in exchange for shares of common stock of Rhapsody, and MTVN’s previous obligation to provide advertising of approximately $111 million as of December 31, 2009 was cancelled. In addition, the Stockholder Agreement, dated as of August 20, 2007, between Real and Viacom International Inc., on behalf of MTVN, and the Limited Liability Company Agreement, dated as of August 20, 2007, among the Parties, were terminated, including the put and call rights held by Real and MTVN and MTVN’s rights to receive a preferred return in connection with the exercise of Real’s put right. At closing, the Parties entered into a Stockholder Agreement that contains provisions regarding the governance of Rhapsody, stock transfer restrictions and approval of certain corporate transactions. In addition, certain existing agreements were amended to, among other things, expand the technology and intellectual property licenses from Real to Rhapsody relating to the core technologies for the Rhapsody audio digital music service to provide worldwide, perpetual licenses and certain rights for use of the core technologies in business-to-business audio music services. Real will also provide certain operational transition services to Rhapsody until December 31, 2010, unless earlier terminated by Rhapsody.

As a result of the restructuring transactions Rhapsody is no longer a consolidated majority-owned subsidiary of RealNetworks, Inc. and is now an independent private company.

Pro Forma Information

The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2009 treats the restructuring transactions of Rhapsody as if they occurred on December 31, 2008. The unaudited pro forma condensed consolidated balance sheet as of December 31, 2009 gives effect to the restructuring transactions of Rhapsody as if they occurred on December 31, 2009. The unaudited pro forma condensed consolidated financial statements are subject to the assumptions and adjustments set forth in the accompanying notes. Management believes that the assumptions used and the adjustments made are reasonable under the circumstances and given the information available. The adjustments are preliminary in nature and subject to change following the transaction based on refinements as actual data become available.

The amounts presented under the column “RealNetworks Consolidated Historical” in the accompanying unaudited pro forma consolidated statement of operations and unaudited pro forma consolidated balance sheet as of and for the year ended December 31, 2009 reflect the historical consolidated amounts as reported by RealNetworks in its Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission on March 10, 2010.

The amount presented under the column “Deconsolidation of Rhapsody” represents the historical amounts of Rhapsody, previously consolidated by RealNetworks.

These unaudited pro forma consolidated financial statements are presented for illustrative purpose only and are not necessarily indicative of the operating results or the financial position that would have been achieved had the sales/divestitures discussed above been consummated as of the dates indicated or of the results that may be obtained in the future. These unaudited pro forma consolidated financial statements and accompanying notes should be read together with Real’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2009 and Management’s Discussion and Analysis included in Real’s Annual Report on Form 10-K for the year ended December 31, 2009.

 

RealNetworks, Inc. and Subsidiaries
Pro Forma Condensed Consolidated Balance Sheet
December 31, 2009
(Unaudited)

		RealNetworks
		Consolidated				Deconsolidation				Pro Forma
		Historical				of Rhapsody(1)				Adjustments				Pro Forma
		(in thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	277,030			$	17,972			$	(18,000)	(2), (5)		$	241,058
Short-term investments			107,870				—				—				107,870
Trade accounts receivable, net			60,937				7,354				—				53,583
Related party receivable — Rhapsody			—				—				8,538	(3)			8,538
Deferred costs, current portion			5,192				616				—				4,576
Prepaid expenses and other current assets			30,624				669				—				29,955
Total current assets			481,653				26,611				(9,462	)			445,580
Equipment, software, and leasehold improvements, at cost:
Equipment and software			151,951				584				(5,669)	(4), (5)			145,698
Leasehold improvements			31,041				—				—				31,041
Total equipment, software, and leasehold improvements			182,992				584				(5,669	)			176,739
Less accumulated depreciation and amortization			125,878				174				—				125,704
Net equipment, software, and leasehold improvements			57,114				410				(5,669	)			51,035
Restricted cash equivalents and investments			13,700				—				—				13,700
Equity investments			19,553				—				29,650	(5)			49,203
Other assets			4,030				—				—				4,030
Deferred costs, non-current portion			10,182				1,559				—				8,623
Deferred tax assets, net, non-current portion			10,001				—				(2,645	) (5)			7,356
Other intangible assets, net			10,650				113				—				10,537
Goodwill			—				—				—				—
Total assets		$	606,883			$	28,693			$	11,874			$	590,064
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	32,703			$	1,895			$	—			$	30,808
Accrued and other liabilities			124,934				3,091				(2,645	) (5)			119,198
Deferred revenue, current portion			31,374				9,742				—				21,632
Related party payable — MTVN			11,216				11,216				—				—
Related party payable — RealNetworks			—				8,538				8,538	(3)			—
Accrued loss on excess office facilities, current portion			3,228				—				—				3,228
Total current liabilities			203,455				34,482				5,893				174,866
Deferred revenue, non-current portion			1,933				777				—				1,156
Accrued loss on excess office facilities, non-current portion			—				—				—				—
Deferred rent			4,464				—				—				4,464
Deferred tax liabilities, net, non-current portion			961				—								961
Other long-term liabilities			13,006				—				—				13,006
Total liabilities			223,819				35,259				5,893				194,453
Noncontrolling interest in Rhapsody (A)			7,253				—				(7,253	) (5)			—
Shareholders’ equity			375,811				(6,566	)			13,234	(5)			395,611
Total liabilities and shareholders’ equity		$	606,883			$	28,693			$	11,874			$	590,064

RealNetworks, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
Year Ended December 31, 2009
(Unaudited)

		RealNetworks
		Consolidated				Deconsolidation				Pro Forma
		Historical				of Rhapsody(1)				Adjustments				Pro Forma
		(in thousands, except per share data)
Net revenue		$	562,264			$	159,561			$	9,136	(6)		$	411,839
Cost of revenue			222,142				100,796				1,442	(6)		$	122,788
Gross profit			340,122				58,765				7,694				289,051
Operating expenses:
Research and development			119,448				16,143				—				103,305
Sales and marketing			165,856				45,772				1,217	(6)			121,301
Advertising with related party (A)			33,292				33,292				—				—
General and administrative			79,164				16,668				1,600	(6)			64,096
Impairment of goodwill and long-lived assets			175,583				—				—				175,583
Restructuring and other charges			4,017				610				—				3,407
Total operating expenses			577,360				112,485				2,817				467,692
Operating loss			(237,238	)			(53,720	)			4,877				(178,641	)
Other income (expenses):
Interest income, net			3,969				119				—				3,850
Equity in net loss of investments			(1,313	)			27,336				585	(7)			(28,064	)
Gain (loss) on sale of equity investments, net			688				—				—				688
Impairment of equity investments			(5,020	)			—				—				(5,020	)
Other income (expense), net			(794	)			—				—				(794	)
Total other income (expense), net			(2,470	)			27,455				585				(29,340	)
Loss before income taxes			(239,708	)			(26,265	)			5,462				(207,981	)
Income tax benefit (expense)			(3,321	)			—				(4,067)	(8)			(7,388	)
Net loss			(243,029	)			(26,265	)			1,395				(215,369	)
Net loss attributable to the noncontrolling interest in Rhapsody			26,265				26,265				—				—
Net loss attributable to common shareholders		$	(216,764	)		$	—			$	1,395			$	(215,369	)
Basic net loss per share available to common shareholders		$	(1.64	)										$	(1.60	)
Diluted net loss per share available to common shareholders		$	(1.64	)										$	(1.60	)
Shares used to compute basic net loss per share available to common shareholders			134,612												134,612
Shares used to compute diluted net loss per share available to common shareholders			134,612												134,612

RealNetworks, Inc. and Subsidiaries
Earnings Per Share Reconciliation
Year Ended December 31, 2009
(Unaudited)

		RealNetworks
		Consolidated				Deconsolidation				Pro Forma
		Historical				of Rhapsody(1)				Adjustments				Pro Forma
		(in thousands, except per share data)
Net loss attributable to common shareholders		$	(216,764	)		$	—			$	1,395			$	(215,369	)
Less accretion of MTVN’s preferred return in Rhapsody			(3,700	)			(3,700	)			—				—
Net loss available to common shareholders		$	(220,464	)		$	(3,700	)		$	1,395			$	(215,369	)
Shares used to compute basic net loss per share available to common shareholders			134,612				—				—				134,612
Dilutive potential common shares:
Stock options and restricted stock			—				—				—				—
Convertible debt			—				—				—				—
Shares used to compute diluted net loss per share available to common shareholders			134,612				—				—				134,612
Basic net loss per share available to common shareholders		$	(1.64	)										$	(1.60	)
Diluted net loss per share available to common shareholders		$	(1.64	)										$	(1.60	)