Segment Information

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information

We have three reportable segments: (1) RealPlayer Group, which includes sales of our RealPlayer media player software and related products, such as the distribution of third party software products, advertising on RealPlayer websites, and sales of RealPlayer Plus software licenses to consumers, sales of intellectual property licenses, and consumer subscriptions such as SuperPass and our RealPlayer Cloud service; (2) Mobile Entertainment, which includes our SaaS services, our LISTEN product, and sales of technology licenses of our software products such as Helix; and (3) Games, which includes all our games-related businesses, including sales of games licenses, online games subscription services, advertising on games sites and social network sites, microtransactions from online and social games, and sales of mobile games.

We allocate certain corporate expenses which are directly attributable to supporting the business to our reportable segments. These corporate expenses include but are not limited to a portion of finance, legal, human resources and headquarters facilities. Remaining expenses, which are not directly attributable to supporting the business, are reported as corporate items. All restructuring, lease exit and related charges, and loss on litigation settlements are included in the corporate segment.

RealNetworks reports three reportable segments based on factors such as how we manage our operations and how our Chief Operating Decision Maker reviews results. Our Chief Operating Decision Maker is considered to be the CEO Staff (CEOS), which includes the Chief Executive Officer, Chief Financial Officer, our Presidents, and General Counsel. The CEOS reviews financial information presented on both a consolidated basis and on a business segment basis. The accounting policies used to derive segment results are the same as those described in Note 1, Description of Business and Summary of Significant Accounting Policies, in the 10-K.

Segment results for the quarters and nine months ended September 30, 2014 and 2013 (in thousands):

RealPlayer Group

	Quarters Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenue	$	6,565		$	17,641		$	30,336		$	58,407
Cost of revenue	3,566			3,264			10,704			12,984
Gross profit	2,999			14,377			19,632			45,423
Operating expenses	12,392			14,449			42,668			44,656
Operating income (loss)	$	(9,393	)	$	(72	)	$	(23,036	)	$	767

Mobile Entertainment

	Quarters Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenue	$	19,190		$	19,948		$	62,285		$	59,035
Cost of revenue	12,626			11,972			38,874			33,974
Gross profit	6,564			7,976			23,411			25,061
Operating expenses	7,086			9,453			26,126			26,976
Operating income (loss)	$	(522	)	$	(1,477	)	$	(2,715	)	$	(1,915	)

Games

	Quarters Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenue	$	8,402		$	11,369		$	28,085		$	38,159
Cost of revenue	2,573			3,216			8,419			10,397
Gross profit	5,829			8,153			19,666			27,762
Operating expenses	8,658			11,513			27,193			35,120
Operating income (loss)	$	(2,829	)	$	(3,360	)	$	(7,527	)	$	(7,358	)

Corporate

	Quarters Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Cost of revenue	$	163		$	538		$	503		$	1,660
Extinguishment of liability	—			—			(10,580		)	—
Operating expenses	7,856			22,990			25,270			46,201
Operating income (loss)	$	(8,019	)	$	(23,528	)	$	(15,193	)	$	(47,861	)

Our customers consist primarily of consumers and corporations located in the U.S., Europe, Republic of Korea and various foreign countries (Rest of the world). Revenue by geographic region (in thousands):

	Quarters Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
United States	$	12,280	$	21,039	$	47,800	$	70,525
Europe	5,749		8,750		21,129		29,278
Republic of Korea	9,728		11,839		31,114		32,062
Rest of the world	6,400		7,330		20,663		23,736
Total net revenue	$	34,157	$	48,958	$	120,706	$	155,601

Long-lived assets (consists of equipment, software, leasehold improvements, other intangible assets, and goodwill) by geographic region (in thousands):

	September 30, 2014		December 31, 2013
United States	$	35,375	$	40,347
Europe	7,352		8,280
Republic of Korea	655		936
Rest of the world	3,641		4,078
Total long-lived assets	$	47,023	$	53,641