Segment Information

6 Months Ended

Jun. 30, 2020


Note 12			Segment Information

We manage our business and report revenue and operating income (loss) in four segments: (1) Consumer Media, which includes licensing of our codec technology and our PC-based RealPlayer products, including RealPlayer Plus and related products; (2) Mobile Services, which includes our SaaS services and our integrated RealTimes® platform which is sold to mobile carriers; (3) Games, which includes all our games-related businesses, including sales of in-game virtual goods, mobile games, games licenses, games subscription services, and in-game advertising and advertising on game sites; and (4) Napster, which includes on-demand music streaming and music services.

RealNetworks allocates to its Consumer Media, Mobile Services and Games reportable segments certain corporate expenses which are directly attributable to supporting these businesses, including but not limited to a portion of finance, legal, human resources and headquarters facilities. Remaining expenses, which are not directly attributable to supporting these businesses, are reported as corporate items. These corporate items may also include restructuring charges and stock compensation charges. As stated in Note 5 Acquisitions, Napster operates as an independent company and, therefore, RealNetworks allocates no corporate expenses to the Napster segment.

RealNetworks reports four reportable segments based on factors such as how we manage our operations and how the Chief Operating Decision Maker (CODM) reviews results. The CODM 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 six months ended June 30, 2020 and 2019 (in thousands):


Consumer Media	Quarter Ended June 30,						Six Months Ended June 30,

	2020		2019		2020		2019
Revenue	$	3,159	$	2,620	$	6,654	$	5,106
Cost of revenue	519		803		1,130		1,636
Gross profit	2,640		1,817		5,524		3,470
Operating expenses	2,204		2,877		4,662		5,996
Operating income (loss)	$	436	$	(1,060)	$	862	$	(2,526)


Mobile Services	Quarter Ended June 30,						Six Months Ended June 30,

	2020		2019		2020		2019
Revenue	$	6,461	$	6,997	$	13,151	$	13,936
Cost of revenue	1,782		1,865		3,478		3,913
Gross profit	4,679		5,132		9,673		10,023
Operating expenses	5,682		7,438		13,270		14,999
Operating income (loss)	$	(1,003)	$	(2,306)	$	(3,597)	$	(4,976)


Games	Quarter Ended June 30,						Six Months Ended June 30,

	2020		2019		2020		2019
Revenue	$	7,465	$	6,048	$	14,102	$	11,758
Cost of revenue	1,958		1,655		3,752		3,325
Gross profit	5,507		4,393		10,350		8,433
Operating expenses	4,976		5,288		9,899		10,325
Operating income (loss)	$	531	$	(895)	$	451	$	(1,892)


Napster	Quarter Ended June 30,						Six Months Ended June 30,

	2020		2019		2020		2019
Revenue	$	23,339	$	28,583	$	49,662	$	52,920
Cost of revenue	18,770		23,026		38,842		43,422
Gross profit	4,569		5,557		10,820		9,498
Operating expenses	6,609		6,638		13,070		12,170
Operating income (loss)	$	(2,040)	$	(1,081)	$	(2,250)	$	(2,672)


Corporate	Quarter Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Cost of revenue	$	4	$	(67)	$	7	$	(144)
Operating expenses	2,819		4,116		5,446		8,373
Operating income (loss)	$	(2,823)	$	(4,049)	$	(5,453)	$	(8,229)

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


	Quarter Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
United States	$	20,785	$	21,322	$	43,205	$	40,292
Europe	14,524		17,097		29,362		32,481

Rest of the World	5,115		5,829		11,002		10,947
Total net revenue	$	40,424	$	44,248	$	83,569	$	83,720

Long-lived assets (consisting of goodwill, equipment, software, leasehold improvements, operating lease assets, and other intangible assets) by geographic region (in thousands) are as follows:


	June 30, 2020		December 31, 2019
United States	$	79,767	$	83,342
Europe	10,224		10,504

Rest of the World	1,815		2,281
Total long-lived assets	$	91,806	$	96,127