Acquisitions (Notes)

Jan. 18, 2019

Business Combination Disclosure [Text Block]


Note 5			Acquisitions and Dispositions

Napster Acquisition

On January 18, 2019, RealNetworks acquired an additional 42% interest in Rhapsody International, Inc. (doing business as Napster) which brought our aggregate ownership to 84% of Napster's outstanding equity, thus giving RealNetworks a majority voting interest. On August 24, 2020, RealNetworks announced that Napster is being sold to MelodyVR Group PLC in a transaction that is expected to close in the fourth quarter of 2020. See below for additional details.

Subsequent to RealNetworks’ January 18, 2019 acquisition, Napster has continued to operate as an independent business with its own board of directors, strategy and leadership team. Napster's separate legal existence is further supported by each company's ongoing compliance with corporate formalities, the independent direction of Napster's activities, and the consistent treatment of each of RealNetworks and Napster as distinct organizations. Accordingly, Napster remains a distinct legal entity and RealNetworks assumes no ownership or control over the assets or liabilities of Napster.

The 16% of Napster that we do not own has been accounted for as a noncontrolling interest in our consolidated financial statements.

As part of the acquisition, we recorded a gain of $12.3 million recognized in Other income (expenses) in the Consolidated statement of operations in the first quarter of 2019. We recorded intangible assets of $23.7 million, consisting of trade name and

trademarks, developed technology, customer relationships, and partner relationships. We recorded goodwill of $45.5 million, representing the intangible assets that do not qualify for separate recognition for accounting purposes. Additionally, as discussed in Note 6 Fair Value Measurements, we recorded contingent consideration for the 42% equity interest acquired in January 2019. The contingent consideration is required to be adjusted quarterly to fair value through earnings. For the quarter ended September 30, 2020, the fair value analysis was not impacted by Napster’s signing of the merger agreement described below due to the contingent conditions required to be met for closing that transaction and various uncertainties regarding consideration allocation and valuation.