'Crucial Time' for Online Music at RealNetworks - TheStreet

'Crucial Time' for Online Music at RealNetworks

The company posts solid third-quarter results and sees opportunity in Webcasting.
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Updated from Oct. 28

RealNetworks

(RNWK) - Get Report

met expectations for the third quarter and announced substantial growth in online music subscriptions.

The company's results reflect progress in its effort to keep a foothold in the legal online music business, which holds great promise for the future but has yet to deliver significant profits.

RealNetworks' shares, which have ranged between $3.02 and $9.29 over the past year, slipped 11 cents Wednesday to $6.98.

For the third quarter ended Sept. 30, RealNetworks reported revenue of $51.8 million, up 14% from the year-ago third quarter and just shy of the Thomson First Call consensus of $52.2 million.

The company reported a net loss, corresponding to generally accepted accounting principles, of $3.7 million, or 2 cents per share, in line with analysts' expectations. The company reported a loss of $35.4 million in the third quarter of 2002, or 22 cents per share.

RealNetworks, which acquired Listen.com -- parent of the Rhapsody online music service -- in August, says subscribers to its digital music services amounted to more than 250,000 at the end of the quarter, up 46% from RealNetworks' and Listen.com's combined subscriptions at the end of June.

The company has made major strides in the online music market, RealNetworks Chairman Rob Glaser said in a Tuesday conference call with analysts, and is moving faster than people realize.

Another area of growth, said Glaser, is the company's RealOne Arcade video game delivery business. Total premium digital media subscriptions at RealNetworks grew from 1 million at the end of the second quarter to 1.15 million at the end of the third.

Noting that the company's three-year contract with Major League Baseball is expiring, Glaser said the company hopes to renew its agreement with MLB, but he suggested it won't suffer mightily if it doesn't.

Losing baseball Webcasts would cause a significant loss of 150,000 subscribers, said Glaser, but would have a less significant financial impact. Annual revenue would drop less than 2%, said Glaser; MLB subscriptions reap less than $2 in gross revenue per subscriber per month.

Looking forward, the company expects fourth-quarter revenue between $52 million adn $56 million; the four-analyst First Call Consensus is for $54.7 million in sales. Fourth-quarter GAAP per-share loss, says RealNetworks, should come in a range of 1 to 4 cents, compared with expectations of a 1-cent loss.

In comments on the call, Glaser indicated a greater willingness than he has had in the past to sacrifice short-term profits in the hopes of building RealNetworks' music business. "Now is a crucial time in the digital music area," he said.