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RealNetworks Buying Rhapsody Parent

The deal will cost $36 million.

RealNetworks (RNWK) - Get RealNetworks, Inc. Report said Monday it will acquire, operator of the well-regarded online music service Rhapsody.

The deal shores up RealNetworks' position as one of the few companies offering subscription-based online entertainment services to consumers. RealNetworks already has 900,000 paying subscribers for its RealOne SuperPass audio/video service, while the privately held says its subscribers number in the "tens of thousands."

"We definitely think this is a doubling down of our position in the business," said RealNetworks CEO Rob Glaser on a Monday evening conference call.

Before the announcement, shares in RealNetworks rose 6 cents Monday to close at $4.64.

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RealNetworks posted an operating loss of $31.7 million in 2002 on revenue of $182.7, compared to a $65.3 million operating loss on revenue of $188.9 million the prior year. The company, which announced a minority investment in in February, is paying approximately $36 million for, with $17.3 million of the payment in cash and the balance in 4.1 million RealNetworks shares.

Following the transaction's expected close late in the second quarter or early in the third, RealNetworks says will contribute $1 million to $2 million in operating losses per quarter for the remainder of 2003, and decreasing amounts thereafter. More detailed financials will be released on RealNetworks' first-quarter conference call, slated for April 29.