Fool.com: RealNetworks Gets Real.com (News) November 8, 1999

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RealNetworks Gets Real.com

By Dave Marino-Nachison (TMF Braden)
November 8, 1999

Online streaming media company RealNetworks Inc. (Nasdaq: RNWK) today announced the launch of its "Real.com Network," which the company wants to develop into a hub for Internet audio and video programming. Shares of the company's stock rose nearly 5% in morning trading.

Announced in conjunction with the beta release of a new version of the company's 85 million-user RealPlayer, Real.com's offerings revolve around the Take5 programming service -- essentially a plug-in for RealPlayer featuring news and entertainment headlines, music, comedy, and original entertainment -- and the Real.com Guide aggregator site for streaming media content.

What makes RealNetworks work is the company's sizable array of broadcast and Internet media partners who provide the content needed to convince consumers that visiting the site and downloading the software -- generally free, although there are premium options -- is worth their time. The company has been able to ingratiate itself with content providers in part because it doesn't compete with them, concentrating primarily on being a vertical provider of streaming media rather than taking the news and information giants on directly.

And today's announcement was piggybacked by a handful of releases signaling a wide variety of initiatives, from new advertising deals to content arrangements. (For a running tally of RealNetworks-related news, click here.)

This comes on the heels of the company's late-October announcement of third-quarter results that humbled its own year-ago performance: Revenues rose 86% as advertising revenue skyrocketed, gross profits more than doubled, and operating losses narrowed. On the balance sheet, RealNetworks' cash, cash equivalents, and short-term investments line item was at $326.8 million, up about $237 million since the end of 1998.

Much of the enthusiasm for today's move probably has to do with the potential for RealNetworks to really boost its advertising revenue through the Real.com Network.

Though advertising represented only 8.5% of the company's revenues through the first nine months of 1999 -- software license fees accounting for more than 71% and service revenues making up the balance -- it has been RealNetworks' fastest-growing segment by far. Advertising sales are up more than 260% this year, compared with about 87% and 75% for software and service revenues, respectively. Advertising gross margins, at about 76%, are comparable with service margins, and though they trail software license levels, they are nevertheless impressive.

Investors looking for RealNetworks to grow and diversify its revenue streams have already seen encouraging signs from the company this year, and today's news suggests more of the same is on the way.

RealNetworks' corporate website is here, with Real.com devoted entirely to its multimedia offerings.

Related Links:
RealNetworks Web Site
RealNetworks Message Board
Real.com

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