RealNetworks is on a roll. Climbing further out of a three-year slump, the Seattle digital-media company posted its second consecutive quarter...

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RealNetworks is on a roll. Climbing further out of a three-year slump, the Seattle digital-media company posted its second consecutive quarter of profit yesterday as sales rose 26 percent.

Strong sales in its online music and games businesses helped the company earn a second-quarter profit of $4.7 million, or 3 cents a share, in the quarter ended June 30. The company’s stock jumped 12 percent yesterday in after-hours trading.

The company gained traction in part from its Rhapsody music service. Its music-related revenue grew 61 percent to $24 million, and its music subscribers reached 1.15 million out of a total 2 million paid subscribers to its digital-media services, Chief Executive Rob Glaser said.

The company also benefited from the timing of the Supreme Court’s decision in June to crack down on illegal file-sharing services. That decision came two months after RealNetworks launched a new version of Rhapsody that provides access to free music, which drove more people to RealNetworks’ service, Glaser said.

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“We launched an innovative new product and tripled the number of people registering as a result,” Glaser said.

RealNetworks is using the free Rhapsody 25 service to attract subscribers to its premium paid service. The company will increase its focus on products that are free to consumers but are supported by advertising revenue, Glaser said.

In the second quarter, ad revenue rose 22 percent to $8.2 million, largely as a result of an expanded relationship with Google, he said. The company’s games-related revenue also posted strong growth, jumping 63 percent to $13.6 million.

RealNetworks has been testing the music-subscription-service market for portable devices, but Glaser says the market is “not ready for prime time.”

Despite the rosy results, ongoing antitrust litigation continues to take a toll on the company.

RealNetworks expects to spend $16 million related to its antitrust suit against Microsoft this year. Taking that into account, the company forecasts profit for the year of $12 million to $15 million.

Lawsuit-related expenses are increasing this quarter because of an intense period of discovery related to the case, the company said.

For the third quarter, RealNetworks says it expects to post a profit of 4 cents to 5 cents a share on $80 million to $82 million in sales. The company reiterated its full-year sales estimate of $323 million to $333 million but raised its profit outlook to 6 cents to 8 cents a share.

RealNetworks’ results were released after the close of regular trading yesterday. In after-hours trading, the company’s shares climbed 62 cents, or 12.3 percent, to $5.67.

Kristi Heim: 206-464-2718 or



Dollar figures in thousands, except per share; parentheses denote losses.
June 30 %
2nd QTR 2005 2004 CHG
Profit $4,700 $(4,600)
Per share $0.03 $(0.03)
Revenue $82,700 65,500 26.2
1st half 2005 2004 CHG
Profit $5,523 $(15,056)
Per share $0.03 $(0.09)
Revenue $159,258 $125,865 26.5