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RealNetworks Reports Third Quarter Earnings

On Tuesday, RealNetworks (www.realnetworks.com) announced its earnings for the third quarter. Overall, revenues were $67.1 million.

More impressively, RealNetworks' pro forma income was $7.6 million, or $0.04 per share.

Tuesday's announcement ended tense speculation about whether RealNetworks'earnings would be a disappointment. But they were exactly in line with Wall Street estimates. In a conference call on Tuesday, RealNetworks did admit that its ad revenues were down. Ad revenues were $13.5 million for the quarter, but it lost about $3 million due to lowered ad rates.

The company's stock price dropped over 12% today, closing at 21 11/16.

"Our third quarter results demonstrated the ongoing strength of our business model, with our thirteenth consecutive quarter of revenue growth, our fifth consecutive quarter of pro forma profitability and our tenth consecutive quarter of positive cash flow from operations," said Rob Glaser, chairman and CEO in a statement.

RealNetworks recent move into its "GoldPass" all-you-can-eat streaming subscription model was also under the microscope. How much did the company make from that new initiative? A company spokesperson said that it hasn't yet revealed Gold Pass revenues or the number of subscribers.

"We're excited by the response the GoldPass has been getting," the spokesperson said, "but we don't break down revenues that way. It's only been six weeks since it was launched, which isn't enough time to evaluate its effectiveness."

Given its position as a huge provider of streaming software and services, RealNetworks' entry into the subscription service model is being viewed as a test to see if that business model can work. Other companies like MP3.com and Emusic.com have also initiated subscription-based music offerings.

In a statement on Tuesday, Tom Frank, COO of RealNetworks said that the company's 150 million "unique registered users" provides them a broad audience. "Over time," he said, "we expect GoldPass to provide RealNetworks with an attractive long-term annuity revenue stream."

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