RealNetworks Reports 250,000 Subscribers For Its Music Services

Q3 revenues: $51.8 million, up 4 percent from the Q2, 03, and up 14 percent from Q3, 02. Net loss was down drastically to $3.7 million, compared to a net loss of $35.4 million in Q3, 02, and $9.6 million in Q2, 03.

Subscribers to its music services–Rhapsody and RadioPass–crossed 250,000 in the quarter, an increase of over 46 percent over the combined music subscribers of RealNetworks and Listen.com at the end of the prior quarter;

Total premium digital media subscription services expanded 15 percent to over 1.15 million paying subscribers from over 1 million at the end of the second quarter (that means this includes the new Rhapsody subscribers brought in after the Listen.com acquisition).

Interestingly, for Q4, RealNetworks expects revenue gross margins to be flat to slightly lower than the Q3, as the music subscription business grows and eats into its margins.

Consumer business, revs, including advertising, increased 22 percent to $36.4 million, and accounted for 70 percent of total revs, up from 67 percent in the prior quarter. Subscription revenue, included in consumer revenue, was $27.9 million, a 30 percent increase from the prior year and a 10 percent increase from the previous quarter. Revenues from the technology business was $15.4 million, essentially flat compared to the third quarter of 2002 and down 6 percent from last quarter.

I am surprised that ad revenues for the consumer services continue to languish: came in at $1.58 million in Q3, compared to $1.66 million in the year-ago quarter.

Europe continues to be a strong growth area for the company: revs in the quarter grew to $8.7 million, up from $6.1 million in the year-ago quarter.

Conference call details: Rob Glaser on conference call: “We believe we’re first in consumer subs. services and first in usage in the music services. Subscription economics work for us..in terms of margins, it works better than download services.” Glaser’s dissing downloads, and holding forth on why they are better…

RealOne Arcade is doing well…

Even if the MLB.com contract does not get renewed, annual revenues for the company would drop less than 2 percent, said Glaser; MLB subscriptions reap less than $2 in gross revenue per subscriber per month.

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. “Now don’t get me wrong: we’ll not go nuts with TV ads with people running around smashing guitars,” but the company will look at investments that will have a more long-term opportunity than short-term bottomline.

Roy Goodman, CFO: Content costs associated with sports events are high…it affected us less than 4 percentage points…we won’t have that in the long term. Rhapsody affected our gross margins less than 2 percent during the quarter…we expect the music business to be a low business, but high growth.

To listen to the conference call, click here.

Related: The Minced Meat Music Pie: RealNetworks’ Sean Ryan

For a complete lowdown on RealNetworks’ efforts in digital media, read the dedicated company page.

Comments have been disabled for this post