A good third quarter for RealNetworks with record revenue of $93.7 million, up 14 percent over $82.2 million in 3Q05. Net income nearly quadrupled to $42.2 million, or $0.24 per share, compared with $11.2 million, or $0.06 per share in the same quarter last year. But that includes the Microsoft settlement effect; without that and several other items, RNWK’s adjusted net was $8.7 million, or $0.05 per share, compared to $6.3 million, or $0.03 per share last year. Gaming revenue gained 53 percent to $22.5 million while music revenue rose 16 percent to $30.4 million. Technology Products and Solutions rose 7 percent to $11.2 million. The only real dip was in Media Software and Services, which dropped 4 percent to $29.6 million.
— RNWK expects up to $122 million more from Microsoft over the next two quarters. That amount could be offset by the number of music users referred through promos. In that regard, both companies stand to gain from the shutdown of MSN Music as a store and its redirects to Rhapsody and its own Zune.
— The acquisition of 95 percent of WiderThan closed Oct. 31, with the company becoming a wholly owned subsidiary of Real. Real paid about $320 million for WiderThan shares. WiderThan reports to John Giamatteo, newly promoted to president, Technology Products and Solutions and International Operations.
More later from the call.
Update: Real CEO Rob Glaser spent a fair amount of the call on WiderThan. For the full details, see the transcript at SeekingAlpha.com but here’s the gist: Glaser: “We believe there is a great opportunity both now and over the long-term. Unlike pure content-based businesses such as ringtone aggregation which are vulnerable to commoditization, Real and WiderThan’s carrier services are technology-based and thus deeply embedded in the carrier’s network. Further, combining the strength of Real’s Rhapsody music service with WiderThan’s successful mobile music service will help us realize our vision of the future of digital music. … In sum, our acquisition of WiderThan is a significant milestone in scaling up and executing on Real’s vision of on-demand digital media services.”
— Gaming: Glaser: “We believe Real is the largest casual games publisher in the industry with an average of approximately 11 million unique users monthly and approximately 40 million monthly users when including our publishing and distribution partners.” Real continues to go global with games, testing a new online service in China during 3Q.
— Music: During this quarter, Real launched the Sansa Rhapsody MP3 line — Glsercalls it the first end-to-end “jukebox in the sky” eexperience. Real is also partnering with Sonos for PC-free music. The Best Buy Digital Music Store powered by Rhapsody adds promotional aspects.
Glaser: “Based on the two great new products we’ve launched and considering that there are only two other credible technology alternatives in this market, both of which focus on vertical, proprietary, end-to-end solutions, we believe our long-term prospects for significant strategic financial success in digital music are stronger than ever.”
— Premium music subscribers were up 27 percent over last year, to more than 1.65 million paid subs, but only rose slightly sequentially.
— Paid subscribers to all premium consumer services ended 3Q at more than 2.45 million, up 11 percent from 2.2 million last year.
— Streaming Big Brother continues to pay for Real in terms of sub growth.
— Glaser: “In terms of Microsoft … on the music side I think we’re headed for co-opetition in the following sense: we actually continue to support the Plays for Sure platform for backward compatibility … we support their architecture even in cases like with Zune where they don
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