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Real Announces Lower Q4/2006 Profits, Gaming Growth

Media company RealNetworks has announced fourth quarter and 2006 financial results, with an overall profit drop following a major settlement with Microsoft, but a rapidly expanding casual games division that grew more than 50 percent to $86.2 in revenue f
Online media company RealNetworks has announced its financial results for the fourth quarter and full year of 2006, with quarterly revenue increasing a record 50 percent over the same period in 2005 - $125.6 million compared to the previous year's $83.6 million. The company's downloadable gaming revenue also saw strong growth, with $23.9 million for the quarter, up 53 percent over last year, and posting $86.2 million in total game revenue for the year. Much of this growth was driven by acquisitions of both Zylom in The Netherlands in early 2006 and Atrativa in Brazil late last year. RealNetworks notes that the growth is expected to continue throughout 2007, with officials labeling the year as one of “accelerating growth and continued [mergers and acquisitions] activity.” Overall, however, Real's profits for the quarter were just $39.3 million, down significantly from the $295.6 million posted during the same period last year, though admittedly 2005's figure was elevated largely due to winnings from an antitrust lawsuit against Microsoft. 2006 annual profits were $145.2 million, down from the prior year's $312.3 million. RealNetworks' game division, which has RealArcade as its main distribution point, both distributes casual PC games from third parties such as Bejeweled developer PopCap, and develops/distributes its own game titles through its GameHouse and Mr. Goodliving development divisions. A particular differentiating factor is its GamePass system, which offers one game every month for a $6.95 subscription fee, and discounts on buying other games. The company stated that its services are now used by 22.7 million paid subscribers, which includes those subscribers gained from RealNetworks' 2006 acquisition of WiderThan. Looking ahead to 2007, RealNetworks expects revenue in the range of $540 million to $560 million, with first quarter revenue to be between $122 million and $126 million. “2006 was a very successful year for RealNetworks,” said Rob Glaser, Chairman and CEO of RealNetworks. “We are pleased to report another year of record revenue and strong profitability. In addition to the company’s financial achievements, 2006 was a year of important strategic achievements for Real that set us up for our next phase of growth.”

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