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RealNetworks Misses Targets As Games Segment Declines

Online entertainment company RealNetworks, home to gaming site RealArcade.com, said revenues fell 11 percent in fiscal Q2, as games division sales dropped 15 percent.
RealNetworks, the online entertainment company that's home to PC game sites RealArcade.com, GameHouse.com, and Zylom.com and develops games like the Collapse! series, said it fell short of expectations in its fiscal Q2, reporting a revenue shortfall and a net loss. The company, which also specializes in online music, media software, and other online content, said revenues for the quarter ended June 30 fell 11 percent to $135.7 million compared to the same quarter a year prior. Sales in the game segment specifically fell 15 percent to $29.8 million. While not mentioned specifically by RealNetworks, casual games are currently subject to what amounts to a price war, with the average price for casual PC games -- the foundation of RealNetworks' games business -- falling dramatically in recent months. (The company has also been expanding into iPhone, web browser game and console digital download fields in recent times.) Overall, RealNetworks reported a net loss of $188.3 million, compared to a net loss of $1.3 million for Q2 2008. "Many of the factors contributing to this quarter’s results are one-off timing related issues, such as product cycles and a major credit card reissuing, which are not expected to impact the business going forward," the company said in a statement. RealNetworks also pointed to a soft advertising market as a cause for the shortfall, although the company said it is now less reliant on ads, as they now make up less than 5 percent of overall revenue. RealNetworks' games division generates revenue from sales of game subscription services, advertising, and the sale of games through partner sites and wireless carriers. Due to a "high level of uncertainty" regarding the market, RealNetworks did not provide financial guidance, but expects total revenue for the year to decline. RealNetworks chair and CEO Rob Glaser categorized the company's business in Q2 as "relatively stable ... in spite of a difficult consumer environment."

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