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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number 0-23137
 RealNetworks, Inc.
 (Exact name of registrant as
    specified in its charter)
  Washington

91-1628146(State of
    incorporation)

(I.R.S. Employer Identification
    Number)2601 Elliott Avenue, Suite 1000
    Seattle, Washington(Address of principal
    executive offices)

98121(Zip Code)   Registrants telephone number, including area code:
 (206) 674-2700
 Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, Par Value $0.001 per share

The NASDAQ Stock Market LLCPreferred Share Purchase Rights

The NASDAQ Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act:
 None
 (Title of Class)
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  þ o o o
 (Do not check if a smaller
    reporting company)
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
      (1)
    
    Excludes shares held of record on
    that date by directors, executive officers and 10% shareholders
    of the registrant. Exclusion of such shares should not be
    construed to indicate that any such person directly or
    indirectly possesses the power to direct or cause the direction
    of the management of the policies of the registrant.




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##### 





TABLE OF
    CONTENTS
   
  
 PagePART IItem 1.

Business


4Item 1A.

Risk Factors


16Item 1B.

Unresolved Staff Comments


28Item 2.

Properties


29Item 3.

Legal Proceedings


29Item 4.

Submission of Matters to a Vote of Security
    Holders


29PART IIItem 5.

Market for Registrants Common Equity,
    Related Shareholder Matters and Issuer Purchases of Equity
    Securities


30Item 6.

Selected Financial Data


32Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


33Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


58Item 8.

Financial Statements and Supplementary Data


60Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


102Item 9A.

Controls and Procedures


102Item 9B.

Other Information


102PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


102Item 11.

Executive Compensation


103Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Shareholder Matters


103Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


104Item 14.

Principal Accountant Fees and Services


104PART IVItem 15.

Exhibits and Financial Statement Schedules


104Signatures


108Exhibit Index


109EX-10.21EX-10.26EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   2




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PART I.  This Annual Report on
    Form 10-K
    and the documents incorporated herein by reference contain
    forward-looking statements that have been made pursuant to the
    provisions of the Private Securities Litigation Reform Act of
    1995. These forward-looking statements are based on current
    expectations, estimates, and projections about
    RealNetworks industry, products, managements
    beliefs, and certain assumptions made by management. Words such
    as anticipates, expects,
    intends, plans, believes,
    seeks, estimates, and similar
    expressions are intended to identify forward-looking statements.
    All statements contained in this annual report on
    Form 10-K
    that do not relate to matters of historical fact should be
    considered forward-looking statements. Forward-looking
    statements include statements with respect to:
  
    future revenues, income taxes, tax benefits, net income per
    diluted share, acquisition costs and related amortization, and
    other measures of results of operations;
    the effects of our acquisitions, including WiderThan, Sony
    NetServices GmbH, Exomi Oy and Trymedia, and our position as a
    technology services provider for leading wireless carriers;
    plans, strategies and expected opportunities for growth,
    increased profitability and innovation in 2009 and future
    years;
    the creation of new strategic partnerships and broadening of
    existing strategic partnerships and the advantages and growth we
    will achieve as a result of such partnerships (including in
    connection with our Games, Music and Technology Products and
    Solutions businesses);
    the expected growth and profitability of our Technology
    Products and Solutions business;
    the performance, governance, management, accounting and
    integration of our Rhapsody America venture;
    the dilutive impact on our shareholders if the call or put
    rights contained in the limited liability agreement for Rhapsody
    America are exercised and result in the issuance of additional
    shares of our common stock;
    the financial performance and growth of our Games business,
    including future international growth;
    our intention to separate our Games business, distribute
    shares of the newly created games company to its shareholders,
    and the potential sale of up to 20% of the shares of the new
    games company in an initial public offering;
    the migration of our Media Software and Services businesses
    from general purpose subscription businesses toward premium
    services and
    free-to-consumer
    services, the popularity of the RealPlayer and our expected
    introduction of new products and innovations in our Media
    Software and Services business;
    our ability to grow our Music business, including
    opportunities for us to become the platform of choice for the
    consumer electronics industry, the integration of our Rhapsody
    DNA into the digital devices of an expanding list of partners
    and our plans to introduce additional innovations;
    the effect of future interoperability on our Music business,
    the significance of growth opportunities in the digital music
    market and our expectations for short-term progress and
    long-term success in our Music business;
    the effects of legislation, regulations, administrative
    proceedings, court rulings, settlement negotiations and other
    factors that may impact music publishing royalty rates;
    the potential outcomes and effects of claims and legal
    proceedings on our business, prospects, financial condition or
    results of operations;
    our financial position and the availability of resources;
    our expectations regarding acquisition activity in 2009 and
    our focus on the integration of completed acquisitions; 3




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
    our relationships with our employees;
    the effects of U.S. and foreign income taxes on our
    business, prospects, financial condition or results of
    operations;
    the impairment of our assets and anticipated effects on our
    customers, business, prospects, financial condition or results
    of operations;
    the effect of economic and market conditions on our business,
    prospects, financial condition or results of operations;
    the effect of Microsofts obligations under the
    settlement agreement and commercial agreements between us and
    Microsoft on our business, prospects, financial condition or
    results of operations;
    the effect of volatility in foreign exchange rates on our
    business, prospects, financial condition or results of
    operations;
    the effect of accounting standards on our business,
    prospects, financial condition or results of operations;
    future competition; and
    the degree of seasonality in our revenue.  These statements are not guarantees of future performance and
    actual actions or results may differ materially. These
    statements are subject to certain risks, uncertainties and
    assumptions that are difficult to predict, including those noted
    in the documents incorporated herein by reference. Particular
    attention should also be paid to the cautionary language
    included or referred to in the section of Item 1 entitled
    Competition, in Item 1A entitled Risk
    Factors and in Item 3 entitled Legal
    Proceedings. RealNetworks undertakes no obligation to
    update publicly any forward-looking statements as a result of
    new information, future events or otherwise, unless required by
    law. Readers should, however, carefully review the risk factors
    included in other reports or documents filed by RealNetworks
    from time to time with the Securities and Exchange Commission,
    particularly the Quarterly Reports on
    Form 10-Q
    and any Current Reports on
    Form 8-K.
  Item 1.
    Business  Overview
    ® ® ® music-on-demand video-on-demand,
   4




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music-on-demand music-on-demand
      Music
    Subscription Revenue.
 5




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Advertising Revenue.
  Revenue from Other Music Products and
    Services.
  International Revenue.
  Consumer
  Games
  quick-to-learn
   6




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PC Games. easy-to-enjoy
      Mobile Games and Other Games Platforms.
  Media
    Software and Services
    RealPlayer.
 7




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Subscription Revenue
    Advertising and Third-Party Software.
  Technology
    Products and Solutions
  music-on-demand, video-on-demand
  music-on-demand
    T-Mobile
    Ringback Tones.
 8




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and/or
  Music-On-Demand. music-on-demand
  Video-On-Demand. video-on-demand and/or
  Messaging. e-mail
    Helix Server.
  OEM Licensing.
  Other Software Licensing.
   9




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Research
    and Development
    Customers
    and Seasonality
      Sales,
    Marketing and Distribution
  e-mail
  Music
    and Consumer Marketing
   10




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www.real.com,
    www.realarcade.com, www.gamehouse.com, www.zylom.com
  Technology
    Products and Solutions Marketing
    Customer
    Support
  e-mail on-site
  Competition
  and/or
    Music
   11




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peer-to-peer
    Consumer
  Games
    Media
    Software and Services
   12




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Technology
    Products and Solutions
  Carrier
    Application Services
  time-to-market,
  music-on-demand video-on-demand
  Technology
    Licensing
    Intellectual
    Property
     13




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Employees
    Position
    on Charitable Responsibility
    Available
    Information
  Form 10-K, Form 10-Q Form 8-K,
  Executive
    Officers of the Registrant
    Name

Age

PositionRobert Glaser


47


Chairman of the Board and Chief Executive OfficerMichael Eggers


37


Senior Vice President, Chief Financial Officer and TreasurerJohn Barbour


49


President, Games DivisionSavino (Sid) Ferrales


58


Senior Vice President, Human ResourcesJohn Giamatteo


42


Chief Operating OfficerRobert Kimball


45


Executive Vice President, Corporate Development and Law, General
    Counsel and Corporate SecretaryMichael Lunsford


41


Executive Vice President, Strategic VenturesHarold Zeitz


45


Chief Operating Officer, Games Division      14




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magna cum laude
        magna cum laude
     15




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Item 1A.
    Risk
    Factors  Form 10-K.
  Risks
    Related to Our Music and Consumer Businesses
  Our
    Music and Consumer businesses face substantial competitive and
    other challenges that may prevent us from being successful in,
    and negatively impact future growth in, those
    businesses.
    
    reduced prices or margins,
    loss of current and potential customers, or partners and
    potential partners who provide content we distribute to our
    customers,
    changes to our products, services, technologies, licenses or
    business practices or strategies,
    lengthened sales cycles,
    pressure to prematurely release products or product
    enhancements, or
    degradation in our stature and reputation in the market.    Music. peer-to-peer
  Games.
 16




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Media Software and Services.
  The
    success of our subscription services businesses depends upon our
    ability to increase subscription revenue and to license
    compelling content on commercially reasonable
    terms.
   17




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Music
    publishing royalty rates for music subscription services offered
    through RealNetworks and Rhapsody America are not yet fully
    established; an unexpected modification or application of
    settlement terms could negatively impact our operating
    results.
    An
    appeal of, or other industry settlement relating to, the April
    2007 Copyright Royalty Board decision regarding Internet radio
    royalties and minimum payments could result in material expenses
    that would harm our operating results and our ability to provide
    popular radio services.
    Our
    RealDVD PC application is currently the subject of pending
    litigation, and we could incur significant expenses or be
    further prevented from selling RealDVD.
   18




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We may
    not be successful in maintaining and growing our distribution of
    digital media products.
    We
    face risks with respect to certain matters in the governance and
    management of our Rhapsody America joint venture and the
    integration and operation of assets that have been combined to
    form Rhapsody America.
  day-to-day
  day-to-day period-over-period
  We and
    MTVN have certain contractual rights relating to the purchase
    and sale of MTVNs membership interest in Rhapsody America
    that may be settled in part through the issuance of additional
    shares of our capital stock, which would dilute our other
    shareholders voting and economic interests in us, and may
    require us to pay MTVN a price that exceeds the appraised value
    of its proportionate interest in Rhapsody America.
   19




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Risks
    Related to Our Technology Products and Solutions
    Business
  Contracts
    with our carrier customers subject us to significant risks that
    could negatively impact our revenue or otherwise harm our
    operating results.
        The
    mobile entertainment market is highly competitive.
  music-on-demand music-on-demand music-on-demand
 20




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A
    majority of the revenue that we generate in our Technology
    Products and Solutions business is dependent upon our
    relationship with a few customers, including SK Telecom; any
    deterioration of these relationships could materially harm our
    business.
    Our
    traditional system software licensing business has been
    negatively impacted by competitive factors, and we may not
    experience improved sales of our system software
    products.
    Risks
    Related to Our Business in General
  Our
    operating results are difficult to predict and may fluctuate,
    which may contribute to volatility in our stock
    price.
  period-to-period,
  
    impairments of goodwill and other long-lived assets,
    integrating and operating newly acquired businesses and assets,
    the seasonality of our business, which has experienced increased
    revenues in the fourth quarter of our fiscal year, and
    the general difficulty in forecasting our operating results and
    metrics, which could result in actual results that differ
    significantly from expected results.   21




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Uncertainty
    and adverse conditions in the economy could have a material
    adverse impact on our business, financial condition and results
    of operations.
      New
    products and services may not achieve market acceptance or may
    be subject to legal challenge that could negatively affect our
    operating results.
   22




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We
    depend upon our executive officers and key personnel, but may be
    unable to attract and retain them, which could significantly
    harm our business and results of operations.
      Acquisitions
    involve costs and risks that could harm our business and impair
    our ability to realize potential benefits from
    acquisitions.
        
    difficulties and expenses in assimilating the operations,
    products, technology, information systems,
    and/or
    personnel of the acquired company;
    retaining key management or employees of the acquired company;
    entrance into unfamiliar markets, industry segments, or types of
    businesses;
    operating and integrating acquired businesses in remote
    locations;
    integrating and managing businesses based in countries in which
    we have little or no prior experience;
    diversion of management time and other resources from existing
    operations to integration activities for acquired businesses;
    impairment of relationships with employees, affiliates,
    advertisers or content providers of our business or acquired
    business; and
    assumption of known and unknown liabilities of the acquired
    company, including intellectual property claims. 23




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An
    impairment in the carrying value of our goodwill or other
    intangible assets could adversely affect our financial condition
    and results of operations.
  Goodwill and Other
    Intangible Assets
  An
    impairment in the carrying value of our long-lived assets could
    adversely affect our financial condition and results of
    operations.
  Accounting
    for the Impairment or Disposal of Long-Lived Assets,
 24




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We
    need to develop relationships and technical standards with
    manufacturers of non-PC media and communication devices and
    interoperability of our services with these devices to grow our
    business.
    We may
    be unable to adequately protect our proprietary rights or
    leverage our patent portfolio, and may face risks associated
    with third-party claims relating to our intellectual
    property.
     25




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Our
    business and operating results will suffer if our systems or
    networks fail, become unavailable, unsecured or perform poorly
    so that current or potential users do not have adequate access
    to our products, services and websites.
    The
    growth of our business is dependent in part on successfully
    implementing our international expansion strategy.
    We may
    be subject to market risk and legal liability in connection with
    the data collection capabilities of our products and
    services.
    We may
    be subject to assessment of sales and other taxes for the sale
    of our products, license of technology or provision of
    services.
     26




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We may
    be subject to additional income tax assessments.
    Risks
    Related to Our Previously Announced Separation of Our Games
    Business
  We
    announced our intention to separate our global Games business
    into an independent company and to distribute shares of the
    newly created games company to our shareholders. If such
    transactions are postponed for a significant period of time or
    not completed, our stock price and business may be adversely
    affected, and we may not realize the anticipated benefits of the
    separation transactions.
      Risks
    Related to the Securities Markets and Ownership of Our Common
    Stock
  Our
    directors and executive officers beneficially own more than 38%
    of our stock, which gives them significant control over certain
    major decisions on which our shareholders may vote, may
    discourage an acquisition of us, and any significant sales of
    stock by our officers and directors could have a negative effect
    on our stock price.
   27




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
    elect or defeat the election of our directors;
    amend or prevent amendment of our articles of incorporation or
    bylaws;
    effect or prevent a merger, sale of assets or other corporate
    transaction; and
    control the outcome of any other matter submitted to the
    shareholders for vote.    Provisions
    of our charter documents, Shareholder Rights Plan, and
    Washington law could discourage our acquisition by a
    third-party.
    
    adopt a plan of merger;
    authorize the sale, lease, exchange or mortgage of assets
    representing more than 50% of the book value of our assets prior
    to the transaction or on which our long-term business strategy
    is substantially dependent;
    authorize our voluntary dissolution; or
    take any action that has the effect of any of the above.          Item 1B.
    Unresolved
    Staff Comments   28




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Item 2.
    Properties      Area leased

MonthlyLocation

(sq. feet)

rent

Lease expirationSeattle, Washington


264,000


$
500,000


September 2014, with an option to
    renew for two five-year periodsSeattle, Washington(1)


133,000



425,000


September 2010Seoul, Republic of Korea(2)


62,000



85,000


October 2011Reston, Virginia(2)


35,000



80,000


September 2012     (1)
    
    In 2001, we re-evaluated our facilities requirements and as a
    result, decided to sublet all of this office space for the
    remainder of the term of our lease.(2)
    
    This facility is utilized only by our Technology Products and
    Solutions segment.    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   29




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PART II.  Item 5.
    Market
    for Registrants Common Equity, Related Shareholder Matters
    and Issuer Purchases of Equity Securities      Years Ended December 31,2008

2007High

Low

High

LowFirst Quarter

$
6.58


$
5.07


$
11.17


$
7.55Second Quarter


7.61



5.82



8.76



7.42Third Quarter


7.28



4.89



8.27



5.45Fourth Quarter


5.12



2.93



7.35



5.74       Total Number of

Average Price PaidPeriod

Shares Repurchased

Per Share(In thousands)10/1/2008  10/31/2008


5,166


$
4.1811/1/2008  11/30/2008


960



4.32Total


6,126


$
4.20    30




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Comparison
    of 5 Year Cumulative Total Return Among RealNetworks,
    Inc.,
    the NASDAQ Composite Index and the Dow Jones
    U.S. Technology Index
  December 31,

December 31,

December 31,

December 31,

December 31,

December 31,2003

2004

2005

2006

2007

2008RealNetworks, Inc.

$
100


$
115.94


$
135.90


$
191.59


$
106.65


$
61.82NASDAQ Composite Index

$
100


$
110.08


$
112.88


$
126.51


$
138.13


$
80.47Dow Jones U.S. Technology Index

$
100


$
101.76


$
105.13


$
115.75


$
133.92


$
76.51    31




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Item 6.
    Selected
    Financial Data    Years Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share data)Consolidated Statements of Operations Data:Net revenue

$
604,810


$
567,620


$
395,261


$
325,059


$
266,719Cost of revenue


233,244



213,491



124,108



98,249



97,145Impairment of deferred costs and prepaid royalties


19,666















Gross profit


351,900



354,129



271,153



226,810



169,574Operating expenses:Research and development


113,680



102,731



77,386



70,731



52,066Sales and marketing


211,922



209,412



165,602



130,515



96,779Advertising with related party


44,213



24,360











General and administrative


69,981



67,326



57,332



50,697



31,538Impairment of goodwill and long-lived assets


192,676















Restructuring and other charges


6,833



3,748











Loss on excess office facilities










738







866Subtotal operating expenses


639,305



407,577



301,058



251,943



181,249Antitrust litigation (benefit) expenses, net






(60,747
)


(220,410
)


(422,500
)


11,048Total operating expenses (benefit)


639,305



346,830



80,648



(170,557
)


192,297Operating income (loss)


(287,405
)


7,299



190,505



397,367



(22,723
)Other income, net


69,355



68,472



37,248



32,176



248Income (loss) before income taxes


(218,050
)


75,771



227,753



429,543



(22,475
)Income taxes


(25,828
)


(27,456
)


(82,537
)


(117,198
)


(522
)Net income (loss)

$
(243,878
)

$
48,315


$
145,216


$
312,345


$
(22,997
)Basic net income (loss) per share

$
(1.74
)

$
0.32


$
0.90


$
1.84


$
(0.14
)Diluted net income (loss) per share

$
(1.74
)

$
0.29


$
0.81


$
1.70


$
(0.14
)Shares used to compute basic net income (loss) per share


140,432



151,665



160,973



169,986



168,907Shares used to compute diluted net income (loss) per share


140,432



166,410



179,281



184,161



168,907   As of December 31, 20082008

2007

2006

2005

2004(In thousands)Consolidated Balance Sheets Data:Cash, cash equivalents, and short-term investments

$
370,734


$
556,629


$
678,920


$
781,327


$
363,621Working capital


266,990



351,066



584,125



710,804



287,599Other intangible assets, net


18,727



107,677



105,109



7,337



8,383Goodwill


175,264



353,153



309,122



123,330



119,217Total assets


789,013



1,275,442



1,303,416



1,112,997



602,502Convertible debt






100,000



100,000



100,000



100,000Shareholders equity


553,558



875,104



969,766



841,733



380,805  32




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
      music-on-demand music-on-demand
  free-to-consumer
  music-on-demand, video-on-demand
 33




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sign-ups
 34




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Years Ended December 31,2008

2007

2006Net revenue


100.0
%


100.0
%


100.0
%Cost of revenue


38.6



37.6



31.4Impairment of deferred costs and prepaid royalties


3.2







Gross profit


58.2



62.4



68.6Operating expenses:Research and development


18.8



18.1



19.6Sales and marketing


35.0



36.9



41.9Advertising with related party


7.3



4.3



General and administrative


11.6



11.9



14.5Impairment of goodwill and long-lived assets


31.9







Restructuring and other charges


1.1



0.6



Loss on excess office facilities










0.2Subtotal operating expenses


105.7



71.8



76.2Antitrust litigation benefit, net






(10.7
)


(55.8
)Total operating expenses


105.7



61.1



20.4Operating income (loss)


(47.5
)


1.3



48.2Other income, net


11.5



12.0



9.4Income (loss) before income taxes


(36.0
)


13.3



57.6Income taxes


(4.3
)


(4.8
)


(20.9
)Net income (loss)


(40.3
)%


8.5
%


36.7
%   Critical
    Accounting Policies and Estimates
    
    Revenue recognition;
    Estimating music publishing rights and music royalty accruals;
    Recoverability of deferred costs and prepaid royalties;
    Estimating allowances for doubtful accounts and sales returns;
    Estimating losses on excess office facilities;
    Determining whether declines in the fair value of investments
    are
    other-than-temporary
    and estimating fair market value of investments in privately
    held companies;
    Valuation of long-lived assets;
    Valuation of goodwill; 35




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##### Table of Contents




    Stock-based compensation;
    Minority interest;
    Accounting for gains on sale of subsidiary stock;
    Accounting for taxes collected from customers; and
    Accounting for income taxes.  Revenue Recognition. No. 97-2, Software Revenue Recognition; SOP No. 98-9, Software Revenue Recognition with Respect to Certain
    Arrangements SOP No. 81-1, Accounting for Performance of Construction-Type and Certain
    Production-Type Contracts Revenue Recognition in Financial Statements No. 00-21, Revenue Arrangements with Multiple Deliverables; No. 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent
    SOP No. 97-2. SOP No. 81-1,
  No. 00-21.
  No. 99-19.
    Music Publishing Rights and Music Royalty
    Accruals.
 36




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##### Table of Contents



Recoverability of Deferred Costs.
    Allowances for Doubtful Accounts and Sales
    Returns.
  Accrued Loss on Excess Office Facilities.
  Impairment of Investments. other-than-temporary. other-than-temporary
  Valuation of Long-Lived Assets.
 37




---



##### Table of Contents



Valuation of Goodwill.
  
    poor economic performance relative to historical or projected
    future operating results;
    significant negative industry, economic or company specific
    trends;
    changes in the manner of our use of the assets or the plans for
    our business; and
    loss of key personnel.    Stock-Based Compensation. Share-Based Payment Accounting for Stock Issued to
    Employees
  Minority Interests. Consolidated
    Financial Statements No. D-98, Classification and Measurement of Redeemable Securities
 38




---



##### Table of Contents



Accounting for Gains on Sale of Subsidiary
    Stock. Accounting for the Sales of Stock of a Subsidiary
  Accounting for Taxes Collected from
    Customers.
  Accounting for Income Taxes.
    non-U.S. subsidiaries
 39




---



##### Table of Contents



Years Ended December 31,2008


2007Balance, beginning of year

$
8,931


$
7,501Increases related to prior year tax positions


586



Decreases related to prior year tax positions


(241
)


Increases related to current year tax positions


1,179



1,430Settlements






Expiration of the statute of limitations






Balance, end of year

$
10,455


$
8,931     Revenue
    by Segment
    2008


Change


2007


Change


2006Music

$
160,721



8
%

$
149,126



21
%

$
123,033Consumer


237,522



12



211,851



6



199,739Technology products and solutions


206,567



(0
)


206,643



185



72,489Total net revenue

$
604,810



7
%

$
567,620



44
%

$
395,261     2008

2007

2006Music


27
%


26
%


31
%Consumer


39



37



51Technology products and solutions


34



37



18Total net revenue


100
%


100
%


100
%   Music.
  peer-to-peer
 40




---



##### Table of Contents



Consumer.
    Technology Products and Solutions. music-on-demand, video-on-demand,
  music-on-demand, video-on-demand
 41




---



##### Table of Contents



Consumer
    Revenue
    2008


Change


2007


Change


2006Games

$
134,649



24
%

$
108,503



26
%

$
86,236Media software and services


102,873



(0
)


103,348



(9
)


113,503Total consumer products and services revenue

$
237,522



12
%

$
211,851



6
%

$
199,739   Games.
    re-launched
   42




---



##### Table of Contents



Media Software and Services.
      Geographic
    Revenue
    2008


Change


2007


Change


2006United States

$
403,799



12
%

$
360,676



27
%

$
283,433Europe


107,223



27



84,368



35



62,270Republic of Korea


50,443



(39
)


82,549



344



18,597Rest of the World


43,345



8



40,027



29



30,961Total

$
604,810



7
%

$
567,620



44
%

$
395,261        43




---



##### Table of Contents



License
    and Service Revenue
    2008


Change


2007


Change


2006License fees

$
113,990



23
%

$
92,718



2
%

$
90,684Service revenue


490,820



3



474,902



56



304,577Total net revenue

$
604,810



7
%

$
567,620



44
%

$
395,261     2008

2007

2006License fees


19
%


16
%


23
%Service revenue


81



84



77Total net revenue


100
%


100
%


100
%   License Fees.
   44




---



##### Table of Contents



Service Revenue. music-on-demand, video-on-demand
      Deferred
    Revenue
    Cost of
    Revenue by Segment
    2008


Change


2007Music

$
92,067



13
%

$
81,462Consumer


64,180



61



39,840Technology products and solutions


96,663



5



92,189Total cost of revenue

$
252,910



18
%

$
213,491  45




---



##### Table of Contents



2008

2007Music


57
%


55
%Consumer


27



19Technology Products and Solutions


47



45Total cost of revenue


42
%


38
%   Cost of Music.
    Cost of Consumer.
    Cost of Technology Products and
    Solutions.
     46




---



##### Table of Contents



Cost of
    License Fees and Service Revenue
    2008


Change


2007


Change


2006License fees

$
50,097



43
%

$
34,927



(6
)%

$
37,089Service revenue


202,813



14



178,564



105



87,019Total cost of revenue

$
252,910



18
%

$
213,491



72
%

$
124,108     2008

2007

2006License fees


44
%


38
%


41
%Service revenue


41



38



29Total cost of revenue


42
%


38
%


31
%   Cost of License Fees.
      Cost of Service Revenue.
   47




---



##### Table of Contents



Impairment
    of Deferred Costs and Prepaid Royalties
      Other
    Segment and Geographical Information
   48




---



##### Table of Contents



Technology Products


ReconcilingMusic


Consumer


and Solutions


Amounts


ConsolidatedNet revenue

$
160,721


$
237,522


$
206,567


$



$
604,810Cost of revenue


91,067



56,351



85,826







233,244Impairment of deferred costs and prepaid royalties


1,000



7,829



10,837







19,666Gross profit


68,654



173,342



109,904







351,900Advertising with related party


44,213















44,213Restructuring and other charges














6,833



6,833Impairment of goodwill and long-lived assets


4,753



46,056



141,867







192,676Other operating expenses


101,022



170,149



123,507



905



395,583Operating income (loss)


(81,334
)


(42,863
)


(155,470
)


(7,738
)


(287,405
)Other income, net


56,057











13,298



69,355Income (loss) before income taxes

$
(25,277
)

$
(42,863
)

$
(155,470
)

$
5,560


$
(218,050
)     Technology Products


ReconcilingMusic


Consumer


and Solutions


Amounts


ConsolidatedNet revenue

$
149,126


$
211,851


$
206,643


$



$
567,620Cost of revenue


81,462



39,840



92,189







213,491Gross profit


67,664



172,011



114,454







354,129Advertising with related party


24,360















24,360Restructuring and other charges














3,748



3,748Other operating expenses


103,482



142,749



130,551



(58,060
)


318,722Operating income (loss)


(60,178
)


29,262



(16,097
)


54,312



7,299Other income, net


36,194











32,278



68,472Income (loss) before income taxes

$
(23,984
)

$
29,262


$
(16,097
)

$
86,590


$
75,771     December 31,2008


2007United States

$
163,730


$
186,665Republic of Korea


51,508



235,728Europe


37,315



87,181Rest of the World


4,445



7,753Total long-lived assets

$
256,998


$
517,327  49




---



##### Table of Contents



December 31,2008


2007United States

$
463,209


$
557,381Republic of Korea


64,824



228,153Europe


20,201



79,410Rest of the World


5,324



10,160Total

$
553,558


$
875,104   Operating
    Expenses
  Research
    and Development
  year-over-year
  2008

Change

2007

Change

2006Research and development

$
113,680



11
%

$
102,731



33
%

$
77,386As a percentage of total net revenue


19
%






18
%






20
%       Sales
    and Marketing
  year-over-year
  2008

Change

2007

Change

2006Sales and marketing

$
211,922



1
%

$
209,412



26
%

$
165,602As a percentage of total net revenue


35
%






37
%






42
%    50




---



##### Table of Contents



Advertising
    with Related Party
    General
    and Administrative
  year-over-year
  2008

Change

2007

Change

2006General and administrative

$
69,981



4
%

$
67,326



17
%

$
57,332As a percentage of total net revenue


12
%






12
%






15
%       Impairment
    of Goodwill and Long-Lived Assets
  Goodwill and Other
    Intangible Assets
   51




---



##### Table of Contents



Restructuring
    and Other Charges
   52




---



##### Table of Contents



Loss
    on Excess Office Facilities
    Antitrust
    Litigation Benefit, net
    Other
    Income, Net
  year-over-year
  2008


Change


2007


Change


2006Interest income, net

$
13,453



(56
)%

$
30,874



(18
)%

$
37,622Gain on sale of equity investments


210



114



98



(96
)


2,286Equity in net income (loss) of investments


(695
)


58



(440
)


(235
)


326Impairment of equity investments






n/a







(100
)


(3,116
)Minority interest in Rhapsody America


41,555



110



19,784



n/a



Gain on sale of interest in Rhapsody America


14,502



(12
)


16,410



n/a



Other income (expenses)


330



(81
)


1,746



1,243



130Other income, net

$
69,355



1
%

$
68,472



84
%

$
37,248    53




---



##### Table of Contents



Accounting for Sales of Stock of
    a Subsidiary.
    Income
    Taxes
    Recently
    Issued Accounting Standards
  Business Combinations
  Noncontrolling Interest in Consolidated Financial Statements,
    an amendment of ARB No. 51
  No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 Goodwill and Other Intangible Assets FSP 142-3 No. 142-3
 54




---



##### Table of Contents



Liquidity
    and Capital Resources
    December 31,2008

2007Working capital

$
266,990


$
351,066Cash, cash equivalents, and short-term investments


370,734



556,629Restricted cash


14,742



15,509       Years Ended December 31,2008

2007

2006Cash (used in) provided by operating activities

$
(29,286
)

$
68,409


$
170,920Cash (used in) provided by investing activities


(113,218
)


467



(294,065
)Cash used in financing activities


(95,862
)


(113,620
)


(4,764
)            55




---



##### Table of Contents



56




---



##### Table of Contents



non-U.S. government non-U.S. agency
        Less than


1-3


3-5


AfterContractual Obligations

Total


1 Year


Years


Years


5 Years(In thousands)Office leases

$
59,938


$
14,831


$
21,878


$
13,580


$
9,649Other contractual obligations


43,996



32,926



11,070







Total contractual cash obligations

$
103,934


$
47,757


$
32,948


$
13,580


$
9,649         Off
    Balance Sheet Arrangements
   57




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Interest Rate Risk.
    WeightedAverage


Expected Maturity DatesInterest








2011-


Amortized


EstimatedRate


2009


2010


2012


Cost


Fair ValueShort-term investments:Corporate notes and bonds


2.61
%

$
1,493


$
19,938


$
32,005


$
54,685


$
53,436U.S. government agency securities


1.43
%


84,330











83,920



84,330Total short-term investments


2.18
%

$
85,823


$
19,938


$
32,005


$
138,605


$
137,766     WeightedAverage


Expected Maturity DatesInterest








2010-


Amortized


EstimatedRate


2008


2009


2012


Cost


Fair ValueShort-term investments:Corporate notes and bonds


5.24
%

$
19,509


$
2,260


$
20,802


$
43,552


$
42,571U.S. government agency securities


4.71
%


37,361











37,296



37,361Total short-term investments


4.94
%

$
56,870


$
2,260


$
20,802


$
80,848


$
79,932   Investment Risk. available-for-sale, other-than-temporary
 58




---



##### Table of Contents



other-than-temporary, other-than-temporary other-than-temporary
  short-term
  Foreign Currency Risk.
  (3) non-U.S. dollar
           59




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  REALNETWORKS,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2008


2007(In thousands, except per share data)ASSETSCurrent assets:Cash and cash equivalents

$
232,968


$
476,697Short-term investments


137,766



79,932Trade accounts receivable, net of allowances for doubtful
    accounts and sales returns of $4,631 in 2008 and $2,455 in 2007


70,201



84,674Deferred costs, current portion


4,026



6,408Deferred tax assets, net, current portion


749



Prepaid expenses and other current assets


33,850



33,845Total current assets


479,560



681,556Equipment, software, and leasehold improvements, at cost:Equipment and software


135,788



109,621Leasehold improvements


30,719



30,632Total equipment, software, and leasehold improvements


166,507



140,253Less accumulated depreciation and amortization


103,500



83,756Net equipment, software, and leasehold improvements


63,007



56,497Restricted cash equivalents


14,742



15,509Equity investments


18,582



9,976Other assets


9,895



10,161Deferred tax assets, net, non-current portion


9,236



40,913Other intangible assets, net of accumulated amortization of
    $56,217 in 2008 and $41,579 in 2007


18,727



107,677Goodwill


175,264



353,153Total assets

$
789,013


$
1,275,442LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
36,575


$
56,160Accrued and other liabilities


118,688



114,136Deferred revenue, current portion


39,835



39,564Related party payable


13,155



17,241Convertible debt






100,000Accrued loss on excess office facilities, current portion


4,317



3,389Total current liabilities


212,570



330,490Deferred revenue, non-current portion


1,961



2,663Accrued loss on excess office facilities, non-current portion


2,893



7,311Deferred rent


4,614



4,518Deferred tax liabilities, net, non-current portion


1,379



22,060Other long-term liabilities


11,660



13,683Total liabilities


235,077



380,725Minority interest in Rhapsody America (see Note 3 for
    redemption value)


378



19,613Commitments and contingencies Shareholders equity:Preferred stock, $0.001 par value, no shares issued and
    outstandingSeries A: authorized 200 shares






Undesignated series: authorized 59,800 shares






Common stock, $0.001 par value authorized
    1,000,000 shares; issued and outstanding
    134,354 shares in 2008 and 142,298 shares in 2007


134



142Additional paid-in capital


635,324



653,904Sale of non-controlling interest in Rhapsody America


7,381



Deferred stock-based compensation






Accumulated other comprehensive income (loss)


(48,729
)


17,732Retained (deficit) earnings


(40,552
)


203,326Total shareholders equity


553,558



875,104Total liabilities and shareholders equity

$
789,013


$
1,275,442    60




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
    (LOSS)
  Years Ended December 31,2008


2007


2006(In thousands, except per share data)Net revenue(A)

$
604,810


$
567,620


$
395,261Cost of revenue(B)


233,244



213,491



124,108Impairment of deferred costs and prepaid royalties(B)


19,666







Gross profit


351,900



354,129



271,153Operating expenses:Research and development


113,680



102,731



77,386Sales and marketing


211,922



209,412



165,602Advertising with related party


44,213



24,360



General and administrative


69,981



67,326



57,332Impairment of goodwill and long-lived assets


192,676







Restructuring and other charges


6,833



3,748



Loss on excess office facilities










738Subtotal operating expenses


639,305



407,577



301,058Antitrust litigation benefit, net






(60,747
)


(220,410
)Total operating expenses


639,305



346,830



80,648Operating income (loss)


(287,405
)


7,299



190,505Other income (expenses):Interest income, net


13,453



30,874



37,622Gain on sale of equity investments


210



98



2,286Equity in net income (loss) of investments


(695
)


(440
)


326Minority interest in Rhapsody America


41,555



19,784



Gain on sale of interest in Rhapsody America


14,502



16,410



Impairment of equity investments










(3,116
)Other income


330



1,746



130Other income, net


69,355



68,472



37,248Income (loss) before income taxes


(218,050
)


75,771



227,753Income taxes


(25,828
)


(27,456
)


(82,537
)Net income (loss)

$
(243,878
)

$
48,315


$
145,216Basic net income (loss) per share

$
(1.74
)

$
0.32


$
0.90Diluted net income (loss) per share

$
(1.74
)

$
0.29


$
0.81Shares used to compute basic net income (loss) per share


140,432



151,665



160,973Shares used to compute diluted net income (loss) per share


140,432



166,410



179,281Comprehensive income (loss):Net income (loss)

$
(243,878
)

$
48,315


$
145,216Unrealized gain (loss) on investments:Unrealized holding losses, net of tax


(2,320
)


(8,482
)


(14,399
)Foreign currency translation gains (losses)


(64,141
)


2,729



11,160Comprehensive income (loss)

$
(310,339
)

$
42,562


$
141,977(A) Components of net revenue:License fees

$
113,990


$
92,718


$
90,684Service revenue


490,820



474,902



304,577$
604,810


$
567,620


$
395,261(B) Components of cost of revenue:License fees

$
50,097


$
34,927


$
37,089Service revenue


202,813



178,564



87,019$
252,910


$
213,491


$
124,108    61




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended December 31,2008


2007


2006(In thousands)Cash flows from operating activities:Net income (loss)

$
(243,878
)

$
48,315


$
145,216Adjustments to reconcile net income (loss) to net cash (used in)
    provided by operating activities:Depreciation and amortization


45,968



45,225



20,980Stock-based compensation


23,531



23,918



18,151Changes in deferred income taxes


11,583



(9,549
)


54,986Impairment of equity investments










3,116Loss on disposal of equipment, software, and leasehold
    improvements


10



302



276Excess tax benefit from stock option exercises


(127
)


(562
)


(39,183
)Accrued loss on excess office facilities


(3,490
)


(3,801
)


(3,515
)Gain on sale of equity investments


(210
)


(98
)


(2,286
)Purchases of trading securities






(270,000
)


Sales and maturities of trading securities






270,000



Equity in net (income) loss of investments


695



440



(326
)Minority interest in Rhapsody America


(41,555
)


(19,784
)


Gain on sale of interest in Rhapsody America


(14,502
)


(16,410
)


Impairment of goodwill and long-lived assets


192,676







Accrued restructuring and other charges


5,524







Other


111



95



97Changes in certain assets and liabilities, net of acquisitions:Trade accounts receivable


9,518



(13,083
)


(7,962
)Prepaid expenses and other assets


(5,040
)


(19,710
)


(3,126
)Accounts payable


(13,709
)


(1,329
)


4,276Accrued and other liabilities


3,609



34,440



(19,780
)Net cash (used in) provided by operating activities


(29,286
)


68,409



170,920Cash flows from investing activities:Purchases of equipment, software, and leasehold improvements


(29,530
)


(26,658
)


(13,808
)Purchases of short-term investments


(251,887
)


(133,427
)


(204,841
)Sales and maturities of short-term investments


194,053



207,183



180,973Purchases of intangible and other assets


(2,839
)


(2,796
)


Decrease in restricted cash equivalents


768



1,805



Proceeds from sale of equity investments


1,140



1,615



2,286Purchases of equity investments


(14,731
)


(1,656
)


(834
)Cash used in acquisitions, net of cash acquired


(10,192
)


(45,599
)


(257,841
)Net cash (used in) provided by investing activities


(113,218
)


467



(294,065
)Cash flows from financing activities:Net proceeds from sales of common stock under employee stock
    purchase plan and exercise of stock options


9,570



15,894



54,929Repayment of convertible debt


(100,000
)






Net proceeds from sales of interest in Rhapsody America


44,640



48,716



Excess tax benefit from stock option exercises


127



562



39,183Repurchase of common stock


(50,199
)


(178,792
)


(98,876
)Net cash used in financing activities


(95,862
)


(113,620
)


(4,764
)Effect of exchange rate changes on cash


(5,363
)


(3,791
)


1,170Net decrease in cash and cash equivalents


(243,729
)


(48,535
)


(126,739
)Cash and cash equivalents, beginning of year


476,697



525,232



651,971Cash and cash equivalents, end of year

$
232,968


$
476,697


$
525,232Supplemental disclosure of cash flow information:Cash paid during the year for income taxes

$
12,110


$
36,615


$
16,487Supplemental disclosure of non-cash investing and financing
    activities:Accrued acquisition consideration

$



$



$
2,000    62




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
  Sale ofNon-Controlling





AccumulatedAdditional


Interest in


Deferred


Other


Retained


TotalCommon Stock


Paid-In


Rhapsody


Stock-Based


Comprehensive


Earnings


ShareholdersShares


Amount


Capital


America


Compensation


Income (Loss)


(Deficit)


Equity(In thousands)Balances, December 31, 2005


166,037



166



805,067







(19
)


26,724



9,795



841,733Common stock issued for exercise of stock options and employee
    stock purchase plan


9,067



8



54,921



















54,929Common shares repurchased


(11,836
)


(12
)


(98,864
)


















(98,876
)Shares issued for director payments


10







97



















97Stock-based compensation










18,132







19











18,151Unrealized loss on investments, net of income tax






















(14,399
)






(14,399
)Translation adjustment






















11,160







11,160Tax benefit from stock option exercises










11,755



















11,755Net income


























145,216



145,216Balances, December 31, 2006


163,278



162



791,108











23,485



155,011



969,766Common stock issued for exercise of stock options, employee
    stock purchase plan, and vesting of restricted shares


2,747



3



15,868



















15,871Common shares repurchased


(23,780
)


(23
)


(178,769
)


















(178,792
)Common shares awarded


40







260



















260Shares issued for director payments


13







74



















74Stock-based compensation










23,918



















23,918Unrealized loss on investments, net of income tax






















(8,482
)






(8,482
)Translation adjustment






















2,729







2,729Tax benefit from stock option exercises










1,445



















1,445Net income


























48,315



48,315Balances, December 31, 2007


142,298



142



653,904











17,732



203,326



875,104Common stock issued for exercise of stock options, employee
    stock purchase plan, and vesting of restricted shares


1,990



2



9,547



















9,549Common shares repurchased


(9,955
)


(10
)


(50,189
)


















(50,199
)Common shares awarded


6







21



















21Shares issued for director payments


15







110



















110Stock-based compensation










23,531



















23,531Unrealized loss on investments, net of income tax






















(2,320
)






(2,320
)Translation adjustment






















(64,141
)






(64,141
)Tax deficiency from stock option exercises










(1,600
)


















(1,600
)Sale of non-controlling interest in Rhapsody America














7,381















7,381Net loss


























(243,878
)


(243,878
)Balances, December 31, 2008


134,354


$
134


$
635,324


$
7,381


$



$
(48,729
)

$
(40,552
)

$
553,558    63




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 Years
    ended December 31, 2008, 2007, and 2006
  Note 1.
    Description
    of Business and Summary of Significant Accounting
    Policies  Description of Business.
    Basis of Presentation.
      Use of Estimates.
  Cash, Cash Equivalents, and Short-Term
    Investments.
   64




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Trade Accounts Receivable.
  Concentration of Credit Risk.
  Depreciation and Amortization.
    Equity Investments. The Equity Method of
    Accounting for Investments in Common Stock
  Other Intangible Assets.
  Goodwill.
 65




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    poor economic performance relative to historical or projected
    operating results;
    significant negative industry, economic or company specific
    trends;
    changes in the manner of our use of the assets or the plans for
    our business; and
    loss of key personnel.  Long-Lived Assets.
  Fair Value of Financial Instruments. No. 157-2.
          Research and Development.
  Restructuring and Other Charges.
 66




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting for Costs Associated with Exit or Disposal
    Activities.
  Revenue Recognition. No. 97-2, Software Revenue Recognition; SOP No. 98-9, Software Revenue Recognition with Respect to Certain
    Arrangements SOP No. 81-1, Accounting for Performance of Construction-Type and Certain
    Production-Type Contracts Revenue Recognition in Financial Statements No. 00-21, Revenue Arrangements with Multiple Deliverables; No. 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent
    SOP No. 97-2. SOP No. 81-1,
  No. 00-21.
  No. 99-19.
    Advertising Expenses.
 67




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Foreign Currency.
  Derivative Financial Instruments.
      Accounting for Gains on Sale of Subsidiary
    Stock. Accounting for the Sales of Stock of a
    Subsidiary
  Accounting for Taxes Collected from
    Customers.
 68




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Income Taxes.
    Stock-Based Compensation. Share-Based
    Payment Accounting for
    Stock-Based Compensation Accounting for
    Stock Issued to Employees
      Minority Interests. Consolidated
    Financial Statements No. D-98, Classification and Measurement of Redeemable Securities
 69




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Net Income Per Share.
  Years Ended December 31,2008

2007

2006Shares used to compute basic net income (loss) per share


140,432



151,665



160,973Dilutive potential common shares:Stock options and restricted stock






3,995



7,558Convertible debt






10,750



10,750Shares used to compute diluted net income (loss) per share


140,432



166,410



179,281     Accumulated Other Comprehensive Income
    (loss).
    December 31,2008


2007Unrealized gains on investments, net of taxes of $(846) in 2008
    and $470 in 2007

$
3,516


$
5,836Foreign currency translation adjustments


(52,245
)


11,896Accumulated other comprehensive income (loss)

$
(48,729
)

$
17,732   Reclassifications.
  New Accounting Pronouncements. Business
    Combinations
 70




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Noncontrolling Interest in Consolidated Financial Statements,
    an amendment of ARB No. 51
  No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 Goodwill and Other Intangible Assets FSP 142-3
  Note 2.
    Stock-Based
    Compensation  Share-Based Payment
      Years Ended December 31,2008

2007

2006Expected dividend yield


0
%


0
%


0
%Risk-free interest rate


2.60
%


4.47
%


4.75
%Expected life (years)


4.2



4.1



4.3Volatility


45
%


42
%


49
%  71




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2008


2007


2006Cost of service revenue

$
2,570


$
769


$
257Research and development


8,410



7,314



6,512Sales and marketing


5,860



9,373



7,152General and administrative


6,691



6,462



4,230Total stock-based compensation expense

$
23,531


$
23,918


$
18,151       Note 3.
    Rhapsody
    America  Formation
  business-to-consumer
  
    RealNetworks contributed its Rhapsody service subscribers,
    certain RadioPass subscribers, cash of $16.4 million,
    contracts, revenue from existing Rhapsody subscribers, marketing
    materials, player hardware, rhapsody.com and related URLs,
    certain liabilities, and distribution arrangements in exchange
    for a 51% equity interest in Rhapsody America. RealNetworks also
    licensed certain assets to Rhapsody America, including Rhapsody
    content, Rhapsody technology, the Rhapsody brands and related
    materials.
    MTVN contributed its URGE service subscribers, cash, contracts,
    marketing materials, revenue from existing URGE subscribers,
    certain liabilities, plus the note payable described below, in
    exchange for a 49% equity interest in Rhapsody America. MTVN has
    also licensed certain assets to Rhapsody America, including URGE
    content, brands and related materials.
    In addition to the assets described above, MTVN also contributed
    a $230 million five-year note payable in consideration for
    acquiring MTVNs interest in the venture. Rhapsody America
    must use the proceeds from the note solely to purchase
    advertising from MTVN. As MTVN makes payments on the note,
    Rhapsody America records equity and RealNetworks realizes an
    immediate appreciation in the carrying value of the
    Companys interests in the venture and recognizes a gain if
    the gain is reasonably assured in accordance with
    SAB No. 51. As of December 31, 2007,
    $25.0 million in payments were made on the note and
    RealNetworks realized and recorded a gain of $12.8 million
    during the year ended December 31, 2007 as all of the
    SAB No. 51 gain recognition criteria were met. For the
    first nine months of the year ended December 31, 2008,
    RealNetworks realized and recorded a gain of $14.5 million
    as all of the SAB No. 51 gain recognition criteria
    were met. Each quarter the Company evaluates the gain
    recognition criteria in SAB No. 51 and determined for
    the fourth quarter of 2008 that recognition of the gain in the
    statement of operations was no longer appropriate, as certain of
    the criteria in SAB No. 51 were no longer met. During
    the fourth quarter, the Company revised its long 72




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  term operating plan, including a detailed cash flow projection
    for the business. The expected impact from significant declines
    observed in the broader economy, including but not limited to, a
    deteriorating advertising market and reduced consumer
    discretionary spending were reflected in the plan and resulted
    in an assumed overall decline in market value. Under the venture
    agreements, neither RealNetworks nor MTVN has future commitments
    to fund additional cash needs of the business. Additionally, as
    described more fully below, in the fourth quarter the Company
    assessed the impact of the preferred return associated with the
    put option held by MTVN and the related likelihood that
    RealNetworks would be required to repurchase the MTVN interests.
    These factors, combined with the overall decline in the market,
    caused the Company to conclude that gain recognition under
    SAB No. 51 was not appropriate for the fourth quarter.
    As a result, for the three months ended December 31, 2008,
    the sale of ownership interests in Rhapsody America have been
    reflected as an equity transaction and $6.6 million has
    been recorded directly to shareholders equity.        Trade Name and Trademarks

$
4,000Existing Technology


1,900Existing Subscribers


1,680Total Identifiable Intangible Assets

$
7,580       Call/Put
    Rights
  ccounting for Derivatives and Hedging Activities Accounting for Certain Financial
    Instruments with Characteristics of Both Liabilities and
    Equity
 73




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
           74




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 4.
    Business
    Combinations  Business
    Combinations in 2008
    Business
    Combinations in 2007
          Cash paid at acquisition

$
20,225Estimated direct acquisition costs


304Total

$
20,529       Current assets

$
747Property and equipment


34Intangible assets subject to amortization:Technology


4,540Customer relationships


950Trade name and trademarks


190Goodwill


15,859Other long-term assets


589Total assets acquired


22,909Liabilities


(2,380
)Net assets acquired

$
20,529  75




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              Cash paid at acquisition

$
12,795Estimated direct acquisition costs


902Total

$
13,697       Current assets

$
5,110Property and equipment


2,351Intangible assets subject to amortization:Technology


1,760Customer relationships


1,610Goodwill


10,212Total assets acquired


21,043Current liabilities


(7,346
)Net assets acquired

$
13,697      76




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Cash paid at acquisition

$
10,745Estimated direct acquisition costs


468Total

$
11,213       Current assets

$
5,409Property and equipment


265Other long-term assets


109Intangible assets subject to amortization:Customer relationships


3,270Technology


2,545Tradenames and trademarks


287Non-compete agreements


80Goodwill


2,852Total assets acquired


14,817Current liabilities


(1,761
)Net deferred tax liabilities


(1,472
)Other long-term liabilities


(371
)Total liabilities assumed


(3,604
)Net assets acquired

$
11,213    77




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 5.
    Fair
    Value Measurements  Fair Value Measurement No. FAS 157-2, Effective Date of FASB Statement No. 157
        Fair Value Measurements as ofDecember 31,2008Total


Level 1


Level 2


Level 3(In thousands)Cash equivalentsMoney market funds

$
157,063


$
157,063


$



$
U.S. government agency securities


4,292



4,292







Short-term investmentsU.S. government agency securities


84,330



84,330







Corporate notes and bonds


53,436



53,436







Equity investmentsPublicly traded investments


13,903



13,903







Total

$
313,024


$
313,024


$



$
    78




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 6.
    Cash,
    Cash Equivalents, Short-Term Investments, and Restricted Cash
    Equivalents    Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair ValueCash and cash equivalents:Cash

$
71,613


$



$



$
71,613Money market mutual funds


156,803



260







157,063U.S. government agency securities


4,203



89







4,292Total cash and cash equivalents


232,619



349







232,968Short-term investments:Corporate notes and bonds


54,685



154



(1,403
)


53,436U.S. Government agency securities


83,920



410







84,330Total short-term investments


138,605



564



(1,403
)


137,766Total cash, cash equivalents, and short-term investments

$
371,224


$
913


$
(1,403
)

$
370,734Restricted cash equivalents

$
14,742


$



$



$
14,742     Gross


GrossAmortized


Unrealized


Unrealized


EstimatedCost


Gains


Losses


Fair ValueCash and cash equivalents:Cash

$
105,615


$



$



$
105,615Money market mutual funds


198,148











198,148Corporate notes and bonds


172,934











172,934Total cash and cash equivalents


476,697











476,697Short-term investments:Corporate notes and bonds


43,552







(981
)


42,571U.S. government agency securities


37,296



65







37,361Total short-term investments


80,848



65



(981
)


79,932Total cash, cash equivalents, and short-term investments

$
557,545


$
65


$
(981
)

$
556,629Restricted cash equivalents

$
15,509


$



$



$
15,509     available-for-sale
 79




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    available-for-sale
  Amortized


EstimatedCost


Fair ValueWithin one year

$
85,420


$
85,823Between one year and five years


53,185



51,943Total short-term investments

$
138,605


$
137,766       Note 7.
    Allowance
    for Doubtful Accounts Receivable and Sales Returns    Years Ended December 31,2008


2007


2006Balance, beginning of year

$
1,117


$
1,101


$
1,340Additions charged to expenses


2,759



278



596Amounts written off


(469
)


(265
)


(835
)Effects of foreign currency translation


125



3



Balance, end of year

$
3,532


$
1,117


$
1,101     Years Ended December 31,2008


2007


2006Balance, beginning of year

$
1,338


$
1,389


$
1,633Additions charged to revenue


3,102



2,980



4,898Amounts written off


(3,347
)


(3,048
)


(5,142
)Effects of foreign currency translation


6



17



Balance, end of year

$
1,099


$
1,338


$
1,389      80




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 8.
    Deferred
    Costs    December 31,2008


2007Deferred costs

$
10,146


$
12,482Less current portion


4,026



6,408Deferred costs, non-current portion

$
6,120


$
6,074         Note 9.
    Equity
    Investments     81




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Consolidation of Variable Interest
    Entities
    2008


2007Carrying





CarryingCost


Value


Cost


ValuePublicly traded investments

$
10,765


$
13,903


$
933


$
8,085Privately held investments


5,695



4,679



2,740



1,891Total equity investments

$
16,460


$
18,582


$
3,673


$
9,976     available-for-sale.
  other-than-temporary
 82




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 10.
    Other
    Intangible Assets    Gross


AccumulatedAmount


Amortization


NetCustomer relationships

$
34,004


$
21,705


$
12,299Developed technology


28,673



23,849



4,824Patents, trademarks and tradenames


8,556



7,176



1,380Service contracts


3,711



3,487



224Total other intangible assets, December 31, 2008

$
74,944


$
56,217


$
18,727Total other intangible assets, December 31, 2007

$
149,256


$
41,579


$
107,677       2009

$
8,6032010


4,2912011


2,1462012


1,9192013


1,522Thereafter


246Total

$
18,727      83




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 11.
    Goodwill    2008


2007Balance, beginning of year

$
353,153


$
309,122Increases due to current year acquisitions


781



28,924Adjustments to the purchase price for Game Trust


(475
)


Adjustments to the purchase price for SNS


(872
)


Adjustments to the purchase price for WiderThan






(1,727
)Purchase of additional shares of WiderThan






1,160Increases for accruals and payments related to the acquisition
    of Zylom


(172
)


12,471Impairment of goodwill


(135,070
)


Effects of foreign currency translation


(42,081
)


3,203Balance, end of year

$
175,264


$
353,153   Goodwill and Other
    Intangible Assets
       84




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 12.
    Accrued
    and Other Liabilities    December 31,2008


2007Royalties and costs of sales and fulfillment

$
55,247


$
37,554Employee compensation, commissions and benefits


21,679



21,639Sales, VAT and other taxes payable


13,784



18,156Income taxes payable


3,017



1,819Legal fees and contingent legal fees


3,290



3,439Accrued charitable donations






268Other


21,671



31,261Total

$
118,688


$
114,136   Note 13.
    Loss on
    Excess Office Facilities    Accrued loss, December 31, 2007

$
10,700Less amounts paid on accrued loss on excess office facilities,
    net of sublease income


3,490Accrued loss, December 31, 2008


7,210Less current portion


4,317Accrued loss, non-current portion

$
2,893  85




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 14.
    Convertible
    Debt  5-year
  Note 15.
    Shareholders
    Equity  Preferred Stock.
    Shareholder Rights Plan.
 86




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Equity Compensation Plans.
  Restricted Stock Units and Awards.
    Shares


Options Outstanding


WeightedAvailable


Number


Weighted


Average Fairfor Grant


of Shares


Average


Valuein (000s)


in (000s)


Exercise Price


GrantsBalances, December 31, 2005


14,474



35,622


$
6.95Options granted at or above common stock price


(12,913
)


12,913



10.05


$
4.53Restricted stock units granted


(129
)










11.38Options exercised






(8,854
)


5.99Options cancelled


3,953



(3,953
)


6.81Balances, December 31, 2006


5,385



35,728



8.31Additional shares authorized in the 2005 Plan(1)


12,048Options granted at common stock price


(14,937
)


14,937



7.02



2.71Stock awards granted


(109
)










6.58Restricted stock units cancelled


35Options exercised






(2,447
)


5.77Options cancelled


5,723



(5,723
)


10.23Balances, December 31, 2007


8,145



42,495



7.76Options granted at common stock price


(7,397
)


7,397



6.08



2.38Stock awards and restricted stock units granted


(2,038
)










6.08Stock awards and restricted stock units cancelled


171Options exercised






(1,526
)


5.23Options cancelled


8,831



(8,831
)


8.22Balances, December 31, 2008


7,712



39,535



7.41  87




---



##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (1)
    
    At the June 25, 2007 Annual Meeting of Shareholders, the
    Companys shareholders approved an amended and restated
    2005 Stock Incentive Plan that authorized a total of
    15 million shares, including any shares that were available
    for grant prior to the approval.    Options OutstandingWeighted





Options ExercisableAverage


Weighted





WeightedNumber


Remaining


Average


Number of


Averageof Shares


Contractual


Exercise


Shares


ExerciseExercise Prices

(in 000s)


Life (Years)


Price


(in 000s)


Price$0.02  $5.07


4,668



6.81


$
4.35



3,411


$
4.23$5.08  $5.78


4,730



7.76



5.66



2,159



5.59$5.81  $5.97


4,244



8.86



5.90



1,907



5.90$5.98  $6.36


4,208



8.31



6.12



1,774



6.12$6.38  $7.22


6,365



9.63



6.91



3,724



7.08$7.23  $8.00


4,496



5.15



7.71



2,091



7.76$8.04  $10.06


6,153



4.71



9.20



3,861



9.25$10.06  $11.49


4,089



4.74



10.93



2,137



10.94$11.55  $46.00


572



9.51



25.75



534



26.76$46.18  $46.19


10



10.69



46.19



10



46.1939,535



7.07


$
7.41



21,608


$
7.64     Employee Stock Purchase Plan.
  Repurchase of Common Stock.
 88




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 16.
    Income
    Taxes    Years Ended December 31,2008


2007


2006United States operations

$
(46,737
)

$
77,167


$
228,668Foreign operations


(171,313
)


(1,396
)


(915
)Income (loss) before income taxes

$
(218,050
)

$
75,771


$
227,753     Years Ended December 31,2008


2007


2006Current:United States federal

$
6,360


$
31,266


$
20,683State and local


(2,449
)


1,291



3,643Foreign


10,333



4,448



3,225Total current


14,244



37,005



27,551Deferred:United States federal


33,603



(6,298
)


53,648State and local


1,044



(58
)


3,206Foreign


(23,063
)


(3,193
)


(1,868
)Total deferred


11,584



(9,549
)


54,986Total income tax expense

$
25,828


$
27,456


$
82,537     Years Ended December 31,2008


2007


2006United States federal tax expense (benefit) at statutory rate

$
(76,318
)

$
26,520


$
79,714State taxes, net of United States federal tax benefit


(1,405
)


1,233



3,127Change in valuation allowance


50,154



(2,262
)


1,757Non-deductible stock compensation


1,758



1,601



912Non-deductible goodwill impairment charge


38,750







Impact of
    non-U.S.
    jurisdictional tax rate difference


13,666



182



471Other


(777
)


182



(3,444
)Total income tax expense

$
25,828


$
27,456


$
82,537  89




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2008


2007Deferred tax assets:United States federal net operating loss carryforwards

$
18,740


$
20,332Deferred expenses


19,509



14,641Net unrealized loss on investments


10,924



10,924Capital loss carryforwards


9,910



2,359Accrued loss on excess office facilities


2,650



3,874Stock-based compensation


14,977



11,431State net operating loss carryforwards


4,756



3,973Foreign net operating loss carryforwards


6,524



8,378Deferred revenue


627



4,494Equipment, software, and leasehold improvements


8,514



4,262Basis difference in majority owned partnership


3,355



140Other


5,382



2,372Gross deferred tax assets


105,868



87,180Less valuation allowance


90,986



39,742Gross deferred tax assets, net of valuation allowance


14,882



47,438Deferred tax liabilities:Other intangible assets


(4,521
)


(27,232
)Net unrealized gains on investments


(1,043
)


(2,250
)Other


(446
)


(94
)Prepaid expenses


(3,053
)


(2,657
)Gross deferred tax liabilities


(9,063
)


(32,233
)Net deferred tax assets

$
5,819


$
15,205        90




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    non-U.S. subsidiaries
  Accounting for
    Uncertainty in Income Taxes
      Years Ended December 31,2008


2007Balance, beginning of year

$
8,931


$
7,501Increases related to prior year tax positions


586



Decreases related to prior year tax positions


(241
)


Increases related to current year tax positions


1,179



1,430Settlements






Expiration of the statue of limitations






Balance, end of year

$
10,455


$
8,931  91




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 17.
    Commitments
    and Contingencies  Commitments.
  OtherOffice


ContractualLeases


Obligations


Total2009

$
14,831


$
32,926


$
47,7572010


13,204



10,820



24,0242011


8,674



250



8,9242012


6,790







6,7902013


6,790







6,790Thereafter


9,649







9,649Total minimum payments


59,938



43,996



103,934Less future minimum receipts under subleases


4,985







4,985Net

$
54,953


$
43,996


$
98,949           Borrowing Arrangements.
   92




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      401(k) Retirement Savings Plan.
  Litigation.
  T-Mobile T-Mobile
   93




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         94




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
  Note 18.
    Guarantees  Guarantors Accounting
    and Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others  an
    interpretation of FASB Statements No. 5, 57, and 107 and
    rescission of FASB Interpretation No. 34
    Note 19.
    Segment
    Information  Disclosures about Segments of an
    Enterprise and Related Information
     95




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  music-on-demand, video-on-demand
      Technology Products


ReconcilingMusic


Consumer


and Solutions


Amounts


ConsolidatedNet revenue

$
160,721


$
237,522


$
206,567


$



$
604,810Cost of revenue


91,067



56,351



85,826







233,244Impairment of deferred costs and prepaid royalties


1,000



7,829



10,837







19,666Gross profit


68,654



173,342



109,904







351,900Advertising with related party


44,213















44,213Restructuring and other charges














6,833



6,833Impairment of goodwill and long-lived assets


4,753



46,056



141,867







192,676Other operating expenses


101,022



170,149



123,507



905



395,583Operating income (loss)


(81,334
)


(42,863
)


(155,470
)


(7,738
)


(287,405
)Other income, net


56,057











13,298



69,355Income (loss) before income taxes

$
(25,277
)

$
(42,863
)

$
(155,470
)

$
5,560


$
(218,050
)     Technology Products


ReconcilingMusic


Consumer


and Solutions


Amounts


ConsolidatedNet revenue

$
149,126


$
211,851


$
206,643


$



$
567,620Cost of revenue


81,462



39,840



92,189







213,491Gross profit


67,664



172,011



114,454







354,129Advertising with related party


24,360















24,360Restructuring and other charges














3,748



3,748Other operating expenses


103,482



142,749



130,551



(58,060
)


318,722Operating income (loss)


(60,178
)


29,262



(16,097
)


54,312



7,299Total non-operating income, net


36,194











32,278



68,472Income (loss) before income taxes

$
(23,984
)

$
29,262


$
(16,097
)

$
86,590


$
75,771  96




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Years Ended December 31,2008


2007


2006Music

$
160,721


$
149,126


$
123,033Consumer


237,522



211,851



199,739Technology Products and Solutions


206,567



206,643



72,489Total net revenue

$
604,810


$
567,620


$
395,261     Years Ended December 31,2008


2007


2006United States

$
403,799


$
360,676


$
283,433Europe


107,223



84,368



62,270Republic of Korea


50,443



82,549



18,597Rest of the World


43,345



40,027



30,961Total

$
604,810


$
567,620


$
395,261     December 31,2008


2007United States

$
163,730


$
186,665Republic of Korea


51,508



235,728Europe


37,315



87,181Rest of the World


4,445



7,753Total long-lived assets

$
256,998


$
517,327     December 31,2008


2007United States

$
463,209


$
557,381Republic of Korea


64,824



228,153Europe


20,201



79,410Rest of the World


5,324



10,160Total

$
553,558


$
875,104  97




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2008


2007Music

$
37,029


$
37,029Consumer


88,302



129,621Technology products and solutions


49,933



186,503Total goodwill

$
175,264


$
353,153   Note 20.
    Related
    Party Transactions  Transactions with MTVN.
       98




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##### Table of Contents



REALNETWORKS,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 21.
    Quarterly
    Information (Unaudited)    Total

Dec. 31

Sept. 30

June 30

Mar. 312008:Net revenue

$
604,810


$
152,644


$
151,955


$
152,648


$
147,563Gross profit


351,900



72,936



89,791



97,003



92,170Operating loss


(287,405
)


(236,199
)


(26,971
)


(12,693
)


(11,542
)Net income (loss)


(243,878
)


(240,499
)


(4,500
)


(1,305
)


2,426Basic net income (loss) per share(1)


(1.74
)


(1.78
)


(0.03
)


(0.01
)


0.02Diluted net income (loss) per share(1)


(1.74
)


(1.78
)


(0.03
)


(0.01
)


0.022007:Net revenue

$
567,620


$
156,882


$
145,095


$
136,171


$
129,472Gross profit


354,129



95,177



88,451



86,972



83,529Operating income (loss)


7,299



(25,881
)


(15,386
)


(5,177
)


53,743Net income


48,315



2,685



4,342



1,327



39,961Basic net income per share(1)


0.32



0.02



0.03



0.01



0.25Diluted net income per share(1)


0.29



0.02



0.03



0.01



0.22     (1)
    
    The sum of the quarterly net income per share will not
    necessarily equal the net income per share for the year due to
    the effects of rounding. 99




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  The Board of Directors and Shareholders
 RealNetworks, Inc.:
        Internal Control  Integrated
    Framework
     100




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control 
    Integrated Framework form 10-K.
        Internal Control  Integrated Framework
        101




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
  Rule 13a-15(e) 15d-15(e)
  Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f). Internal Control 
    Integrated Framework
    Changes
    in Internal Control over Financial Reporting
  Rules 13a-15 15d-15
  Item 9B.
    Other
    Information   PART III.  Item 10.
    Directors,
    Executive Officers and Corporate Governance   102




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##### Table of Contents



Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Shareholder Matters    Equity
    Compensation Plans
        Number of SecuritiesRemaining AvailableNumber of Securities





for Future Issuanceto be Issued upon


Weighted-average


under EquityExercise of


Exercise Price of


Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding SecuritiesWarrants and Rights


Warrants and Rights


Reflected in Column (a))Plan Category

(in 000s)(a)


(b)


(in 000s)(c)Equity compensation plans approved by security holders


39,161


$
7.39



7,712Equity compensation plans not approved by security holders


374


$
9.90



Total


39,535


$
7.41



7,712     (1)
    
    On January 1, 2008, the 2007 ESPP became effective. Column
    (c) above excludes the 1,500,000 shares of the
    Companys common stock that are authorized for issuance
    pursuant to the 2007 ESPP.(2)
    
    Includes shares available for future issuances pursuant to the
    Real Networks, Inc. 2007 Director Compensation Stock Plan
    (2007 Director Plan), a
    sub-plan
    that operates and is administered under the 2005 Plan. Under the
    2007 Director Plan, outside directors may elect to receive
    all or a portion of his or her quarterly director compensation
    in shares of the Companys common stock in lieu of cash.
    Shares issued to directors under the 2007 Director Plan are
    issued from the shares reserved under the 2005 Plan. 103




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##### Table of Contents



Equity Compensation Plans Not Approved By Security
    Holders.
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  Directors-Director
  Item 14.
    Principal
    Accountant Fees and Services   PART IV.  Item 15.
    Exhibits
    and Financial Statement Schedules  Index to Consolidated Financial Statements
                Financial Statement Schedules
   104




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##### Table of Contents



(a)(3) Index to Exhibits  ExhibitNumber

Description2
.1

Agreement and Plan of Merger and Reorganization by and among
    RealNetworks, Inc., Symphony Acquisition Corp. I, Symphony
    Acquisition Corp. II, Listen.Com, Inc., Mellon Investor Services
    LLC, as Escrow Agent and Robert Reid, as Shareholder
    Representative dated as of April 21, 2003 (incorporated by
    reference from Exhibit 2.1 to RealNetworks, Inc.s
    Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2003 filed with the
    Securities and Exchange Commission on August 14, 2003)2
.2

Combination Agreement by and among RealNetworks, Inc., RN
    International Holdings B.V. and WiderThan Co., Ltd. dated as of
    September 12, 2006 (incorporated by reference from
    Exhibit 2.1 to RealNetworks Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    September 14, 2006)3
.1

Amended and Restated Articles of Incorporation (incorporated by
    reference from Exhibit 3.1 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended June 30, 2000 filed with the
    Securities and Exchange Commission on August 11, 2000)3
.2

Amended and Restated Bylaws adopted April 24, 2007
    (incorporated by reference from Exhibit 3.1 to
    RealNetworks Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    April 27, 2007)4
.1

Amended and Restated Shareholder Rights Plan dated as of
    December 2, 2008, by and between RealNetworks, Inc. and
    Mellon Investor Services LLC including the form of Certificate
    of Designation, the form of Rights Certificate and the Summary
    of Rights attached thereto as Exhibits A, B and C,
    respectively (incorporated by reference from Exhibit 4.1 to
    RealNetworks
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 3, 2008)4
.2

Registration Rights Agreement dated as of June 17, 2003,
    between RealNetworks, Inc. and Goldman, Sachs & Co.
    (incorporated by reference from Exhibit 4.3 to
    RealNetworks Registration Statement on
    Form S-3
    filed with the Securities and Exchange Commission on
    September 12, 2003)10
.1

RealNetworks, Inc. 1995 Stock Option Plan (incorporated by
    reference from Exhibit 99.1 to RealNetworks
    Registration Statement on
    Form S-8
    filed with the Securities and Exchange Commission on
    September 14, 1998)10
.2

RealNetworks, Inc. 1996 Stock Option Plan, as amended and
    restated on June 1, 2001 (incorporated by reference from
    Exhibit 10.1 to RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2001 filed with the
    Securities and Exchange Commission on August 13, 2001)10
.3

RealNetworks, Inc. 2000 Stock Option Plan, as amended and
    restated on June 1, 2001 (incorporated by reference from
    Exhibit 10.2 to RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2001 filed with the
    Securities and Exchange Commission on August 13, 2001)10
.4

RealNetworks, Inc. 2002 Director Stock Option Plan
    (incorporated by reference from Exhibit 10.2 to
    RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2002 filed with the
    Securities and Exchange Commission on July 25, 2002)10
.5

Form of Stock Option Agreement under the RealNetworks, Inc. 1996
    Stock Option Plan, as amended and restated (incorporated by
    reference from Exhibit 10.1 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2002 filed
    with the Securities and Exchange Commission on November 14,
    2002)10
.6

Form of Stock Option Agreement under the RealNetworks, Inc. 2000
    Stock Option Plan, as amended and restated (incorporated by
    reference from Exhibit 10.2 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2002 filed
    with the Securities and Exchange Commission on November 14,
    2002)10
.7

Forms of Stock Option Agreement under the RealNetworks, Inc.
    2002 Director Stock Option Plan (incorporated by reference
    from Exhibit 10.3 to RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2002 filed
    with the Securities and Exchange Commission on November 14,
    2002)10
.8

RealNetworks, Inc. 2007 Employee Stock Purchase Plan
    (incorporated by reference from Exhibit 10.2 to
    RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2007 filed with the
    Securities and Exchange Commission on August 8, 2007) 105




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##### Table of Contents



ExhibitNumber

Description10
.9

RealNetworks, Inc. 2007 Director Compensation Stock Plan
    (incorporated by reference from Exhibit 10.9 to
    RealNetworks Annual Report on
    Form 10-K
    for the year ended December 31, 2007 filed with the
    Securities and Exchange Commission on February 29, 2008)10
.10

RealNetworks, Inc. 2005 Stock Incentive Plan, as amended and
    restated effective June 25, 2007 (incorporated by reference
    from Exhibit 10.1 to RealNetworks Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    June 29, 2007)10
.11

Form of Non-Qualified Stock Option Terms and Conditions for use
    under the RealNetworks, Inc. 2005 Stock Incentive Plan
    (incorporated by reference from Exhibit 10.11 to
    RealNetworks Annual Report on
    Form 10-K
    for the year ended December 31, 2006 filed with the
    Securities and Exchange Commission on March 1, 2007)10
.12

Form of Restricted Stock Units Terms and Conditions for use
    under the RealNetworks, Inc. 2005 Stock Incentive Plan
    (incorporated by reference from Exhibit 10.12 to
    RealNetworks Annual Report on
    Form 10-K
    for the year ended December 31, 2006 filed with the
    Securities and Exchange Commission on March 1, 2007)10
.13

Lease dated January 21, 1998 between RealNetworks, Inc. as
    Lessee and 2601 Elliott, LLC, as amended (incorporated by
    reference from Exhibit 10.1 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2004 filed
    with the Securities and Exchange Commission on November 9,
    2004)10
.14

Form of Director and Officer Indemnification Agreement
    (incorporated by reference from Exhibit 10.14 to
    RealNetworks Registration Statement on
    Form S-1
    filed with the Securities and Exchange Commission on
    September 26, 1997 (File
    No. 333-36553))10
.15

Voting Agreement dated September 25, 1997 by and among
    RealNetworks, Robert Glaser, Accel IV L.P., Mitchell Kapor
    and Bruce Jacobsen (incorporated by reference from
    Exhibit 10.17 to RealNetworks Registration Statement
    on
    Form S-1
    filed with the Securities and Exchange Commission on
    September 26, 1997 (File
    No. 333-36553))10
.16

Agreement dated September 26, 1997 by and between
    RealNetworks and Robert Glaser (incorporated by reference from
    Exhibit 10.18 to RealNetworks Registration Statement
    on
    Form S-1
    filed with the Securities and Exchange Commission on
    September 26, 1997 (File
    No. 333-36553))10
.17

Offer Letter dated March 31, 2005 between RealNetworks,
    Inc. and John Giamatteo (incorporated by reference from
    Exhibit 10.1 to RealNetworks Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    June 6, 2005)10
.18

Offer Letter dated July 1, 2008 between RealNetworks, Inc.
    and John Giamatteo (incorporated by reference from
    Exhibit 10.1 to RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2008 filed with the
    Securities and Exchange Commission on August 11, 2008)10
.19

Offer Letter dated September 18, 2003 between RealNetworks,
    Inc. and Dan Sheeran (incorporated by reference from
    Exhibit 10.18 to RealNetworks Annual Report on
    form 10-K
    for the year ended December 31, 2005 filed with the
    Securities and Exchange Commission on March 16, 2005)10
.20

Offer Letter dated February 13, 2006 between RealNetworks,
    Inc. and Michael Eggers (incorporated by reference from
    Exhibit 10.19 to RealNetworks Annual Report on
    form 10-K
    for the year ended December 31, 2005 filed with the
    Securities and Exchange Commission on March 16, 2006)10
.21

Offer Letter dated January 23, 2009 between RealNetworks,
    Inc. and Bob Kimball10
.22

Agreement dated February 1, 2006 between RealNetworks, Inc.
    and Rob Glaser (incorporated by reference from Exhibit 10.1
    to RealNetworks Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    February 3, 2006)10
.23

Agreement dated November 30, 2005 between RealNetworks,
    Inc. and Bob Kimball (incorporated by reference from
    Exhibit 10.22 to RealNetworks Annual Report on
    form 10-K
    for the year ended December 31, 2005 filed with the
    Securities and Exchange Commission on March 16, 2006)10
.24

Form of MBO Plan Document under the Real Networks, Inc. 2008
    Executive Compensation Program (incorporated by reference from
    Exhibit 10.2 to RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2008 filed with the
    Securities and Exchange Commission on August 11, 2008) 106




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##### Table of Contents



ExhibitNumber

Description10
.25

Form of MBO Plan Document under the RealNetworks, Inc. 2008
    Chief Executive Officer Compensation Program (incorporated by
    reference from Exhibit 10.3 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended June 30, 2008 filed with the
    Securities and Exchange Commission on August 11, 2008)10
.26

Form of MBO Plan Document under the RealNetworks, Inc. 2009
    Executive Compensation Program10
.27*

Amended and Restated Settlement Agreement dated as of
    March 10, 2006 between RealNetworks, Inc. and Microsoft
    Corporation (incorporated by reference from Exhibit 10.24
    to RealNetworks Annual Report on
    form 10-K
    for the year ended December 31, 2005 filed with the
    Securities and Exchange Commission on March 16, 2006)10
.28*

Transaction, Contribution and Purchase Agreement dated as of
    August 20, 2007 by and among Rhapsody America LLC,
    RealNetworks, Inc., RealNetworks Digital Music of California,
    Inc., Viacom International Inc. and DMS Holdco Inc.
    (incorporated by reference from Exhibit 10.1 to
    RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2007 filed
    with the Securities and Exchange Commission on November 9,
    2007)10
.29*

Limited Liability Company Agreement of Rhapsody America LLC
    dated as of August 20, 2007 among RealNetworks, Inc.,
    RealNetworks Digital Music of California, Inc., Viacom
    International Inc. and DMS Holdco Inc. (incorporated by
    reference from Exhibit 10.2 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2007 filed
    with the Securities and Exchange Commission on November 9,
    2007)10
.30

Stockholder Agreement by and between Viacom International Inc.
    and RealNetworks, Inc. dated as of August 20, 2007
    (incorporated by reference from Exhibit 10.3 to
    RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2007 filed
    with the Securities and Exchange Commission on November 9,
    2007)14
.1

RealNetworks, Inc. Code of Business Conduct and Ethics
    (incorporated by reference from Exhibit 14.1 to
    RealNetworks Annual Report on
    Form 10-K
    for the year ended December 31, 2003 filed with the
    Securities and Exchange Commission on March 15, 2004)21
.1

Subsidiaries of RealNetworks, Inc.23
.1

Consent of KPMG LLP24
.1

Power of Attorney (included on signature page)31
.1

Certification of Robert Glaser, Chairman and Chief Executive
    Officer of RealNetworks, Inc., Pursuant to Exchange Act
    Rules 13a-14(a)
    and 15d-14(a), as Adopted Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200231
.2

Certification of Michael Eggers, Senior Vice President, Chief
    Financial Officer and Treasurer of RealNetworks, Inc., Pursuant
    to Exchange Act
    Rules 13a-14(a)
    and 15d-14(a), as Adopted Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200232
.1

Certification of Robert Glaser, Chairman and Chief Executive
    Officer of RealNetworks, Inc., Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 200232
.2

Certification of Michael Eggers, Senior Vice President, Chief
    Financial Officer and Treasurer of RealNetworks, Inc., Pursuant
    to 18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     
    
    Executive Compensation Plan or Agreement*
    
    Portions of this exhibit are omitted and were filed separately
    with the Securities and Exchange Commission pursuant to the
    Companys application requesting confidential treatment
    under
    Rule 24b-2
    of the Securities Exchange Act of 1934, as amended. 107




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##### Table of Contents



SIGNATURES      By:
    /s/  ROBERT
    GLASER     POWER OF
    ATTORNEY
      Signature

Title/s/  ROBERT
    GLASERRobert
    Glaser

Chairman of the Board and Chief Executive Officer
    (Principal Executive Officer)/s/  MICHAEL
    EGGERSMichael
    Eggers

Senior Vice President, Chief Financial Officer and Treasurer
    (Principal Financial and Accounting Officer)/s/  ERIC
    A. BENHAMOUEric
    A. Benhamou

Director/s/  EDWARD
    BLEIEREdward
    Bleier

Director/s/  PRADEEP
    JOTWANIPradeep
    Jotwani

Director/s/  JEREMY
    JAECHJeremy
    Jaech

Director/s/  JONATHAN
    D. KLEINJonathan
    D. Klein

Director/s/  KALPANA
    RAINAKalpana
    Raina

Director  108




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##### Table of Contents



Exhibits
    Index
  ExhibitNumber

Description2
.1

Agreement and Plan of Merger and Reorganization by and among
    RealNetworks, Inc., Symphony Acquisition Corp. I, Symphony
    Acquisition Corp. II, Listen.Com, Inc., Mellon Investor Services
    LLC, as Escrow Agent and Robert Reid, as Shareholder
    Representative dated as of April 21, 2003 (incorporated by
    reference from Exhibit 2.1 to RealNetworks, Inc.s
    Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2003 filed with the
    Securities and Exchange Commission on August 14, 2003)2
.2

Combination Agreement by and among RealNetworks, Inc., RN
    International Holdings B.V. and WiderThan Co., Ltd. dated as of
    September 12, 2006 (incorporated by reference from
    Exhibit 2.1 to RealNetworks Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    September 14, 2006)3
.1

Amended and Restated Articles of Incorporation (incorporated by
    reference from Exhibit 3.1 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended June 30, 2000 filed with the
    Securities and Exchange Commission on August 11, 2000)3
.2

Amended and Restated Bylaws adopted April 24, 2007
    (incorporated by reference from Exhibit 3.1 to
    RealNetworks Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    April 27, 2007)4
.1

Amended and Restated Shareholder Rights Plan dated as of
    December 2, 2008, by and between RealNetworks, Inc. and
    Mellon Investor Services LLC including the form of Certificate
    of Designation, the form of Rights Certificate and the Summary
    of Rights attached thereto as Exhibits A, B and C,
    respectively (incorporated by reference from Exhibit 4.1 to
    RealNetworks
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 3, 2008)4
.2

Registration Rights Agreement dated as of June 17, 2003,
    between RealNetworks, Inc. and Goldman, Sachs & Co.
    (incorporated by reference from Exhibit 4.3 to
    RealNetworks Registration Statement on
    Form S-3
    filed with the Securities and Exchange Commission on
    September 12, 2003)10
.1

RealNetworks, Inc. 1995 Stock Option Plan (incorporated by
    reference from Exhibit 99.1 to RealNetworks
    Registration Statement on
    Form S-8
    filed with the Securities and Exchange Commission on
    September 14, 1998)10
.2

RealNetworks, Inc. 1996 Stock Option Plan, as amended and
    restated on June 1, 2001 (incorporated by reference from
    Exhibit 10.1 to RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2001 filed with the
    Securities and Exchange Commission on August 13, 2001)10
.3

RealNetworks, Inc. 2000 Stock Option Plan, as amended and
    restated on June 1, 2001 (incorporated by reference from
    Exhibit 10.2 to RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2001 filed with the
    Securities and Exchange Commission on August 13, 2001)10
.4

RealNetworks, Inc. 2002 Director Stock Option Plan
    (incorporated by reference from Exhibit 10.2 to
    RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2002 filed with the
    Securities and Exchange Commission on July 25, 2002)10
.5

Form of Stock Option Agreement under the RealNetworks, Inc. 1996
    Stock Option Plan, as amended and restated (incorporated by
    reference from Exhibit 10.1 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2002 filed
    with the Securities and Exchange Commission on November 14,
    2002)10
.6

Form of Stock Option Agreement under the RealNetworks, Inc. 2000
    Stock Option Plan, as amended and restated (incorporated by
    reference from Exhibit 10.2 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2002 filed
    with the Securities and Exchange Commission on November 14,
    2002)10
.7

Forms of Stock Option Agreement under the RealNetworks, Inc.
    2002 Director Stock Option Plan (incorporated by reference
    from Exhibit 10.3 to RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2002 filed
    with the Securities and Exchange Commission on November 14,
    2002)10
.8

RealNetworks, Inc. 2007 Employee Stock Purchase Plan
    (incorporated by reference from Exhibit 10.2 to
    RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2007 filed with the
    Securities and Exchange Commission on August 8, 2007) 109




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##### Table of Contents



ExhibitNumber

Description10
.9

RealNetworks, Inc. 2007 Director Compensation Stock Plan
    (incorporated by reference from Exhibit 10.9 to
    RealNetworks Annual Report on Form 10-K for the year
    ended December 31, 2007 filed with the Securities and
    Exchange Commission on February 29, 2008)10
.10

RealNetworks, Inc. 2005 Stock Incentive Plan, as amended and
    restated effective June 25, 2007 (incorporated by reference
    from Exhibit 10.1 to RealNetworks Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    June 29, 2007)10
.11

Form of Non-Qualified Stock Option Terms and Conditions for use
    under the RealNetworks, Inc. 2005 Stock Incentive Plan
    (incorporated by reference from Exhibit 10.11 to
    RealNetworks Annual Report on
    Form 10-K
    for the year ended December 31, 2006 filed with the
    Securities and Exchange Commission on March 1, 2007)10
.12

Form of Restricted Stock Units Terms and Conditions for use
    under the RealNetworks, Inc. 2005 Stock Incentive Plan
    (incorporated by reference from Exhibit 10.12 to
    RealNetworks Annual Report on
    Form 10-K
    for the year ended December 31, 2006 filed with the
    Securities and Exchange Commission on March 1, 2007)10
.13

Lease dated January 21, 1998 between RealNetworks, Inc. as
    Lessee and 2601 Elliott, LLC, as amended (incorporated by
    reference from Exhibit 10.1 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2004 filed
    with the Securities and Exchange Commission on November 9,
    2004)10
.14

Form of Director and Officer Indemnification Agreement
    (incorporated by reference from Exhibit 10.14 to
    RealNetworks Registration Statement on
    Form S-1
    filed with the Securities and Exchange Commission on
    September 26, 1997 (File
    No. 333-36553))10
.15

Voting Agreement dated September 25, 1997 by and among
    RealNetworks, Robert Glaser, Accel IV L.P., Mitchell Kapor
    and Bruce Jacobsen (incorporated by reference from
    Exhibit 10.17 to RealNetworks Registration Statement
    on
    Form S-1
    filed with the Securities and Exchange Commission on
    September 26, 1997 (File
    No. 333-36553))10
.16

Agreement dated September 26, 1997 by and between
    RealNetworks and Robert Glaser (incorporated by reference from
    Exhibit 10.18 to RealNetworks Registration Statement
    on
    Form S-1
    filed with the Securities and Exchange Commission on
    September 26, 1997 (File
    No. 333-36553))10
.17

Offer Letter dated March 31, 2005 between RealNetworks,
    Inc. and John Giamatteo (incorporated by reference from
    Exhibit 10.1 to RealNetworks Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    June 6, 2005)10
.18

Offer Letter dated July 1, 2008 between RealNetworks, Inc.
    and John Giamatteo (incorporated by reference from
    Exhibit 10.1 to RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2008 filed with the
    Securities and Exchange Commission on August 11, 2008)10
.19

Offer Letter dated September 18, 2003 between RealNetworks,
    Inc. and Dan Sheeran (incorporated by reference from
    Exhibit 10.18 to RealNetworks Annual Report on
    form 10-K
    for the year ended December 31, 2005 filed with the
    Securities and Exchange Commission on March 16, 2005)10
.20

Offer Letter dated February 13, 2006 between RealNetworks,
    Inc. and Michael Eggers (incorporated by reference from
    Exhibit 10.19 to RealNetworks Annual Report on
    form 10-K
    for the year ended December 31, 2005 filed with the
    Securities and Exchange Commission on March 16, 2006)10
.21

Offer Letter dated January 23, 2009 between RealNetworks,
    Inc. and Bob Kimball10
.22

Agreement dated February 1, 2006 between RealNetworks, Inc.
    and Rob Glaser (incorporated by reference from Exhibit 10.1
    to RealNetworks Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    February 3, 2006)10
.23

Agreement dated November 30, 2005 between RealNetworks,
    Inc. and Bob Kimball (incorporated by reference from
    Exhibit 10.22 to RealNetworks Annual Report on
    form 10-K
    for the year ended December 31, 2005 filed with the
    Securities and Exchange Commission on March 16, 2006)10
.24

Form of MBO Plan Document under the Real Networks, Inc. 2008
    Executive Compensation Program (incorporated by reference from
    Exhibit 10.2 to RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended June 30, 2008 filed with the
    Securities and Exchange Commission on August 11, 2008) 110




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##### Table of Contents



ExhibitNumber

Description10
.25

Form of MBO Plan Document under the RealNetworks, Inc. 2008
    Chief Executive Officer Compensation Program (incorporated by
    reference from Exhibit 10.3 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended June 30, 2008 filed with the
    Securities and Exchange Commission on August 11, 2008)10
.26

Form of MBO Plan Document under the RealNetworks, Inc. 2009
    Executive Compensation Program10
.27*

Amended and Restated Settlement Agreement dated as of
    March 10, 2006 between RealNetworks, Inc. and Microsoft
    Corporation (incorporated by reference from Exhibit 10.24
    to RealNetworks Annual Report on
    form 10-K
    for the year ended December 31, 2005 filed with the
    Securities and Exchange Commission on March 16, 2006)10
.28*

Transaction, Contribution and Purchase Agreement dated as of
    August 20, 2007 by and among Rhapsody America LLC,
    RealNetworks, Inc., RealNetworks Digital Music of California,
    Inc., Viacom International Inc. and DMS Holdco Inc.
    (incorporated by reference from Exhibit 10.1 to
    RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2007 filed
    with the Securities and Exchange Commission on November 9,
    2007)10
.29*

Limited Liability Company Agreement of Rhapsody America LLC
    dated as of August 20, 2007 among RealNetworks, Inc.,
    RealNetworks Digital Music of California, Inc., Viacom
    International Inc. and DMS Holdco Inc. (incorporated by
    reference from Exhibit 10.2 to RealNetworks Quarterly
    Report on
    Form 10-Q
    for the quarterly period ended September 30, 2007 filed
    with the Securities and Exchange Commission on November 9,
    2007)10
.30

Stockholder Agreement by and between Viacom International Inc.
    and RealNetworks, Inc. dated as of August 20, 2007
    (incorporated by reference from Exhibit 10.3 to
    RealNetworks Quarterly Report on
    Form 10-Q
    for the quarterly period ended September 30, 2007 filed
    with the Securities and Exchange Commission on November 9,
    2007)14
.1

RealNetworks, Inc. Code of Business Conduct and Ethics
    (incorporated by reference from Exhibit 14.1 to
    RealNetworks Annual Report on
    Form 10-K
    for the year ended December 31, 2003 filed with the
    Securities and Exchange Commission on March 15, 2004)21
.1

Subsidiaries of RealNetworks, Inc.23
.1

Consent of KPMG LLP24
.1

Power of Attorney (included on signature page)31
.1

Certification of Robert Glaser, Chairman and Chief Executive
    Officer of RealNetworks, Inc., Pursuant to Exchange Act
    Rules 13a-14(a)
    and 15d-14(a), as Adopted Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200231
.2

Certification of Michael Eggers, Senior Vice President, Chief
    Financial Officer and Treasurer of RealNetworks, Inc., Pursuant
    to Exchange Act
    Rules 13a-14(a)
    and 15d-14(a), as Adopted Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200232
.1

Certification of Robert Glaser, Chairman and Chief Executive
    Officer of RealNetworks, Inc., Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 200232
.2

Certification of Michael Eggers, Senior Vice President, Chief
    Financial Officer and Treasurer of RealNetworks, Inc., Pursuant
    to 18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     
    
    Executive Compensation Plan or Agreement*
    
    Portions of this exhibit are omitted and were filed separately
    with the Securities and Exchange Commission pursuant to the
    Companys application requesting confidential treatment
    under
    Rule 24b-2
    of the Securities Exchange Act of 1934, as amended. 111