Category: Financials

Real Networks Results, Sales Up but No Profit

RealNetworksRealNetworks is enjoying record sales that have helped the Seattle-based Internet company to trim its fourth-quarter loss. The announcement comes amidst its ongoing cost of litigation against rival Microsoft, with whom it’s suing in a billion-dollar case for unfairly promoting its own media software.

The company reported a net loss of $1.0 million, or 1 cent per share, for the fourth quarter, compared with a loss of $5.3 million, or 3 cents per share, a year earlier. According to RealNetworks’ CEO Rob Glaser, the company’s improved sales have resulted in an increase in ad-supported revenues ($19.1 million of revenue in 2004, up from $8.2 million in 2003), mainly due to a better Google relationship. Its Comcast relationship (on the music side) is going very well, and Video/SuperPass now has lower content acquisition costs.

The company has also discontinued CNN and Nascar video offerings to focus on more profitable products, and noticed a secular trend going on – the move to digital music – in which it will participate in the overall category growth, along with Apple. RealNetworks is also no longer counting on university subscribers.

RealNetworks has been aiming to reach profitability, excluding litigation costs, by the end of 2004, and said it expects to be profitable on the same basis throughout 2005. For 2005, RealNetworks expects revenue to grow 16 to 20 per cent over 2004 with revenue of $266.7 million. Other Q4 highlights include music revenue grew 172 per cent to $21.6 million from $7.9 million in the year-ago quarter, revenues from games sales and subscriptions grew 156 percent to $10.1 million from $3.9 million in the year-ago quarter, although video and consumer software and other revenue was down slightly to $29.1 million compared to $29.3 million in the year-ago quarter.

Paying subscribers to Rhapsody music and premium radio services increased to over 700,000 from over 625,000 at the end of Q3 of 2004, and ad-supported Web services garnered $19.1 million of revenue in 2004, up from $8.2 million in 2003. What’s also helped the company is that Internet video streaming was up 80 per cent in 2004, with 14.2 billion video streams being counted worldwide over the year, according to a new report by AccuStream iMedia Research. The number of video streams last year was up by 80 per cent compared to 2003.

Real Networks

Report: Euro Music Download Market $5.7 Billion by 2009

A new report by research and analysis firm Generator, predicts that the digital song download market in Europe will reach $5.7 billion (€4.5 billion) by 2009. If this figure pans out, it will mean that the download market will account for about 40% of the total recorded music market.

The report also predicts that the mobile channel will figure largely in this market growth, up to $777 million (€610 million), 13.5% of the total by 2009 – and that’s not including huge ringtone market. But Europe first needs to change its usage-based mobile data tariffs and adopt flat-rate 3G tariffs like DoCoMo in Japan to encourage the successful use of the mobile channel, says the report’s author, Andrew Sheehy.

Operators will also need to develop their WAP portal strategies, so consumers can directly access existing Internet music resources, such as artist Web sites and digital music stores.

The Generator report, ‘Digital Music Meets Mobile Music’, differs considerably from last months Jupiter Research report, ‘European Digital Music: Identifying Opportunity’, which predicts that digital music revenue will reach €836 million, or 8% of the total market, by 2009. With a difference of 32% between Generator and Jupiter, one perhaps slightly conservative and one perhaps slightly ambitious, it might be safest to pitch the predicted figure somewhere between the two.

Only one year into the legal digital music industry, but in real terms more than a few years in, it has permeated the world of commercial music consumption far quicker than happened with the CD.

While both Generator and Jupiter agree that sales of downloaded digital music in Europe will continue to grow steadily for the forseeable future, Jupiter says the trend but will not replace the CD anytime soon, while Generator says it will be largely replaced within ten years.

Don’t throw anything away yet!

Google’s Profit Growth Continues

Anyone who was concerned that Internet search giant Google would be hampered by going public in August can breathe easy as Google announces, in its first financial results since floating on the stock market, that its profits have more than doubled.

They have posted third quarter net profits of $52m (£30m), up from $20.4m in the previous year, and its share price has now surged more than 90% since its initial float.
 
Not bad for a company, which was started in a garage by two students and overtook the established search engine giants Yahoo! and Microsoft to become the most popular search engine in the world.  If only so many rock bands who started life in that same auspicious incubator could have done so well.

Many have argued that Google is an advertising company, not a search company. As Google strength as a search tool has surged, so has their income from advertising. Demand for their paid-for search text-ads, where advertisers are increasingly willing to pay high prices to have their site listed along side search results in the knowledge that they only have to pay if a potential customer clicks on their link. The move to putting their advert on many other sites, targeting them closely to the pages content by automatically understanding what the page was about, significantly increasing their reach.

Google hasn’t rested on their advertising laurels, have now moved into email, a core business for its rivals Yahoo! and Microsoft, and it also operates a comparison-shopping search engine called Froogle, which recently launched in the UK. It’s not stop there – it also recently announced a test of a new desktop search product in the US that allows people to search Google using mobile telephone text messages in an ongoing game of chess where they are trying to anticipate what a rival like Microsoft will do.  

Personally, I get nervous when ‘the suits’ move in on previously laid-back but remarkably successful technology companies. Google and rival Yahoo each get a significant portion of their revenue from the lucrative Web search advertisements, and while some analysts predict that growth in this area will slow down in coming years, its hard to predict where Google will end up if this potential difficulty is realised.

Google