14 DAY TRIAL // Real Networks, the entertainment software company, laid off 12 employees from its Rhapsody America, joint-venture with Viacom's MTV Networks, about 9 percent of the division's work force. The layoffs came after poor earnings for the company in the second quarter and a significant drop in subscribers.
Revenue for the second quarter was at $135.7 million for Real Networks, an 11 percent drop from the $152.6 million in Q2 2008. The decline was across all of its divisions except music, which saw a 9 percent rise in sales. Net loss grew to $188.3 million, mostly pushed downwards by impairment charges, compared to the $1.3 million in 2008.
Rhapsody America dropped to 750,000 subscribers from 800,000 just three months ago though the number of users is up from last year, when the service had 600,000 subscribers. The layoffs are part of a shift in the focus for Rhapsody, moving to mobile and online apps and away from the desktop client and editorial content it was known for. The new focus was spurred by a drop in advertising revenue as well as the drop in subscribers.
Overall Real Networks saw a massive drop in subscribers to its radio service, from 1.2 million to just 75,000. To blame is a canceled partnership with cable and broadband provider Comcast, leaving over 1.1 million subscribers without access to the service.
The news doesn't bode well for other music subscription services and online radios, which haven't proven very profitable so far even though there are signs that things are picking up. A recent licensing agreement between Internet radio representatives and the music industry brought in significantly lowered fees for streaming, which gave hope to a business that otherwise looked doomed. Other players in the market are having more success, with online radio service Pandora recently securing significant funding while Europe's Spotify, which has been very successful in the UK, is setting its sights on the US.