SEATTLE, Jan. 22, 2019 /PRNewswire/ -- RealNetworks, Inc.
(Nasdaq: RNWK), a recognized leader in digital media software and
services, announced today that it has acquired debt and equity
interests in Rhapsody International, which does business as
"Napster," from Rhapsody Applebee, LLC ("Applebee"), an entity
managed by Columbus Nova Technology Partners ("CNTP"). The purchase
took place after RealNetworks sought and received special approval
from the U.S. Treasury Department's Office of Foreign Assets
Control ("OFAC") to purchase the sanctioned stake in Napster.
Following the transaction, RealNetworks has become the majority
owner of Napster, with approximately 84% of outstanding stock, up
from RealNetworks' previous stake of approximately 42%.
In exchange for all of the CNTP-managed equity, debt, and other
interests in Napster, RealNetworks has committed to pay
$1 million cash up front and an
additional $14 million over time
subject to certain conditions, with additional consideration
depending on subsequent events, for a total of up to $40 million. The entity managed by CNTP would
receive the full $40 million in the
case of a sale or similar liquidity event within the next five
years where total equity value of the 42% equity interest acquired
would exceed $60 million. More
details are available in the RealNetworks 8-K filed today to report
the Napster transaction.
Rob Glaser, Chairman and CEO of
RealNetworks and Chairman of Napster, commented, "We are very
pleased to have deepened our partnership with Napster. Under
Bill Patrizio's leadership, Napster
has delivered five consecutive quarters of positive operating
income and generated over $14 million
in operating income in the first three quarters of 2018. This
success was achieved by pivoting to a B2B strategy focused on
selling the Napster platform as a service. We think Napster's
future is very bright."
Cary Baker, RealNetworks' CFO,
added, "The unique deal structure is one that we believe will drive
significant value for RealNetworks' shareholders. The terms and
deal structure reflect the unusual circumstances that CNTP has been
operating under since a major limited partner of its managed funds
– including Applebee – was sanctioned by the U.S. Government in
April 2018. In spite of these
circumstances, Napster continued to execute on its business plan
and had a strong 2018 operationally. These circumstances are now a
closed chapter for Napster."
Napster's innovative "Powered by Napster" music and audio
products and services generate revenue primarily through
subscriptions either directly to consumers or through distribution
partners, and through technology and platform licensing and
operating fees.
Napster will continue to run as an independent subsidiary of
RealNetworks with its own board of directors, strategy, and
management team. Bill Patrizio will
continue to be Napster's CEO, and Rob
Glaser will continue as Napster's Chairman.
RealNetworks will report fourth quarter and full year 2018
results on February 6, and as
customary, will discuss its go-forward strategy at that time.
About RealNetworks
RealNetworks invented the streaming media category and changed
the way audio and video content was consumed across devices and
around the world. Building on a legacy of digital media expertise
and innovation, RealNetworks has created a new generation of
products that employ best-in-class artificial intelligence and
machine learning to enhance and secure our daily lives. Find
RealNetworks' corporate information
at www.realnetworks.com.
RealNetworks® and the company's respective logos are trademarks,
registered trademarks, or service marks of RealNetworks, Inc. Other
products and company names mentioned are the trademarks of their
respective owners.
About Rhapsody International, Inc.
Rhapsody International is a pioneer in digital music and leading
provider of innovative music and audio streaming technologies and
services for businesses. Rhapsody operates the Napster platform in
33 countries with a premium subscription service giving millions of
consumers unlimited ad-free access to music and more on any device
– online or offline. Napster combines the iconic history of one of
the most recognizable music brands in the world with the vast
experience and technology platform of Rhapsody International Inc.,
the industry's first subscription streaming service provider.
Rhapsody is headquartered in Seattle,
WA with offices in the U.S., Europe, Asia
and Latin America.
www.napster.com.
Forward-Looking Statements
This press release contains forward-looking statements that
involve risks and uncertainties, including statements relating to
RealNetworks' current expectations regarding the potential benefits
of the Acquisition, and the Company's plans, objectives,
expectations and intentions, and the financial condition, results
of operations and business of Napster on a standalone basis and as
consolidated with RealNetworks. All statements contained in this
press release that do not relate to matters of historical fact
should be considered forward-looking statements. These statements
reflect RealNetworks' expectations as of today, and actual results
may differ materially from the results predicted. Factors that
could cause actual results to differ from the results predicted
include: Napster's ability to operate efficiently and effectively
subsequent to the Acquisition; the operational and financial
effects of consolidating Napster's financial statements with ours;
RealNetworks' ability to realize operating efficiencies, growth and
other benefits from the implementation of its growth plan,
strategic initiatives (including the Acquisition), and
restructuring efforts; the emergence of new entrants and
competition in the market for digital media products and services;
other competitive risks, including the growth of competing
technologies, products and services; the potential outcomes and
effects of claims and legal proceedings on RealNetworks' business,
prospects, financial condition or results of operations; risks
associated with key customer or strategic relationships, business
acquisitions and the introduction of new products and services;
changes in consumer and advertising spending in response to
disruptions in the global financial markets; fluctuations in
foreign currencies; and changes in RealNetworks' effective tax
rate. More information about potential risk factors that could
affect RealNetworks' business and financial results is included in
RealNetworks' annual report on Form 10-K for the most recent year
ended December 31, 2017, its
quarterly reports on Form 10-Q and in other reports and documents
filed by RealNetworks from time to time with the Securities and
Exchange Commission. The company assumes no obligation to update
any forward-looking statements or information, which are in effect
as of their respective dates.
Investor Contact
Laura
Bainbridge
Addo Investor Relations
1-310-829-5400
IR@realnetworks.com
RNWK-F
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SOURCE RealNetworks, Inc.