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RealNetworks' Stake In MusicNet Sold To Private Equity Firm

(CelebrityAccess MediaWire) —

RealNetworks has sold its its shares in MusicNet to Baker Capital. With its critically-acclaimed Rhapsody internet jukebox and premium radio services, RealNetworks is the market leader in online music subscription services with more than 700,000 paying subscribers at the end of 2004.

"While we're certainly proud of our history with MusicNet, we are quite pleased with the sale of our legacy investment in the company," said Rob Glaser, CEO of RealNetworks. "When we founded MusicNet in 1999, it provided a catalyst for opening up the digital rights vaults and access to legal online music for all consumers. However, once we acquired in 2003 and started offering services directly to consumers, MusicNet was no longer of the same strategic importance to us."

In 1999, RealNetworks created MusicNet as a wholly-owned subsidiary, incubated it, and then brought in Time Warner, Bertelsmann, and EMI Group as shareholders. RealNetworks created the joint venture to accelerate access to rights necessary to build legal music services and satisfy the needs then being met by illegal services. MusicNet's primary strategy then was to supply technology, content and services to the suppliers who provided music directly to consumers, including to RealNetworks.

In 2002, however, RealNetworks decided to accelerate plans to offer its own music subscription services to consumers. The company recognized that in addition to offering the best service, it needed to have a direct relationship with the labels and direct control of the digital music consumer experience. This strategy led to its acquisition of and its subscription service Rhapsody in 2003.

RealNetworks received approximately $7.3M of proceeds in connection with the April 12 closing and expects to receive up to an additional $2.7M upon expiration of its additional escrow arrangements. — Bob Grossweiner and Jane Cohen