TECH + INTERNET: Loudeye Acquires Assets Of Digital Media Broadcast … And More!

Loudeye Corporation, a leading provider of Webcasting and digital media services, has acquired the assets from privately-held, Los Angeles-based Digital Media Broadcast (formerly EncodeThis!), which will expand Loudeye's local presence in Los Angeles, one of the largest media services markets in the world. Terms of the transaction were not disclosed.

Digital Media Broadcast provides outsourced digital media services for a variety of customers in the media, entertainment and e-commerce industries. Customers include leading television broadcasters and film studios, major music companies, independent music labels, and leading retailers. Through this acquisition, Loudeye gains customer relationships and a sales pipeline from Digital Media Broadcast and has hired certain employees from Digital Media Broadcast's sales staff. Steven Samuels, the former chief executive officer of Digital Media Broadcast, will serve as general manager of Loudeye's Los Angeles operations.

"There is growing demand from media and entertainment companies seeking to capitalize on digital media technologies to market, promote and distribute film, broadcast and music content," said Steven Samuels, former chief executive officer of Digital Media Broadcast. "Our customer relationships, business pipeline and Southern California location, in combination with Loudeye's extensive suite of digital media services, comprise a powerful combination."

The two companies have been working together on a referral and reseller basis prior to this transaction. The newly combined operations will provide an end-to-end service offering, including digital media capture, encoding, management, hosting, delivery, streaming and application services, to meet the demand for such services from media and entertainment companies.

"Media and entertainment companies are clearly committed to digital distribution for marketing and promotional activities," said John T. Baker, Loudeye chairman and chief executive officer. "With Digital Media Broadcast's industry relationships and a Los Angeles presence, we can provide an enhanced level of local attention and service to a wider range of media and entertainment customers requiring encoding, hosting, restoration, media management and digital distribution services."

RealNetworks Revises Second Quarter Outlook

RealNetworks, Inc. revised the company's business outlook for the second quarter, which ends June 30, 2002. By expecting the second quarter revenue to be between $42.5 million and $45.0 million. This represents a sequential decline from revenue of $47.2 million reported for the first quarter. The lower revenue expectation reflects weakness in the Company's systems software business this quarter, due primarily to some corporations reducing or delaying their information technology spending, contrary to earlier expectations.

Conversely, RealNetworks' consumer subscription business continues to grow. As of today, there are now more than 700,000 paying subscribers to RealNetworks' premium subscription services, compared to 600,000 announced in April. Last week, RealNetworks launched a European edition of RealOne SuperPass with premium content from partners such as BBC, Champions League soccer from UEFA, Big Brother 3 from UK/Channel 4, CNN Europe and MTV Europe.

Due to the decrease in revenue from the higher margin systems business, gross margins are expected to be below expectations, as system software sales will comprise a smaller portion of overall revenues. Given the combination of weakness in the systems software revenue, growth in overall consumer revenue, RealNetworks expects a net loss of $0.01 to $0.02 per share.

"While we are disappointed with the expected results of our systems business, they reflect a trend that several others in the industry are seeing as well," stated Rob Glaser, Chairman and CEO. "On the other hand, our consumer subscription business continues to show strong growth. More generally, we believe that the continued growth in consumer demand for IP- based streaming and media delivery positions all of RealNetworks' businesses very well for the future."

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