Had Rhapsody been a standalone entity in 2009, it would have reported a net loss of about $26 million and an operating loss of $54 million, according to pro forma financial statements released by RealNetworks on Tuesday.

Though Rhapsody has about 700,000 subscribers it is far from profitability. It also lacks the subscriber and revenue growth that would put it on a sustainable trajectory. Services that provide on-demand streaming and downloads have cost structures that demand scale beyond what Rhapsody and its peers have yet achieved.

Rhapsody is working toward achieving that scale through price cuts and embracing mobile apps. On Tuesday it announced it has lowered the price of its mobile subscription fee to $10 from $15 per month. It also unveiled a new Rhapsody app for the Google Android mobile operating system. As Billboard has reported, Rhapsody was able price its subscription service more competitively because it was able to renegotiate its licenses with labels.

The SEC filing was made in conjunction with RealNetwork's spinoff of its Rhapsody joint venture with MTV Networks. Because RealNetworks owned a majority interest in the Rhapsody joint venture, it had reported Rhapsody's assets, liabilities, revenues and expenses on its financial statements. Now, Rhapsody has been spun off as an independent entity and RealNetworks controls slightly less than 47.5%. Because of this, RealNetworks has released these pro forma financials to show investors how it is impacted by the spinoff.

The division's operating results were actually worse than the bottom line suggests. Rhapsody's loss from operations was $53.7 million. If not for $27.3 million of other income, the net loss would have been worse.

Rhapsody's 2009 pro forma revenue was $159.6 million. Its cost of revenue was $101 million, leaving a gross margin percentage of 63.2%. In other words, for every dollar in revenue, Rhapsody experienced 63 cents in direct costs (mainly to content owners). Marketing expenses totaled $45.7 million, or 28.7% percent of revenue.

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