RealNetworks : November 2020 Investor Presentation

Investor Presentation | November 2020

Safe harbor statement

This presentation contains forward-looking statements that involve risks and uncertainties, including statements relating to our current expectations regarding our future growth, profitability, and market position, our financial condition and liquidity, our strategic focus and initiatives, product plans, agreements with partners, and expectations and contingencies relating to the sale of Napster. All statements contained in this presentation that do not relate to matters of historical fact should be considered forward-looking statements. These statements reflect our expectations as of today, and actual results may differ materially from the results predicted. Factors that could cause actual results for RealNetworks, on a consolidated basis, to differ from the results predicted include: our ability to realize operating efficiencies, growth and other benefits from the implementation of our growth initiatives and restructuring efforts; cash usage and conservation, and the pursuit of additional funding sources; successful monetization of our products and services; competitive risks, including the emergence or growth of competing technologies, products and services; potential outcomes and effects of claims and legal proceedings; risks associated with key customer or strategic relationships and business acquisitions; challenges caused by the COVID-19 pandemic; disruptions in the global financial markets, including changes in consumer spending and impacts to credit availability; fluctuations in foreign currencies; and unique risk factors that relate to our Napster segment, such as risks stemming from its streaming music service and related music royalties. More information about potential risk factors that could affect our business and financial results is included in RealNetworks' annual report on Form 10-K for the most recent year ended December 31, 2019, 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 preparation of our financial statements and forward-looking financial guidance requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, and revenues and expenses during the reported period. Actual results may differ materially from these estimates under different assumptions or conditions. RealNetworks assumes no obligation to update any forward-looking statements or information, which are in effect as of their respective dates.

SAFR™, Kontxt™, RealMedia® HD, RealPlayer®, GameHouse®, RealVideo®, RealAudio®, RealTimes®, LISTEN®, and other trademarks of

ours are used throughout this presentation.

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About us

RealNetworks, the inventor of the streaming media category, creates next-generation products that employ best-in-class artificial intelligence and machine learning to enhance and secure our daily lives.

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Investment highlights

• Emerging turnaround story
• Continued legacy of innovation
• Diverse business portfolio
• Promising new products in market to drive top-line growth
• Fostering worldwide technology and distribution partnerships
• Aligning and rightsizing business operations to enhance profitability

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2002

1995

		Helix DNA
RealAudio brings	1998	transcodes media
streaming audio to	into multiple
the web	RealJukebox lets	formats	2007
The streaming	users download	Ringback Tones	First DVR-like
media category is	and manage digital	enhance the	recording of
born	music	mobile experience	internet video

2015
RealTimes uses AI to		2020
automate the creation of
2018
sharable videos from photo	Rhapsody
libraries
SAFR facial	acquisition by
	MelodyVR Group
GameHouse Original Stories	recognition offers
PLC announced
brings unique narrative	advanced AI to
and supported by
games to engage and	improve secure access
RealNetworks
entertain	and convenience

1997	2000	2003
RealVideo brings	First video	Rhapsody is the
mainstream TV to	streaming	first music
the internet	subscription	subscription
	service	service to stream
		music from the top
		five labels

A legacy of innovation

2013	2017
RealPlayer Cloud	Kontxt AI gives mobile
lets users move,	carriers class-of-service
watch, and share	message handling
video content	RealMedia HD next-
LISTEN offers	generation codec achieves
more ways to use	unprecedented size and
ringback tones	quality with 4K video
	streaming

2019

Rhapsody became majority owned by RealNetworks after it doubled its stake to become 84% owner of Napster

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A diversified business portfolio

The premier facial recognition platform for live video in the real world

Intelligent message classification and analysis to drive new revenue and stop spam

High quality, low overhead 8K video codec delivered to any screen without taxing networks, bandwidth, or batteries

Original subscription and free-to-play mobile games to engage and entertain

Napster is a music and audio streaming platform that provides consumer subscriptions and a B2B platform as a service

Also: Inter Carrier Messaging, Ringback Tones

MOBILE SERVICES

Also: RealPlayer, RMVB

CONSUMER MEDIA

Also: Zylom.com

GAMES

DIGITAL MUSIC

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The premier facial recognition platform for live video in the real world

• SAFR ranks as one of the fastest and most accurate facial recognition systems in the world
• SAFR is a top growth focus for RealNetworks
• • Focused primarily on the traditional security and safety markets
  • Creating innovations focused on new needs at the intersection of public health and public safety

The facial recognition market is expected to grow by an average of 21.3% over the next four years, to $9.6 billion by 2022*

*Allied Market Research

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Intelligent message classification and analysis to drive new revenue and stop spam

• Unmanaged mobile message delivery represents estimated carrier revenue loss of $15 billion annually
• Yearly A2P message volume will surge to 3.5 trillion by 2023*
• Enables new carrier service tiers and revenue streams eg 10DLC services in USA
• Next-generationspam filtering and gray route protection

*According to Juniper Research https://www.juniperresearch.com/press/press-releases/a2p-business-messages-to-reach-3-5-tn-2023

Traffic Analytics			Inline Spam Detection			Revenue growth enablement
Content Classification			Offline Spam Detection			Antispam
Clustering						Smishing Detection
Policy Control						Compliance
		MSISDN Registry

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Best-in-class streaming media codec delivering crystal-clear 8K video at half the bitrate, allowing crisp and smooth playback on any device

• Ideal balance of quality vs. efficiency
• Higher compression efficiency, faster encoding time, and lower costs
• Mobile friendly, with low CPU consumption

Commercial deployment in China with CIBN OTT TV, reaching 110 million subscribers

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A unique category of narrative games with rich character development and engaging storylines

• Growth continues to be driven by the success of free- to-play casual mobile games
• • Three live free-to play games in market
  • Two new games in development
• 40+ story games
• Four wholly owned studios
• 160+ million downloads
• 3 million players per month
• $70M in mobile revenue

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RealNetworks announced support for the acquisition of Rhapsody International, Inc., which does business as Napster, by MelodyVR Group PLC on August 24, 2020

• RealNetworks is the majority owner of Napster, with an approximate 84% stake
• Transaction value: $70M (comprising payment by MelodyVR of $26.3M in combined cash and MelodyVR stock at closing, and assumption by MelodyVR of approximately $44M in Napster liabilities)
• Consideration payable to RealNetworks is subject to several factors, including deal costs, Napster repaying $3.9 million in debt, an escrow of $3.0 million, the mix of cash vs Melody stock and the market value of that stock, and payment to Columbus Nova that's tied to the January 2019 acquisition of CN's stake in Napster.
• The acquisition is expected to close in the fourth quarter of 2020

The Napster platform began

2020 with over 3 million users on four continents, delivering more than 90 million licensed tracks to consumers and the many B2B and Platform-as-a- Service partners. It served

10.8 billion streams in 2019 with revenues of $113 million.

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Quarterly revenue by business

	$10.0
				6.9 7.2			7.5	7.6
			7.0
	6.9	6.9	6.3 6.6	6.7 6.6	6.5
					6.4
Millions			6.0
5.6	5.7
$5.0				4.4
$	4.1			3.6
					3.5	3.2
	2.5		2.6					2.5
	$0.0
	4Q18	1Q19	2Q19	3Q19	4Q19	1Q20	2Q20	3Q20

Consumer Media

Mobile Services

Games

Notes: In the third quarter of 2020, RealNetworks announced its support for the acquisition of Napster by MelodyVR Group. The transaction is expected to close in the fourth quarter of 2020. Napster is treated as a discontinued operation for accounting and disclosure purposes; therefore, results relate to the continuing operations of RealNetworks, which exclude Napster.

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Equity snapshot | Nasdaq: RNWK

Share Price(1):	$1.31
Shares Outstanding(2):	38.3M
Market Capitalization(1):	$50.1M
Net Debt(3):	($6.5)M
Enterprise Value(1):	$43.7M

1. Values for Share Price, Market Capitalization and Enterprise Value are based off the closing share price on FactSet on November 4, 2020.
2. Shares Outstanding is the number of shares of RNWK Common Stock as of October 29, 2020, as reported on Form 10-Q for the Fiscal Quarter ended September 30, 2020.
3. Net Debt is total debt of $6.8M less the combined total of cash and cash equivalents of $13.2M, which is ($6.5)M, for the Fiscal Quarter ended September 30, 2020.

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Executive Management

Rob Glaser	Mike Ensing	Judd Lee	Michael Parham
Founder, Chairman and CEO	President and COO	SVP, CFO	SVP, General Counsel
Mr. Glaser has long been intrigued with	Mr. Ensing joined RealNetworks in	Mr. Lee serves as SVP, CFO, and	Mr. Parham has served as
the nexus of media, computing, and	August 2020 as President and COO.	Treasurer of RealNetworks since April	RealNetworks' General Counsel and
communications. Since founding Real	He served as RealNetworks' interim	2020. Mr. Lee worked as an	Corporate Secretary since August
in 1994, Mr. Glaser has played an	CFO and a strategic advisor from	independent consultant from March	2012, and previously had served as
integral role in the transformation of the	January through early May 2020. Mr.	2019 until joining Real, prior to which	Associate General Counsel since
internet into the next great mass	Ensing is a skilled business leader with	he was CFO of desktop virtualization	January 2004. Prior to joining
medium. By creating innovative	over 25 years of experience in	provider Parallels Inc. from November	RealNetworks in March 2000, Mr.
technology and services that make it	executive finance and operations at	2016 until March 2019, after its	Parham was an attorney with IBM,
easy for people to connect with and	large-scale organizations.	December 2018 sale to Corel	serving as Regional Counsel for IBM's
enjoy digital media, RealNetworks and		Corporation.	Midwest region in Chicago.
Mr. Glaser are at the forefront of the
digital media revolution.

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Board of Directors

Rob Glaser	Bruce Jaffe	Chris Jones	Dawn G. Lepore
Mr. Glaser has long been intrigued with	Mr. Jaffe has been a director of	Mr. Jones has been a director of	Ms. Lepore has been a director of
the nexus of media, computing, and	RealNetworks since October 2015. He	RealNetworks since 2016. He currently	RealNetworks since October 2013. Ms.
communications. Since founding Real in	is a consultant and investor with Three	serves as SVP of Product for Amperity,	Lepore served as interim Chief
1994, Mr. Glaser has played an integral	Point Group, LLC, which he founded in	Inc., a privately held company providing	Executive Officer of Prosper
role in the transformation of the internet	2008 and which focuses on early stage	the world's first intelligent customer data	Marketplace, Inc., a privately held peer-
into the next great mass medium. By	and growth technology companies.	platform.	to-peer lending marketplace, from
creating innovative technology and			March 2012 to January 2013.
services that make it easy for people to
connect with and enjoy digital media,
RealNetworks and Mr. Glaser are at the
forefront of the digital media revolution.

Erik Prusch	Michael Slade	Tim Wan
Mr. Prusch has been a director of	Mr. Slade has been a director of	Mr. Wan has been a director of
RealNetworks since December 2019. He	RealNetworks since November 2011. Mr.	RealNetworks since December 2019. He
has served as Chief Executive Officer at	Slade is a co-founder of Second Avenue	is currently the Chief Financial Officer at
several companies, including Harland	Partners, a provider of management,	Asana, Inc., a publicly traded company
Clarke Holdings Corp., Outerwall Inc.	strategy and capital for early stage	that develops and offers a SaaS-based
(formerly, Coinstar, Inc.), NetMotion	companies, where he has served as a	work management platform.
Wireless, Inc., Lumension Security, Inc.,	partner since 2000.
Clearwire Corporation, and Borland
Software Corporation.

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