Item 1. Summary Term Sheet
	Item 2. Subject Company Information
	Item 3. Identity and Background of Filing Person
	Item 4. Terms of the Transaction
	Item 5. Past Contacts, Transactions, Negotiations and Arrangements
	Item 6. Purposes of the Transaction and Plans or Proposals
	Item 7. Source and Amount of Funds or Other Consideration
	Item 8. Interest in Securities of the Subject Company
	Item 9. Person/Assets, Retained, Employed, Compensated or Used
	Item 10. Financial Statements
	Item 11. Additional Information
	Item 12. Exhibits
	Item 13. Information Required by Schedule 13E-3
SIGNATURE
Exhibit (a)(1)(A)
Exhibit (a)(1)(B)
Exhibit (a)(1)(C)
Exhibit (a)(1)(D)
Exhibit (a)(1)(E)
Exhibit (a)(1)(F)
Exhibit (a)(1)(G)
Exhibit (a)(1)(H)
Exhibit (a)(1)(I)
Exhibit (a)(1)(J)
Exhibit (a)(1)(K)
Exhibit (a)(1)(L)
Exhibit (d)(5)
Exhibit (d)(6)
Exhibit (d)(7)

     This Tender Offer Statement on Schedule TO relates to an offer by RealNetworks, Inc., a Washington corporation (“RealNetworks” or the “Company”), to exchange (the “Exchange Offer”) certain options to purchase up to an aggregate of 26,319,598 shares of the Company’s common stock, whether vested or unvested, with an exercise price per share greater than $4.48 (the “Eligible Options”).

     These Eligible Options may be exchanged for new options (“New Options”) upon the terms and subject to the conditions set forth in (i) the Offer to Exchange Certain Outstanding Options for New Options dated November 19, 2009 (the “Offer to Exchange”), attached hereto as Exhibit (a)(1)(A), (ii) the Email to All Eligible Employees from Sid Ferrales, dated November 19, 2009, attached hereto as Exhibit (a)(1)(B), (iii) the Form of Election Form, attached hereto as Exhibit (a)(1)(D) and (iv) the Form of Withdrawal Form, attached hereto as Exhibit (a)(1)(E). The following disclosure materials also were provided to eligible employees: (I) the Form of Email to Eligible Employees Forwarding Login Information, dated November 19, 2009, attached hereto as Exhibit (a)(1)(C), (II) the Form of Confirmation Email/Letter to Employees who Elect to Participate in or Withdraw From the Exchange Offer, attached hereto as Exhibit (a)(1)(F), (II) the Form of Reminder Email, attached hereto as Exhibit (a)(1)(G), (III) the Screen Shots of Offer Website, attached hereto as Exhibit (a)(1)(H), (IV) the Notice to Eligible Employees Regarding Expiration of Offer Period, attached hereto as Exhibit (a)(1)(I), (V) Employee Presentation Materials and Transcript of Presentation to Employees, attached hereto as Exhibit (a)(1)(J), (VI) Frequently Asked Questions Regarding Stock Options, attached hereto as Exhibit (a)(1)(K) and (VII) Frequently Asked Questions Regarding Exchange Offer, attached hereto as Exhibit (a)(1)(L). These documents, as they may be amended or supplemented from time to time, together constitute the “Disclosure Documents.” An “eligible employee” refers to each employee of the Company or its subsidiaries with a principal work location in an Eligible Country (as defined in the Offer to Exchange) as of the start of the offer and who remains an employee of the Company or any of its subsidiaries through the date exchanged Eligible Options are cancelled and the date the New Options are granted. Notwithstanding the foregoing, the Company’s senior executive officers, members of the Company’s board of directors and employees of the Company or its direct or indirect subsidiaries who are located in certain countries are not eligible employees and may not participate in the Exchange Offer.

     The information in the Disclosure Documents, including all schedules and annexes to the Disclosure Documents, is incorporated herein by reference to answer the items required in this Schedule TO.

Item 1. Summary Term Sheet.

     The information set forth under the caption “Summary Term Sheet” in the Offer to Exchange is incorporated herein by reference.

Item 2. Subject Company Information.

     (a)  Name and Address .

     RealNetworks is the issuer of the securities subject to the Exchange Offer. The address of the Company’s principal executive office is 2601 Elliott Avenue, Suite 1000, Seattle, WA 98121, and the telephone number at that address is (206) 674-2700. The information set forth in the Offer to Exchange under the caption “The Offer” titled “Information concerning RealNetworks” is incorporated herein by reference.

     (b)  Securities .

     The subject class of securities consists of the Eligible Options. The actual number of shares of common stock subject to the options to be issued in the Exchange Offer will depend on the number of shares of common stock subject to the unexercised options tendered by eligible employees and accepted for

-3-

Stock Incentive Plan attached hereto as Exhibits (d)(1), (d)(2) and (d)(5), respectively, and related agreements attached hereto as Exhibits (d)(3), (d)(4), (d)(6) and (d)(7) are incorporated herein by reference.

     (b)  Securities Transactions .

     The information set forth in the section of the Offer to Exchange under the caption “The Offer” titled “Interests of directors and executive officers; transactions and arrangements concerning the awards” is incorporated herein by reference.

Exhibit
Number		Description
(a)(1)(H)		Screen Shots of Offer Website.
(a)(1)(I)		Notice to Eligible Employees Regarding Expiration of Offer Period.
(a)(1)(J)		Employee Presentation Slide Deck.
(a)(1)(K)		Frequently Asked Questions Regarding Stock Options.
(a)(1)(L)		Frequently Asked Questions Regarding Exchange Offer.
(b)		Not applicable.
(d)(1)		RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated on June 1, 2001 (incorporated by reference from Exhibit 10.1 to RealNetworks’ Quarterly Report on Form 10-Q filed for the quarterly period ended June 30, 2001 filed with the Securities and Exchange Commission on August 13, 2001).
(d)(2)		RealNetworks, Inc. 2000 Stock Option Plan, as amended and restated on June 1, 2001 (incorporated by reference from Exhibit 10.2 to RealNetworks’ Quarterly Report on Form 10-Q filed for the quarterly period ended June 30, 2001 filed with the Securities and Exchange Commission on August 13, 2001).
(d)(3)		Form of Stock Option Agreement under the RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated (incorporated by reference from Exhibit 10.1 to RealNetworks’ Quarterly Report on Form 10-Q for the quarterly period ended September 20, 2002 filed with the Securities and Exchange Commission on November 14, 2002).
(d)(4)		Form of Stock Option Agreement under the RealNetworks, Inc. 2000 Stock Option Plan, as amended and restated (incorporated by reference from Exhibit 10.2 to RealNetworks’ Quarterly Report on Form 10-Q for the quarterly period ended September 20, 2002 filed with the Securities and Exchange Commission on November 14, 2002).
(d)(5)		RealNetworks, Inc. 2005 Stock Incentive Plan, as approved by the shareholders of the Company on September 21, 2009 and to be effective upon completion of the Exchange Offer.
(d)(6)		Form of Non-Qualified Stock Option Terms and Conditions for use under the RealNetworks, Inc. 2005 Stock Incentive Plan.
(d)(7)		Form of Non-Qualified Stock Option Terms and Conditions (For Optionees Located Outside the U.S.) for use under RealNetworks, Inc. 2005 Stock Incentive Plan.
(g)		Not applicable.
(h)		Not applicable.

INDEX TO EXHIBITS

Exhibit
Number		Description
(a)(1)(A)		Offer to Exchange Certain Outstanding Options for New Options, dated November 19, 2009.
(a)(1)(B)		Email to All Eligible Employees from Sid Ferrales, dated November 19, 2009.
(a)(1)(C)		Form of Email to Eligible Employees Forwarding Login Information, dated November 19, 2009.
(a)(1)(D)		Form of Election Form.
(a)(1)(E)		Form of Withdrawal Form.
(a)(1)(F)		Form of Confirmation Email/Letter to Employees who Elect to Participate in or Withdraw From the Exchange Offer.
(a)(1)(G)		Form of Reminder Email.
(a)(1)(H)		Screen Shots of Offer Website.
(a)(1)(I)		Notice to Eligible Employees Regarding Expiration of Offer Period.
(a)(1)(J)		Employee Presentation Slide Deck.
(a)(1)(K)		Frequently Asked Questions Regarding Stock Options.
(a)(1)(L)		Frequently Asked Questions Regarding Exchange Offer.
(b)		Not applicable.
(d)(1)		RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated on June 1, 2001 (incorporated by reference from Exhibit 10.1 to RealNetworks’ Quarterly Report on Form 10-Q filed for the quarterly period ended June 30, 2001 filed with the Securities and Exchange Commission on August 13, 2001).
(d)(2)		RealNetworks, Inc. 2000 Stock Option Plan, as amended and restated on June 1, 2001 (incorporated by reference from Exhibit 10.2 to RealNetworks’ Quarterly Report on Form 10-Q filed for the quarterly period ended June 30, 2001 filed with the Securities and Exchange Commission on August 13, 2001).
(d)(3)		Form of Stock Option Agreement under the RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated (incorporated by reference from Exhibit 10.1 to RealNetworks’ Quarterly Report on Form 10-Q for the quarterly period ended September 20, 2002 filed with the Securities and Exchange Commission on November 14, 2002).
(d)(4)		Form of Stock Option Agreement under the RealNetworks, Inc. 2000 Stock Option Plan, as amended and restated (incorporated by reference from Exhibit 10.2 to RealNetworks’ Quarterly Report on Form 10-Q for the quarterly period ended September 20, 2002 filed with the Securities and Exchange Commission on November 14, 2002).
(d)(5)		RealNetworks, Inc. 2005 Stock Incentive Plan, as approved by the shareholders of the Company on September 21, 2009 and to be effective upon completion of the Exchange Offer.
(d)(6)		Form of Non-Qualified Stock Option Terms and Conditions for use under the RealNetworks, Inc. 2005 Stock Incentive Plan.
(d)(7)		Form of Non-Qualified Stock Option Terms and Conditions (For Optionees Located Outside the U.S.) for use under RealNetworks, Inc. 2005 Stock Incentive Plan.
(g)		Not applicable.
(h)		Not applicable.

Exhibit (a)(1)(A)

REALNETWORKS, INC.

OFFER TO EXCHANGE
CERTAIN OUTSTANDING OPTIONS
FOR NEW OPTIONS

This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933, as amended.

The prospectus relates to the RealNetworks, Inc. 2005 Stock Incentive Plan, as approved by the shareholders of the Company on September 21, 2009 and to be effective upon the completion of offer, the RealNetworks 2000 Stock Option Plan, as amended and restated, and the RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated.

November 19, 2009

REALNETWORKS, INC.

Offer to Exchange Certain Outstanding Options
for New Options

This offer and withdrawal rights will expire at 9:00 p.m., U.S.Pacific Time, on December 17, 2009
unless we extend them.

     By this offer, RealNetworks, Inc. (referred to as “ RealNetworks ,” the “ Company ,” “ we ,” “ our ” or “ us ”) is giving eligible employees of RealNetworks and of our subsidiaries the opportunity to exchange certain outstanding options with an exercise price greater than $4.48 (the 52-week high of our per share stock price as of the start of this offer) granted under the RealNetworks, Inc. 2005 Stock Incentive Plan, as amended and restated (the “ 2005 Plan ”), the RealNetworks 2000 Stock Option Plan, as amended and restated (the “ 2000 Plan ”), or the RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated (the “ 1996 Plan ” and, together with the 2000 Plan and the 2005 Plan, the “ Plans ”), whether vested or unvested, for new options to purchase shares of our common stock (“ New Options ”).

     If you participate in this offer, the number of New Options you receive will depend on the number and exchange ratio of the eligible options that you elect to exchange. Each New Option will be granted under, and subject to, the terms of the 2005 Plan and an option agreement between you and RealNetworks.

     We will grant New Options on the U.S. calendar day on which the offer expires, which is the same U.S. calendar day on which we will cancel the exchanged options (the “ New Option Grant Date ”). We expect the New Option Grant Date to be December 17, 2009. If the expiration date of the offer is extended, the New Option Grant Date similarly will be delayed. We will grant the New Options with an exercise price equal to the closing price of our common stock on the New Option Grant Date.

     New Options will be unvested as of the New Option Grant Date, whether the exchanged options were vested or unvested, and will vest based on your continued employment with us (or one of our subsidiaries) through each applicable vesting date in accordance with new vesting schedules. The vesting schedules of the New Options are described in Section 9 of this Offer to Exchange Certain Outstanding Options for New Options (the “ Offer to Exchange ”). Your participation in this offer and the receipt of New Options does not provide any guarantee or promise of continued service with RealNetworks.

     Our common stock is traded on the NASDAQ Global Select Market under the symbol “RNWK.” On November 18, 2009, the closing price of our common stock was $3.75 per share. You should evaluate the risks related to our business, our common stock, and this offer, and review current market quotes for our common stock, among other factors, before deciding to participate in this offer.

      See “Risks of Participating in the Offer” beginning on page 16 for a discussion of risks that you should consider before participating in this offer.

IMPORTANT

     If you want to participate in this offer, you must submit your election via the RealNetworks offer website at https://realnetworks.equitybenefits.com (the “ offer website ”) or via Stock Plan Administration by email at stock@real.com or facsimile at (206) 674-2695, by the deadline on the expiration date, currently expected to be 9:00 p.m., U.S. Pacific Time, on December 17, 2009, unless the offer is extended.

     The offer website will provide you with instructions on submitting your election and certain information about your Eligible Options (as defined below), including the grant date, the exercise price, the number of underlying shares and the election alternatives available to you.

     If you are not able to submit your election electronically via the offer website as a result of technical failures of the offer website or if you do not otherwise have access to the offer website for any reason (including lack of internet services), you must complete a paper election form and return it to Stock Plan Administration at the Company via email at stock@real.com or facsimile at (206) 674-2695. To obtain a paper election form, please contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695.

     You may change your election to participate in the offer at any time before the offer expires by completing a new electronic election form or paper election form, but your last valid election in place when the offer expires will be controlling.

     Your delivery of all documents regarding the offer, including elections and withdrawals, is at your own risk. Only responses that are properly completed and actually received by RealNetworks by the deadline via the offer website or via Stock Plan Administration by email or fax will be accepted. Responses submitted by any other means, including hand delivery, interoffice or U.S. mail (or other post) and Federal Express (or similar delivery service) are not permitted. We will not accept delivery of any election after expiration of this offer. If you submit your election or withdrawal via the offer website, you should print and keep a copy of the Confirmation Statement that you will see on the offer website at the time that you complete and submit your election or withdrawal. The printed Confirmation Statement will provide evidence that you submitted your election or withdrawal. If you submit your election or withdrawal via email or facsimile, we intend to confirm the receipt of your election or withdrawal by email within two U.S. business days of receiving your election or withdrawal. If you have not received a confirmation, it is your responsibility to confirm that we have received your election and/or any withdrawal. You should contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695. Note that if you submit any election and/or withdrawal via email or facsimile within the last two U.S. business days prior to the expiration of the offer, time constraints may prevent RealNetworks from providing you with email confirmation prior to the expiration of the offer.

      Neither the U.S. Securities and Exchange Commission (the “ SEC ”) nor any state or foreign securities commission has approved or disapproved of these securities or passed judgment upon the accuracy or adequacy of this offer. Any representation to the contrary is a criminal offense.

     We recommend that you discuss the personal tax consequences of this offer with your financial, legal and/or tax advisors.

     If you have questions about this offer or would like to receive a printed copy of this Offer to Exchange and the other offer documents, you should contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695.

Offer to Exchange dated November 19, 2009

      You should rely only on the information contained in this Offer to Exchange or documents to which we have referred you. We have not authorized anyone to provide you with different information. We are not making an offer of New Options in any jurisdiction where the offer is not permitted or feasible. However, we may, at our discretion, take any actions necessary for us to make the offer to option holders in any of these jurisdictions. You should not assume that the information provided in this Offer to Exchange is

accurate as of any date other than the date as of which it is shown, or if no date is otherwise indicated, the date of this offer. This Offer to Exchange summarizes various documents and other information. These summaries are qualified in their entirety by reference to the documents and information to which they relate.

TABLE OF CONTENTS

				Page
SUMMARY TERM SHEET					1
RISKS OF PARTICIPATING IN THE OFFER					16
THE OFFER					34
1.		Eligibility			34
2.		Number of New Options; Expiration Date			34
3.		Purpose of the offer			36
4.		Procedures for electing to exchange options			37
5.		Withdrawal rights and change of election			40
6.		Acceptance of options for exchange and issuance of New Options			42
7.		Conditions of the offer			43
8.		Price range of shares underlying the options			45
9.		Source and amount of consideration; terms of New Options			45
10.		Information concerning RealNetworks			51
11.		Interests of directors and executive officers; transactions and arrangements concerning the options			51
12.		Status of options acquired by us in the offer; accounting consequences of the offer			52
13.		Legal matters; regulatory approvals			53
14.		Material U.S. federal income tax consequences			53
15.		Material income tax consequences and certain other considerations for employees who reside outside the U.S.			55
16.		Extension of offer; termination; amendment			55
17.		Fees and expenses			56
18.		Additional information			56
19.		Financial statements			57
20.		Miscellaneous			57

SCHEDULE A		Information Concerning the Executive Officers and Directors of RealNetworks			A-1
SCHEDULE B		Financial Statements of RealNetworks			B-1
SCHEDULE C		Guide to Tax & Legal Issues in Austria			C-1
SCHEDULE D		Guide to Tax & Legal Issues in Brazil			D-1
SCHEDULE E		Guide to Tax & Legal Issues in Canada			E-1
SCHEDULE F		Guide to Tax & Legal Issues in China			F-1
SCHEDULE G		Guide to Tax & Legal Issues in Finland			G-1
SCHEDULE H		Guide to Tax & Legal Issues in France			H-1
SCHEDULE I		Guide to Tax & Legal Issues in Germany			I-1
SCHEDULE J		Guide to Tax & Legal Issues in India			J-1
SCHEDULE K		Guide to Tax & Legal Issues in Indonesia			K-1
SCHEDULE L		Guide to Tax & Legal Issues in Japan			L-1
SCHEDULE M		Guide to Tax & Legal Issues in Korea			M-1

				Page
SCHEDULE N		Guide to Tax & Legal Issues in Mexico			N-1
SCHEDULE O		Guide to Tax & Legal Issues in the Netherlands			O-1
SCHEDULE P		Guide to Tax & Legal Issues in Singapore			P-1
SCHEDULE Q		Guide to Tax & Legal Issues in Spain			Q-1
SCHEDULE R		Guide to Tax & Legal Issues in Turkey			R-1
SCHEDULE S		Guide to Tax & Legal Issues in the United Kingdom			S-1

SUMMARY TERM SHEET

     The following are answers to some of the questions that you may have about this offer. You should carefully read the entire Offer to Exchange, the accompanying email from Sid Ferrales, our Senior Vice President of Human Resources, dated November 19, 2009, and the election form, together with its associated instructions. This offer is made subject to the terms and conditions of these documents as they may be amended. The information in this summary is not complete. Additional important information is contained in the remainder of this Offer to Exchange and the other offer documents. We have included in this summary references to other sections in this Offer to Exchange to help you find a more complete description of these topics.

Q1.		What is the offer?
A1.		This offer is a voluntary opportunity for Eligible Employees to exchange certain outstanding options with an exercise price greater than $4.48 per share for New Options.
		The following are some of the terms that are frequently used in this Offer to Exchange.
		Terms Used in This Offer to Exchange

	•		“ 52-week high ” refers to the highest intraday sales price of our common stock for the 52 weeks preceding the start of this offer. The 52-week high is $4.48.
	•		“ Cancellation Date ” refers to the U.S. calendar date on which the exchanged options will be cancelled. Exchanged options will be cancelled on the same day that the offer expires and on which the New Options will be granted. This cancellation will occur after the expiration of the offer and before granting the New Options. We expect the cancellation date to be December 17, 2009. If the expiration date of the offer is extended, then the cancellation date similarly will be delayed.
	•		“ Common Stock ” refers to RealNetworks, Inc. common stock.
	•		“ Eligible Country ” refers to Austria, Brazil, Canada, China, Finland, France, Germany, India, Indonesia, Japan, Korea, Mexico, the Netherlands, Singapore, Spain, Turkey, the United Kingdom and the United States.
	•		“ Eligible Employees ” refers to an employee of RealNetworks (or one of its subsidiaries) whose principal work location is in an Eligible Country as of the start of the offer and remaining so through the Cancellation Date and New Option Grant Date. Our Section 16 officers and directors are not eligible to participate in the offer.
	•		“ Eligible Option Grant ” refers to all of the eligible options issued by RealNetworks to an individual that are part of the same grant and subject to the same option agreement.
	•		“ Eligible Options ” refers to the stock options to purchase our common stock (each an “ option ”) that were granted under a Plan with an exercise price per share greater than $4.48 (the 52-week high of our per share stock price as of the start of this offer) that remain outstanding and unexercised as of the Expiration Date.
	•		“ Exchanged Options ” refers to all options to purchase RealNetworks common stock that you exchange pursuant to this offer.

	•		“ Expiration Date ” refers to the date on which this offer expires. We expect that the Expiration Date will be December 17, 2009 at 9:00 p.m., U.S. Pacific Time. We may extend the Expiration Date at our discretion. If we extend the offer, the term “Expiration Date” will refer to the time and date at which the extended offer expires.
	•		“ New Option Grant Date ” refers to the U.S. calendar date on which the New Options will be granted. The New Options will be granted on the same day as the expiration of the offer and the cancellation of the Exchanged Options. The New Options will be granted immediately following such expiration and cancellation. We expect that the New Option Grant Date will be December 17, 2009. If the Expiration Date is extended, then the New Option Grant Date will be similarly extended.
	•		“ New Options ” refers to the options issued to Eligible Employees pursuant to this offer that replace their Exchanged Options. New Options granted in connection with this offer will be granted on the New Option Grant Date pursuant to the 2005 Plan and any applicable sub-plan thereto and subject to the terms and conditions of a new option agreement, including any applicable country-specific appendix, between you and the Company.
	•		“ Offering Period ” refers to the period from the launch of this offer to the Expiration Date. This period will commence on November 19, 2009 and we expect that it will end at 9:00 p.m., U.S. Pacific Time, on December 17, 2009.
	•		“ Plans ” refers to the RealNetworks, Inc. 2005 Stock Incentive Plan, as approved by the shareholders of the Company on September 21, 2009 and to be effective upon completion of the offer, the RealNetworks 2000 Stock Option Plan, as amended and restated, and the RealNetworks, Inc. 1996 Stock Option Plan, as amended and restated. Each is referred to as a “Plan.”
	•		“ Section 16 officers and directors ” refers to those officers and directors of RealNetworks who are officers and directors for purposes of Section 16 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

Q2.		How do I participate in this offer?
A2.		Participation in this offer is voluntary. If you are an Eligible Employee, at the start of the offer you will receive an email from Sid Ferrales, our Senior Vice President of Human Resources, announcing the offer. If you want to participate in the offer, you must make an election in one of the manners described below before the Expiration Date, currently expected to be 9:00 p.m., U.S. Pacific Time, on December 17, 2009.

Elections via Offer Website

1. To submit an election via the offer website, click on the link to the offer website in the email you received from Sid Ferrales announcing this offer or go to the offer website at https://realnetworks.equitybenefits.com .

2. Log into the offer website using the login instructions provided to you in the email you received from stock@real.com on November 19, 2009.

3. After logging into the offer website, click on the “MAKE AN ELECTION” button. You will be directed to your election form that contains the following personalized information with respect to each Eligible Option you hold, including:

	•		the option number of the Eligible Option;
	•		the grant date of the Eligible Option;
	•		the total number of outstanding shares subject to the Eligible Option;
	•		the current exercise price per share of the Eligible Option; and
	•		the expiration date and remaining life of the Eligible Option.

4. Select the appropriate box next to each of your Eligible Option Grants to indicate your choice whether to exchange your Eligible Options in accordance with the terms of this offer. Select the “NEXT” button to proceed to the next page.

5. After completing the election form, you will have the opportunity to review the elections you have made with respect to your Eligible Options. If you are satisfied with your elections, continue the election process as instructed through the offer website. Select the “I AGREE” button to agree to the Agreement to Terms of Election and to submit your election.

6. You will be directed to the Confirmation Statement page. Please print and keep a copy of the Confirmation Statement for your records.

Elections via Fax or Email

Alternatively, you may submit your election form via fax or email by doing the following:

1. Properly complete, sign and date the election form that you received in the email from Sid Ferrales, dated November 19, 2009, announcing the offer.

2. Submit the properly completed election form to Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695. We must receive your properly completed and submitted election form by the Expiration Date, currently expected to be 9:00 p.m., U.S. Pacific Time, on December 17, 2009.

If you are an Eligible Employee in the Netherlands or if you resided in the Netherlands when your Eligible Options were granted to you, print out the Dutch agreement attached as Schedule A to the Election Form, sign and date the Dutch agreement and deliver it to the on-site Human Resources representative. Note that your election to participate in the offer will not be valid unless the properly signed and dated Dutch agreement is received by the Company by the Expiration Date. For further information, see Schedule O — Guide to Tax and Legal Issues in the Netherlands.

If you want to use the offer website but are unable to submit your election via the offer website as a result of technical failures of the offer website, such as the offer website being unavailable or the offer website not accepting your election, or if you do not have access to the offer website for any reason, you may submit your election by email or facsimile by following the instructions provided above. To obtain a paper election form, please contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695.

If you elect to exchange any Eligible Option Grant in this offer, you must elect to exchange all shares subject to that Eligible Option Grant. If you hold more than one Eligible Option Grant, however, you may choose to exchange one or more of such Eligible Option Grants without having to exchange all of your

Eligible Option Grants. To help you recall your outstanding Eligible Options and give you the information necessary to make an informed decision, please refer to the grant information available via the offer website that lists your Eligible Option Grants, the grant date of your Eligible Options, the current exercise price per share of your Eligible Options, and the number of outstanding shares subject to your Eligible Options. Each time you make an election on the RealNetworks Offer website, please be sure to make an election with respect to each of your eligible options. If you need an election form or other offer documents or are unable to access your grant information via the offer website, you may contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695.

This is a one-time offer, and we will strictly enforce the Offering Period. We reserve the right to reject any elections to exchange options that we determine are not in appropriate form or that we determine are unlawful to accept. Subject to the terms and conditions of this offer, we will accept all properly tendered options promptly after the expiration of this offer. (See Section 4 which begins on page 37 below).

We may extend this offer. If we extend this offer, we will issue a press release, email or other communication disclosing the extension no later than 6:00 a.m., U.S. Pacific Time, on the U.S. business day following the previously scheduled Expiration Date.

Your delivery of all documents regarding the offer, including elections and withdrawals, is at your risk. If you submit your election or withdrawal via the offer website, you should print and keep a copy of the Confirmation Statement on the offer website at the time that you complete and submit your election or withdrawal. The printed Confirmation Statement will provide evidence that you submitted your election or withdrawal. If you submit your election or withdrawal via email or facsimile, we intend to confirm the receipt of your election or withdrawal by email within two U.S. business days of receiving your election or withdrawal. If you have not received a confirmation, it is your responsibility to confirm that we have received your election and/or any withdrawal. You should contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695. Note that if you submit any election and/or withdrawal via email or facsimile within the last two U.S. business days prior to the expiration of the offer, time constraints may prevent RealNetworks from providing you with an email confirmation prior to the expiration of the offer. Only responses that are properly completed and actually received by RealNetworks by the deadline by the offer website or by Stock Plan Administration via email or via facsimile will be accepted. Responses submitted by any other means, including hand delivery, interoffice or U.S. mail (or other post) and Federal Express (or similar delivery service), are not permitted. (See Section 4 which begins on page 37 below.)

Q3.		Why is RealNetworks making this offer?
A3.		We believe that this offer will foster retention of our valuable employees, provide meaningful incentive to them, and better align the interests of our employees and shareholders to maximize shareholder value. We issued the currently outstanding options to attract and retain the best available personnel and to provide incentive to employees. Our stock price, like that of many other companies in the technology industry, has dropped substantially as a result of the national and global economic downturn. In response, we have taken actions in an effort to manage our business more efficiently and cost-effectively; however, our efforts have not had a significant impact on our stock price, which remains at a relatively low level on a historical basis. Some of our outstanding options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current market price for our stock. These options are commonly referred to as being “underwater.” By making this offer, we intend to provide Eligible Employees with the opportunity to own New Options that over time may have a greater potential than the underwater options to increase in value. (See Section 3 which begins on page 36.)

Q4.		Who may participate in this offer?
A4.		You may participate in this offer if you are an Eligible Employee who holds Eligible Options. You are an “Eligible Employee” if you are an active employee of RealNetworks (or one of its subsidiaries) whose principal work location is in an Eligible Country as of the start of the offer and remain so through the Cancellation Date and New Option Grant Date. Our Section 16 officers and directors are not eligible to participate in the offer. (See Section 1 which begins on page 34.)
		Eligible Employees who reside in the Netherlands or were granted Eligible Options while residing in the Netherlands must sign and return the Dutch agreement described in Schedule O — Guide to Tax and Legal Issues in the Netherlands before the expiration of the Offering Period in order to be eligible to participate in the offer.
Q5.		Am I required to participate in this option exchange?
A5.		No. Participation in this offer is completely voluntary. (See Section 2 which begins on page 34.)
Q6.		Are there circumstances under which I would not be granted New Options?
A6.		Yes. If, for any reason, you are no longer an employee of RealNetworks or one of its subsidiaries on the New Option Grant Date, you will not be an Eligible Employee and will not be eligible to participate in the offer. As a result, you will not be granted New Options. Instead, you will keep your current Eligible Options and those options will vest and expire in accordance with their original terms. Except as provided by applicable law and/or any employment agreement between you and RealNetworks (or one of its subsidiaries), your employment with RealNetworks (or one of its subsidiaries) will remain “at-will” regardless of your participation in the offer and can be terminated by you or your employer at any time with or without cause or notice. (See Section 1 which begins on page 34.)
		Moreover, even if we accept your Exchanged Options, we will not grant New Options to you if we are prohibited from doing so by applicable laws. For example, we could become prohibited from granting New Options as a result of changes in SEC or NASDAQ rules. We do not anticipate any such prohibitions at this time. (See Section 13 which begins on page 53.)
		In addition, if you hold an option that expires after the start of, but before the cancellation of options under, this offer, that particular option is not eligible for exchange. As a result, if you hold options that expire before the currently scheduled Cancellation Date or, if we extend the offer such that the Cancellation Date is a later date and you hold options that expire before the rescheduled Cancellation Date, those options will not be eligible for exchange and such options will continue to be governed by their original terms. (See Section 2 which begins on page 34.)
Q7.		How many New Options will I receive for the options that I exchange?
A7.		If you are an Eligible Employee, each Exchanged Option will be replaced with a New Option to purchase a reduced number of shares of our common stock equal to (a) the number of options you exchange divided by (b) an exchange ratio. For purposes of applying the exchange ratios, fractional shares subject to New Options will be rounded down to the nearest whole share. The exchange ratios will be applied on a grant-by-grant basis. This means that the various Eligible Options you hold may be subject to different exchange ratios. The exchange ratios for your Eligible Options will be provided on the RealNetworks offer website when you make your election as described in Question and Answer 2, which begins on page 2. We used a binomial valuation model to determine the exchange ratios. The most favorable exchange ratio that will apply to Eligible Options is fixed at 1.5-to-1.0, even if the binomial model returned a more favorable exchange ratio. In addition, exchange ratios were established by grouping together Eligible Options with similar binomial model values, with exchange ratios rounded up to the next higher band. For example, if the binomial model value of a particular Eligible Option grant indicated the exchange ratio for that grant was 2.3-to-1.0, the actual exchange ratio for that grant was set at 2.5-to-1.0. (See Section 2 which begins on page 34.)

		For purposes of this offer the term “option” generally refers to an option to purchase one share of our common stock.
		The following table represents the exchange ratios applicable to the offer.

Exchange Ratios Using Binomial Model
Exchange Ratio		Number of Shares												Number of New Stock
(Eligible Options		Underlying				Weighted Average				Weighted Average				Options that May be
for New Options)		Eligible Options (1)				Exercise Price				Remaining Term				Granted (2)
1.5-for-1			6,623,716			$	6.49				13.13	(3)			4,415,775
2.0-for-1			3,821,605			$	6.70				5.69				1,910,802
2.5-for-1			5,735,966			$	6.58				4.91				2,294,386
3.0-for-1			3,463,949			$	6.93				3.66				1,154,635
3.5-for-1			110,374			$	11.03				4.15				31,535
4.0-for-1			1,381,772			$	9.27				3.59				345,441
4.5-for-1			4,919,716			$	10.38				3.67				1,093,252
5.0-for-1			262,500			$	10.27				3.35				52,500
Total: 2.3-for-1			26,319,598			$	7.53				6.61				11,298,326
Total stock options surrendered:															26,319,598
Total stock options re-issued:															11,298,326
Total stock options surrendered and available for re-grant:															10,514,890
Total stock options retired and not available for future grant:															4,506,382

		Example
		If you exchange an option grant covering 1,000 shares that fits within the 5.0-for-1 exchange ratio category, on the New Option Grant Date you will receive a new option for 200 shares of our common stock. This is equal to the 1,000 shares divided by the 5.0-for-1 exchange ratio.
Q8.		Why isn’t the exchange ratio simply one-for-one?
A8.		Our exchange program was designed to balance the interests of both our employees and our non-employee shareholders. As described in Question and Answer 3 above, the exchange program provides employees with a benefit by replacing underwater options with New Options that have a greater potential to increase in value. The underwater options will be replaced with New Options that generally have the same value, and consequently, the total number of replacement options to be granted in the exchange program will be less than the total number of Eligible Options outstanding. As a result, our shareholders will benefit from a decrease in potential dilution due to the decrease in the total number of outstanding shares of Company stock subject to our equity awards. (See Section 3 which begins on page 36.)

Q9.		What will be the exercise price of my New Options?
A9.		The exercise price per share of all New Options will be equal to the closing price of our common stock as reported on the NASDAQ Global Select Market on the New Option Grant Date, which is expected to be December 17, 2009.
		We cannot predict the exercise price of the New Options. (See Section 9 which begins on page 45.)
Q10.		When will my New Options vest?
A10.		Each New Option will be scheduled to vest according to the following vesting schedule and actually will vest only if you remain employed with RealNetworks (or one of its subsidiaries) through each relevant vesting date:

	•		None of the New Options will be vested on the New Option Grant Date.
	•		New Options received in exchange for Eligible Options that were vested as of the Expiration Date vest as follows: (a) fifty percent (50%) of the shares subject to the New Option will vest on the six (6) month anniversary of the New Option Grant Date and (b) the remaining fifty percent (50%) of the shares subject to the New Option will vest on the one (1) year anniversary of the New Option Grant Date.
	•		New Options received in exchange for Eligible Options that were unvested as of the Expiration Date vest on the later of (a) the six (6) month anniversary of the New Option Grant Date and (b) the date the New Options would have vested under their original vesting schedule.
	•		Upon vesting, your New Options will be exercisable in accordance with the terms and conditions of the 2005 Plan and any applicable sub-plan thereto and the new option agreement, including any applicable country-specific appendix, under which it was granted.

We expect the New Option Grant Date will be December 17, 2009. Vesting of your New Options also is subject to the following conditions:

	•		If your employment with us (or one of our subsidiaries) terminates before part or all of your New Option vests, the unvested part of your New Option will expire unvested and will never vest. You will not be entitled to any shares of common stock from that unvested part of your New Option. Thus, if your employment with us (or one of our subsidiaries) terminates shortly after the Expiration Date, then you may hold only unvested New Options or only a limited number of vested New Options, and all unvested New Options will expire on such termination date. (See Section 9 which begins on page 45.) If you are employed by Rhapsody America or if your employment with the Company transfers to Rhapsody America as part of or following the potential restructuring of Rhapsody America, there may be scenarios in which you may incur a termination of employment for purposes of our 2005 Plan. See Question and Answer 11 for more details.
	•		We will make minor modifications to the vesting schedule of any New Options to eliminate fractional vesting (such that a whole number of shares subject to the New Option will vest on each vesting date), and to ensure that the number of New Options vesting on each vesting date through the vesting schedule is as equal as possible. As a result, subject to your continued employment with us (or one of our subsidiaries) through each relevant vesting date, you will vest as to a

			number of shares on each vesting date equal to (x) the number of shares scheduled to vest on the vesting date, rounded down to the nearest whole number; plus (y) one additional share on each vesting date until the aggregate number of additional shares vesting under this clause (y) equals the aggregate total of all fractional shares resulting from rounding down in clause (x) for all scheduled vesting dates in the vesting schedule. (See Section 9 which begins on page 45.)
	•		The terms of the new option award agreement, including vesting acceleration, if any, applicable upon termination of your employment.

Q11.		If I am employed by Rhapsody America or my employment with the Company transfers to Rhapsody America, what could happen to my New Options? What could happen to my Eligible Options that are not exchanged in this offer?
A11.		Today, we reported that we are currently in discussions with MTV Networks, a division of Viacom International Inc. (“MTVN”), relating to the possible strategic reorganization of Rhapsody America LLC, our joint venture with MTVN (“Rhapsody America”). These negotiations are focused on a potential restructuring of our and MTVN’s relative economic rights in the joint venture and on the parties’ relative abilities to exercise control over decision-making to enable Rhapsody America to operate more independently of either party. If these discussions result in a definitive agreement, we may agree, among other things, to adjust the corporate governance and/or management structure of Rhapsody America and to reallocate the ownership of Rhapsody America between us and MTVN such that our percentage ownership of RhapsodyAmerica could be reduced from 51% resulting in both parties owning 50% or slightly less. In addition, it is possible that certain employees of the Company may be asked to transfer their employment to Rhapsody America in connection with the restructuring.
		If, as part of the potential reorganization, our resulting percentage ownership in Rhapsody America drops below 50%, then employees of Rhapsody America and any Company employees whose employment transfers to Rhapsody America would incur a termination of employment for purposes of our 2005 Plan and vesting of New Options will cease. If such a termination of employment event occurs shortly after the Expiration Date, then you may hold only unvested New Options or only a limited number of vested New Options, and all unvested New Options will expire on such termination date. You will have 90 days to exercise any vested New Options per the terms of the 2005 Plan and the related option agreement. (See Section 9 which begins on page 45.)
		Likewise, if we ultimately hold less than 50% of Rhapsody America as part of, or following, the potential restructuring, then any Eligible Options that were not exchanged in this offer under any of the Plans will terminate and vesting will cease at the time that we no longer hold at least 50% of the outstanding ownership interests of Rhapsody America. At that time, all unvested Eligible Options not exchanged that you still hold will expire, and you will have 90 days under the terms of the Plans to exercise any vested Eligible Options not exchanged in this offer. (See Section 9 which begins on page 45.)
		If, as part of the potential reorganization, our resulting percentage ownership in Rhapsody America remains at 50% or higher, or if our discussions with MTVN do not result in any changes to the current structure of Rhapsody America, then there will be no automatic termination event under the 2005 Plan with respect to the New Options held by employees of Rhapsody America or to any New Options held by Company employees whose employment may transfer to Rhapsody America. Likewise, there will be no automatic termination event under any of the Plans with respect to any Eligible Options that are not exchanged in this offer that are still held by Rhapsody America employees or by Company employees who may transfer to Rhapsody America.

		The discussions between MTVN and us are currently in the preliminary stages, and we cannot predict whether they will result in a definitive agreement or, if a definitive agreement is reached, the final terms and conditions of any such agreement, or the impact of a restructuring on our financial statements or results of operations.
Q12.		If I participate in this offer, do I have to exchange all of my Eligible Options?
A12.		No. You may pick and choose which of your outstanding Eligible Option Grants you wish to exchange. However, if you decide to participate in this offer and to exchange an Eligible Option Grant, you must elect to exchange all shares subject to that Eligible Option Grant. We will not accept partial tenders of option grants, except that you may elect to exchange the entire remaining portion of an option grant that you previously exercised partially. You otherwise may not elect to exchange only some of the shares covered by any particular option grant. For example and except as otherwise described below, if you hold (1) an Eligible Option grant to purchase 1,000 shares, 700 of which you have already exercised, (2) an Eligible Option grant to purchase 1,000 shares, and (3) an Eligible Option grant to purchase 2,000 shares, you may elect to exchange:

	•		Your first option grant covering the entire remaining 300 shares,
	•		Your second option grant covering 1,000 shares,
	•		Your third option grant covering 2,000 shares,
	•		Two of your three option grants,
	•		All three of your option grants, or
	•		None of your option grants.

		These are your only choices in the above example. You may not elect, for example, to exchange your first option grant with respect to options to purchase only 150 shares (or any other partial amount) under that grant or less than all of the shares under the second and third option grants. (See Section 2 which begins on page 34.)
Q13.		What happens if I have an option grant that is subject to a domestic relations order or comparable legal document as the result of the end of a marriage?
A13.		If you have an Eligible Option that is subject to a domestic relations order (or comparable legal document as the result of the end of a marriage) and a person who is not an Eligible Employee beneficially owns a portion of that Eligible Option, you may accept this offer with respect to the entire remaining outstanding portion of the Eligible Option as long as you are the legal owner of the Eligible Option. As described in Question and Answer 11, we will not accept partial tenders of option grants, so you may not accept this offer with respect to a portion of an Eligible Option grant that is beneficially owned by you while rejecting it with respect to the portion beneficially owned by someone else. As you are the legal owner of the Eligible Options, we will respect an election to exchange such Eligible Option Grant pursuant to the offer that is made by you and accepted by us and we will not be responsible to you or the beneficial owner of the Eligible Option Grant for any action taken by you with respect to such Eligible Option Grant.

Q14.		When will my Exchanged Options be cancelled?
A14.		Your Exchanged Options will be cancelled on the Expiration Date, which is the same date as the New Options Grant Date. We refer to this date as the Cancellation Date. We expect that the Cancellation Date will be December 17, 2009, unless the offer period is extended. If the Expiration Date is extended, then the Cancellation Date similarly will be delayed. (See Section 6 which begins on page 42.)
Q15.		Once I surrender my Exchanged Options, is there anything I must do to receive the New Options?
A15.		You must remain an Eligible Employee through the Cancellation Date for your exchanged options to be cancelled and the New Option Grant Date in order to receive the New Options pursuant to the offer. The Cancellation Date and New Option Grant Date will occur on the same U.S. calendar day as the Expiration Date. Once your Exchanged Options have been cancelled, there is nothing that you must do to receive your New Options. We expect that the New Option Grant Date will be December 17, 2009. In order to vest in the shares covered by the New Options, you will need to remain an employee of RealNetworks (or one of our subsidiaries) through the applicable vesting dates, as described in Question and Answer 10. (See Section 1 which begins on page 34.)
Q16.		When will I receive the New Options?
A16.		We will grant the New Options on the New Option Grant Date. We expect the New Option Grant Date will be December 17, 2009. If the Expiration Date is delayed, the New Option Grant Date will be similarly delayed. If you are granted New Options, we will provide you with your option agreement promptly after the expiration of the offer. You will be able to exercise your New Options when and if your New Options vest. (See Section 6 which begins on page 42.)
Q17.		Can I exchange shares of RealNetworks common stock that I acquired upon exercise of RealNetworks options?
A17.		No. This offer relates only to certain outstanding options to purchase shares of RealNetworks common stock. You may not exchange shares of RealNetworks common stock in this offer. (See Section 2 which begins on page 34.)
Q18.		Will I be required to give up all of my rights under the cancelled options?
A18.		Yes. Once we have accepted your Exchanged Options, your Exchanged Options will be cancelled and you will no longer have any rights under those options. We intend to cancel all Exchanged Options on the same U.S. calendar day as the Expiration Date. We refer to this date as the Cancellation Date. We expect that the Cancellation Date will be December 17, 2009. (See Section 6 which begins on page 42.)
Q19.		If I receive New Options for Exchanged Options, will the terms and conditions of my New Options be the same as my Exchanged Options?
A19.		No. While many terms and conditions of your New Options will stay the same, certain key terms and conditions of your New Options will vary from the terms and conditions of your Exchanged Options. Your New Options may have a different exercise price and will have a new vesting schedule. (See Section 9 which begins on page 45.) The maximum term of your New Options will be seven years from the New Option Grant Date. Additional terms will be set forth in your new option agreement and any country-specific appendix thereto.

		Your New Options will be granted under and subject to the terms and conditions of the 2005 Plan and an option agreement between you and RealNetworks. The 2005 Plan and the current forms of option agreements for grants made thereunder are filed as exhibits to the Schedule TO with which this Offer to Exchange has been filed and are available on the SEC website at www.sec.gov . If your Eligible Option was not granted under the same stock plan under which your New Options are granted, your New Options may have some additional terms that differ from those that applied to your Eligible Option — for instance, the treatment of awards in the event of a change in control of RealNetworks might differ. Please see Section 9 which begins on page 45 for a more complete discussion of the terms of your New Options under the 2005 Plan.
Q20.		What happens to my options if I choose not to participate or if my options are not accepted for exchange?
A20.		If you choose not to participate or your options are not accepted for exchange, your existing options will (a) remain outstanding until they are exercised or cancelled or they expire by their original terms, (b) retain their current exercise price, (c) retain their current vesting schedule, and (d) retain all of the other terms and conditions as set forth in the relevant agreement related to such option grant. (See Section 6 which begins on page 42.)
Q21.		How does RealNetworks determine whether an option has been properly tendered?
A21.		We will determine, in our discretion, all questions about the validity, form, eligibility (including time of receipt) and acceptance of any options. Our determination of these matters will be given the maximum deference permitted by law. However, you have all rights accorded to you under applicable law to challenge a determination in a court of competent jurisdiction. Only a court of competent jurisdiction can make a determination that will be final and binding upon the parties. We reserve the right to reject any election or any options tendered for exchange that we determine are not in an appropriate form or that we determine are unlawful to accept. We will accept all properly tendered options that are not validly withdrawn, subject to the terms of this offer. No tender of options will be deemed to have been made properly until all defects or irregularities have been cured or waived by us. We have no obligation to give notice of any defects or irregularities in any election and we will not incur any liability for failure to give any notice. (See Section 4 on page 37.) For example, and in no way limiting the Company’s ability to reject a form that it determines is not appropriate, if you fail to fully complete or alter in any way the election form or any of the related documents, the Company has the right to reject your election form.
Q22.		Will I have to pay taxes if I participate in the offer?
A22.		If you participate in the offer and are a citizen or resident of the U.S., you generally will not be required under current U.S. law to recognize income for U.S. federal income tax purposes at the time of the exchange or the New Option Grant Date. However, you may have taxable income when you exercise your New Options or when you sell your shares. (See Section 14 on page 53.)
		If you are a citizen or tax resident of a country other than the U.S., the tax consequences of participating in this offer may be different for you. Please be sure to read the schedule for your country of residence in Schedules C through S attached to this offer, which discusses the tax and certain other consequences of participating in the offer.
		For all employees, we recommend that you consult with your own tax advisor to determine the personal tax consequences to you of participating in this offer. If you are a citizen or tax resident or subject to the

		tax laws of more than one country, you should be aware that there might be additional or different tax and social insurance consequences that may apply to you.
Q23.		If I receive New Options, will my New Options be incentive stock options or nonstatutory stock options for U.S. tax purposes?
A23.		New Options will be nonstatutory stock options for purposes of U.S. tax law. Please read the tax discussion in Section 14 which begins on page 53 of this Offer to Exchange and discuss the personal tax consequences of nonstatutory stock options with your financial, legal and/or tax advisors. (See Section 9 which begins on page 45 and Section 14 which begins on page 53.)
Q24.		Will I receive a new option agreement?
A24.		Yes. All New Options will be subject to an option agreement between you and RealNetworks, as well as to the terms and conditions of our 2005 Plan. The current forms of option agreement for grants made under the 2005 Plan are filed as exhibits to the Schedule TO with which this Offer to Exchange has been filed and are available on the SEC website at www.sec.gov . (See Section 9 which begins on page 45.)
Q25.		Are there any conditions to this offer?
A25.		Yes. The completion of this offer is subject to a number of customary conditions that are described in Section 7 of this Offer to Exchange. If any of these conditions are not satisfied, we will not be obligated to accept and exchange properly tendered Eligible Options, though we may do so at our discretion. (See Section 2 which begins on page 34 and Section 7 which begins on page 43.)
Q26.		If you extend the offer, how will you notify me?
A26.		If we extend this offer, we will issue a press release, email or other form of communication disclosing the extension no later than 6:00 a.m., U.S. Pacific Time, on the next U.S. calendar day following the previously scheduled Expiration Date. (See Section 2 which begins on page 34 and Section 16 which begins on page 55.)
Q27.		How will you notify me if the offer is changed?
A27.		If we change the offer, we will issue a press release, email or other form of communication disclosing the change no later than 6:00 a.m., U.S. Pacific Time, on the next U.S. calendar day following the day we change the offer. (See Section 2 which begins on page 34 and Section 16 which begins on page 55.)
Q28.		May I change my mind about which Eligible Option Grants I want to exchange?
A28.		Yes. You may change your mind after you have submitted an election and change the Eligible Option Grants you elect to exchange at any time before the offer expires by completing and submitting either (i) a new election via the offer website or via Stock Plan Administration by email or facsimile to include more or less Eligible Option Grants in your election or (ii) a withdrawal via the offer website or via Stock Plan Administration by email or facsimile to withdraw Eligible Option Grants. If we extend the Expiration Date, you may change your election at any time until the extended offer expires. You may elect to exchange additional Eligible Option Grants, fewer Eligible Option Grants, all of your Eligible Option Grants or none of your Eligible Option Grants. You may change your mind as many times as you wish, but you will be bound by the last properly submitted election and/or withdrawal we receive by the Expiration Date. Please be sure that any completed and new election form you submit includes all the

		Eligible Option Grants with respect to which you want to accept this offer and is clearly dated after your last-submitted election or withdrawal. (See Section 5 which begins on page 40.)
Q29.		How do I withdraw my election?
A29.		To withdraw some or all of the options that you previously elected to exchange, you must do one of the following before the Expiration Date, currently expected to be 9:00 p.m., U.S. Pacific Time, on December 17, 2009.

      Withdrawals via Offer Website

     1. Log into the offer website via the link provided in the email announcing the offer or via https://realnetworks.equitybenefits.com , by using the login instructions provided to you in the email you received from stock@real.com on November 19, 2009.

     2. After logging into the offer website, click on the “MAKE AN ELECTION” button. You will be directed to your election form that contains the following personalized information with respect to each Eligible Option you hold, including:

	•		the option number of the Eligible Option;
	•		the grant date of the Eligible Option;
	•		the total number of outstanding shares subject to the Eligible Option;
	•		the current exercise price per share of the Eligible Option; and
	•		the expiration date and remaining life of the Eligible Option.

     Additionally, the form will indicate the selections you previously made with respect to Eligible Options you want to exchange pursuant to the terms of this offer.

     3. Click the appropriate box next to each of your previously-selected Eligible Options Grants in order to remove the selection with respect those Eligible Options Grants you wish to withdraw from participation in the offer. Select the “NEXT” button to proceed to the next page. Each time you make a withdrawal via the RealNetworks Offer website, please be sure to select either “Yes” or “No” with respect to each of your eligible options.

     4. After completing the form, you will have the opportunity to review the changes you have made with respect to your Eligible Options. If you are satisfied with your changes, continue through the offer website. Select the “I AGREE” button to agree to the Agreement to Terms of Election and to submit your election.

     5. You will be directed to the Confirmation Statement page. Please print and keep a copy of the Confirmation Statement for your records.

      Withdrawals via Fax or Email

     Alternatively, you may submit a withdrawal form via fax or email by doing the following:

     1. Properly complete, date and sign the withdrawal form that you received in the email from Sid Ferrales, dated November 19, 2009, announcing the offer.

     2. Submit the properly completed withdrawal form to Stock Plan Administration by facsimile at (206) 674-2695 or by email to stock@real.com . We must receive your properly completed and submitted withdrawal form by the Expiration Date, currently expected to be 9:00 p.m., U.S. Pacific Time, on December 17, 2009.

     If you want to use the offer website but are unable to submit your withdrawal via the offer website as a result of technical failures of the offer website, such as the offer website being unavailable or the offer website not accepting your election, or if you do not have access to the offer website for any reason, you may submit your withdrawal by email or facsimile by following the instructions provided above. To obtain a paper withdrawal form, please contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695.

     Your delivery of all documents regarding the offer, including withdrawal forms, is at your own risk. Only responses that are complete and actually received by RealNetworks by the deadline via the offer website at https://realnetworks.equitybenefits.com or via Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695 will be accepted. Responses submitted by any other means, including hand delivery, interoffice, U.S. mail (or other post) and Federal Express (or similar delivery service) are not permitted. If you submit your election or withdrawal via the offer website, you should print and keep a copy of the Confirmation Statement on the offer website at the time that you complete and submit your election or withdrawal. The printed Confirmation Statement will provide evidence that you submitted your election or withdrawal. If you submit your election or withdrawal via email or facsimile, we intend to confirm the receipt of your election or withdrawal by email within two U.S. business days of receiving your election or withdrawal. If you have not received a confirmation, it is your responsibility to confirm that we have received your withdrawal. You should contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695. Note that if you submit any election and/or withdrawal via email or facsimile within the last two U.S. business days prior to the expiration of the offer, time constraints may prevent RealNetworks from providing you with an email confirmation prior to the expiration of the offer. (See Section 5 which begins on page 40 below.)

Q30.		What if I withdraw my election and then decide again that I want to participate in this offer?
A31.		If you have withdrawn your election to participate and then decide again that you would like to participate in this offer, you may re-elect to participate by submitting a new properly completed electronic election form or paper election form accepting the offer before the Expiration Date, in accordance with the procedures described in Question and Answer 2 (See Section 5 which begins on page 40 below.) Each time you make an election on the RealNetworks Offer website, please be sure to make an election with respect to each of your eligible options.
Q31.		Are you making any recommendation as to whether I should exchange my Eligible Options?
A31.		No. We are not making any recommendation as to whether you should accept this offer. We understand that the decision whether or not to exchange your Eligible Options in this offer will be a challenging one for many employees. The program involves risk (see “Risks of Participating in the Offer” on page 16 for information regarding some of these risks), and there is no guarantee that you will receive greater value from the New Options you would receive in exchange for your Eligible Options. As a result, you must make your own decision as to whether or not to participate in this offer. For questions regarding personal tax implications or other investment-related questions, you should talk to your own legal counsel, accountant, and/or financial advisor. (See Section 3 which begins on page 36.)

Q32.		Who can I talk to if I have questions about the offer, or if I need additional copies of the offer documents?
A32.		If you have questions about this offer or would like to receive additional copies of this Offer to Exchange and the other offer documents, you should contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695. (See Section 10 which begins on page 51.)

RISKS OF PARTICIPATING IN THE OFFER

      Participating in the offer involves a number of risks, including those described below. This list and the risk factors in our quarterly report on Form 10-Q for the quarter ended September 30, 2009 and our annual report on Form 10-K for the fiscal year ended December 31, 2008 filed with the SEC highlight the material risks of participating in this offer. You should carefully consider these risks and are encouraged to speak with an investment and tax advisor as necessary before deciding to participate in the offer. In addition, we strongly urge you to read the sections in this Offer to Exchange discussing the tax consequences in the U.S. and Schedules C through S discussing the tax consequences for employees outside the U.S., as well as the rest of this Offer to Exchange for a more in-depth discussion of the risks that may apply to you before deciding to participate in the exchange offer.

      In addition, this offer and our SEC reports referred to above include “forward-looking statements.” When used in this Offer to Exchange, the words “anticipate,” “believe,” “estimate,” “expect,” “intend” and “plan” as they relate to us are intended to identify these forward-looking statements. All statements by us regarding our expected future financial position and operating results, our business strategy, our financing plans and expected capital requirements, forecasted trends relating to our services or the markets in which we operate and similar matters are forward-looking statements, and are dependent upon certain risks and uncertainties, including those set forth in this section and other factors described elsewhere in this Offer to Exchange. You should carefully consider these risks, in addition to the other information in this Offer to Exchange and in our other filings with the SEC. The documents we file with the SEC, including the reports referred to above, discuss some of the risks that could cause our actual results to differ from those contained or implied in the forward-looking statements. The safe harbor afforded by the Private Securities Litigation Reform Act of 1995 to certain forward-looking statements does not extend to forward-looking statements made by us in connection with the offer.

      The following discussion should be read in conjunction with the financial statements and notes to the financial statements incorporated by reference, the financial data provided in Schedule B attached to this Offer to Purchase as well as our most recent Forms 10-K and 10-Q. We caution you not to place undue reliance on the forward-looking statements contained in this offer, which speak only as of the date hereof.

Economic Risks

If the price of our common stock increases after the date on which your options are cancelled, your cancelled options might be worth more than the New Options that you receive in exchange for them.

     The exchange ratio of this offer is not one-for-one with respect to all options. Therefore, it is possible that, at some point in the future, your Exchanged Options would have been economically more valuable than the New Options granted pursuant to this exchange offer.

     For example, assume that you exchange an option to purchase 1,200 shares with an exercise price per share of $5.78, and assume the applicable exchange ratio entitles you to receive a New Option exercisable for 400 shares, with an exercise price of $4.50. Assume further, for illustrative purposes only, that the price of our common stock increases to $6.50 per share. Under this example, if you had kept your Exchanged Options and exercised and sold the underlying shares at $6.50 per share, you would have realized pre-tax gain of approximately $864. However, if you exchanged your options and sold the underlying shares subject to the New Option grant (as the shares vest) at $6.50 per share, you would realize a pre-tax gain of approximately $800.

If we are acquired by or merge with another company or reorganize, sell or otherwise change our ownership interest in any of our subsidiaries, including Rhapsody America, your cancelled options might be worth more than the New Options that you receive in exchange for them.

     A transaction involving us, such as a merger or other acquisition, could have a substantial effect on our stock price, including significantly increasing the price of our common stock. Depending on the structure and terms of this type of transaction, option holders who elect to participate in the offer might receive less of a benefit from the appreciation in the price of our common stock resulting from the merger or acquisition. This could result in a greater financial benefit for those option holders who did not participate in this offer and retained their original options.

     Furthermore, a transaction involving us, such as a merger or other acquisition, could result in a reduction in our workforce. In addition, we are currently in discussions with MTVN relating to the possible strategic reorganization of Rhapsody America. If, as part of the potential reorganization, our resulting percentage ownership in Rhapsody America drops below 50%, then employees of Rhapsody America and any Company employees whose employment transfers to Rhapsody America will incur a termination of employment for purposes of our 2005 Plan and vesting of New Options will cease. If such a termination of employment event occurs shortly after the Expiration Date, then you may hold only unvested New Options or only a limited number of vested New Options, and all unvested New Options will expire on such termination date. You will have 90 days following the termination date to exercise any vested New Options. If your employment with us or one of our subsidiaries terminates or you have a termination of employment for purposes of the 2005 Plan because you are employed by, or your employment with the Company transfers to, Rhapsody America and our ownership in Rhapsody America drops below fifty percent (50%) before part or all of your New Options vest, you will not receive any value from the unvested part of your New Options.

Each of your New Options will be completely unvested on the New Option Grant Date and will be subject to a new vesting schedule. If your New Options expire before they completely vest, you will not receive any value from the unvested portion of your New Options.

     The New Options will be subject to new vesting schedules. This is true even if your Exchanged Options are 100% vested. If you do not remain an employee with us (or one of our subsidiaries) through the date your New Options vest, you will not be able to exercise the unvested portion of your New Options. Instead, the unvested portion of your New Options will expire immediately upon your termination of employment. As a result, you may not receive any value from that unvested port of your New Options. If your employment with us (or one of our subsidiaries) terminates shortly after the Expiration Date, then you may hold only unvested New Options, in which case you will not receive any value from the New Options. For example, if your employment is terminated by us in connection with a reduction in force shortly after the New Option Grant Date and before you vest in any of your New Options, you will immediately forfeit your rights to your New Options as of the date of your termination of employment and you will not receive any value from your New Options. Similarly, if you are employed by Rhapsody America or if your employment with the Company transfers to Rhapsody America as part of or following the potential restructuring of Rhapsody America in which our percentage ownership in Rhapsody America drops below 50%, then you will incur a termination of employment for purposes of our 2005 Plan. If this termination of employment event occurs shortly after the New Option Grant Date and before you vest in any of your New Options, you will immediately forfeit your rights to your New Options as of the date of your termination of employment and you will not receive any value from your New Options.

If the price of our common stock increases after the date on which we launch the Offer, the per share exercise price of your cancelled options might be lower than the New Options that you receive in exchange for them.

     If you participate in the offer and receive New Options in exchange for Eligible Options, the exercise price per share for your New Options will be the closing price of our common stock as reported on the NASDAQ Global Select Market on the New Option Grant Date, currently expected to be December 17, 2009, unless we extend the Offer. Because we do not know what the closing price will be on December 17, 2009 (or such later day if we extend the offer), it is possible that the New Options will have an exercise price per share in excess of the Eligible Options you exchange. For example, if you exchange an option grant for 1,200 shares with an exercise price per share of $5.78, and assume the applicable exchange ratio entitles you to receive a New Option exercisable for 400 shares, it is possible that the closing price of our common stock on December 17, 2009 (or such later day if we extend the offer) could increase to $5.95; therefore, you would hold a New Option for 400 shares with a per share exercise price of $5.95 instead of your current Eligible Option for 1,200 shares at an exercise per share of $5.78.

If the price of our common stock decreases after the New Option Grant Date, your New Options will be underwater.

     As discussed above, if you participate in the offer, the exercise price per share for your New Options will be the closing price of our common stock on the New Option Grant Date. However, your participation in this offer does not guarantee that the fair market value for a share of our common stock will not decrease below the closing price of our common stock on the New Option Grant Date at some point in the future, thereby leaving you with an underwater option.

Tax - Related Risks

Tax effects of New Options.

     If you participate in the offer and receive New Options in exchange for Eligible Options, you generally will not be required under current U.S. law to recognize income for U.S. federal income tax purposes at the time of the exchange or on the New Option Grant Date. For more detailed information, please read the rest of the Offer to Exchange, and see the tax disclosure set forth under Section 14 of the Offer to Exchange.

Tax-related risks for non-U.S. employees.

     Non-U.S. employees should carefully review the schedule for their country of residence in Schedules C through S attached to this offer to determine whether participation in the offer could trigger any negative income tax, social insurance or other tax or legal consequences.

If you are a tax resident of multiple countries, there may be tax and social security consequences of more than one country that apply to you.

     If you are subject to the tax laws in more than one jurisdiction, you should be aware that there may be tax and social security consequences of more than one country that may apply to you. You should be certain to consult your own tax advisor to discuss these consequences.

      There are additional tax-related risks for employees who have transferred employment between two or more countries.

     If you have been employed by us (or one of our subsidiaries) in more than one tax jurisdiction, you should be aware that there may be tax and social insurance contribution consequences in each jurisdiction that may apply to you. If you received your Eligible Options when you resided in one country but now reside in a different country, you may have a tax obligation in the country of the original grant in connection with the

New Options received under this Offer to Exchange. You should be certain to consult your own tax advisor to discuss these consequences if you have transferred employment in more than one tax jurisdiction.

Risks Related to Our Business

Risks Related to Our Music, Games and Media Software and Services Businesses

Our Music, Games and Media Software and Services businesses face substantial competitive and other challenges that may prevent us from being successful in, and negatively impact future growth in, those businesses.

     Many of our current and potential competitors in our Music, Games and Media Software and Services businesses have longer operating histories, greater name recognition, more employees and significantly greater resources than we do. Our competitors across the breadth of our product lines in these businesses include a number of large and powerful companies, such as Apple, Amazon.com and Microsoft. To effectively compete in the markets for our Music, Games and Media Software and Services businesses, we may experience the following consequences, any of which would adversely affect our operating results and the trading price of our stock:

	•		reduced prices or margins,
	•		loss of current and potential customers, or partners and potential partners who provide content we distribute to our customers,
	•		changes to our products, services, technologies, licenses or business practices or strategies,
	•		lengthened sales cycles,
	•		pressure to prematurely release products or product enhancements, or
	•		degradation in our stature and reputation in the market.

     In addition, we face the following competitive risks relating to our Music, Games and Media Software and Services businesses:

      Music . Our online music services offered through our Rhapsody America joint venture with MTV Networks, a division of Viacom International Inc. (MTVN) face significant competition from traditional offline music distribution competitors and from other online digital music services, as well as online theft or “piracy.” Some of these competing online services have spent substantial amounts on marketing and have received significant media attention, including Apple’s iTunes music download service, which it markets closely with its popular iPod line of portable digital audio players and its iPhone. Microsoft also offers premium music services in conjunction with its Windows Media Player and also markets a portable music player and related download software and music service called Zune. We also expect increasing competition from online retailers such as Amazon.com, online community websites such as MySpace.com and Facebook.com, as well as other providers of free, ad-supported music services, some of whom are successfully growing consumer awareness of their services. Our online music services also face significant competition from “free” peer-to-peer services which allow consumers to directly access a wide variety of unlicensed content. Enforcement efforts have not effectively shut down these services and the ongoing presence of these “free” services substantially impairs the marketability of legitimate services like ours. To compete in this crowded market, we develop and work with partners to develop new and often unique marketing programs designed to build awareness of our music products and services and to attract subscribers. However, many of these marketing programs are unproven and may result in significant

expenses we may not recoup due to the program’s failure to increase awareness or the number of subscribers to our music services. Rhapsody America may not be able to compete effectively in this highly competitive and rapidly evolving market, which may negatively impact the future growth of our Music business.

      Games . Our RealArcade, GameHouse, and Zylom branded services compete with other online aggregators and distributors of online and downloadable casual PC games. Some of these competitors have high volume distribution channels and greater financial resources than we do. Our Games business also competes with many other smaller companies that may be able to adjust to market conditions faster than us. We also face an increasingly price competitive casual games market, and some of our competitors may be able to compete on price more effectively than us. We expect competition to intensify in this market from these and other competitors and no assurance can be made that we will be able to continue to grow our revenue. Our development studios compete primarily with other developers of online, downloadable and mobile casual PC games and must continue to develop popular and high-quality game titles and to execute on opportunities to expand the play of our games on a variety of non-PC platforms to maintain our competitive position and help maintain the growth of our Games business.

      Media Software and Services . Our media software and services (primarily our SuperPass subscription service) face competition from existing competitive alternatives and other emerging services and technologies, such as user generated content services like YouTube and alternative streaming media playback technologies including Microsoft Windows Media Player and Adobe Flash. Content owners are increasingly marketing their content on their own websites rather than licensing to other distributors such as us. We face competition in these markets from traditional media outlets such as television, radio, CDs, DVDs, videocassettes and others. We also face competition from emerging Internet media sources and established companies entering into the Internet media content market, including Time Warner’s AOL subsidiary, NBC Universal, Microsoft, Apple, Adobe, Yahoo! and broadband internet service providers. We expect this competition to continue to be intense as the market and business models for Internet video content mature and more competitors enter these new markets. Competing services may be able to obtain better or more favorable access to compelling video content than us, may develop better offerings than us and may be able to leverage other assets or technologies to promote or distribute their offerings successfully. If we are unable to compete successfully, the future growth of our Media Software and Services business will be negatively impacted. In addition, our overall ability to sell subscription services depends in part on the use of RealNetworks’ formats on the Internet, and declines in the use of our formats may negatively affect our subscription revenue and increase costs of obtaining new subscribers. Both Microsoft and Adobe are aggressively seeking to grow their format usage.

The success of our subscription services businesses depends upon our ability to increase subscription revenue and to license compelling content on commercially reasonable terms.

     Our operating results could be adversely impacted by the loss of subscription revenue, including the revenue generated from the online music services offered by our Rhapsody America joint venture. Internet subscription businesses are a relatively new media delivery model, and we cannot predict with accuracy our long-term ability to maintain or increase subscription revenue. Subscribers may cancel their subscriptions to our services for many reasons, including a perception that they do not use the services sufficiently or that the service does not provide enough value, a lack of attractive or exclusive content generally or as compared with competitive service offerings (including Internet piracy), or because customer service issues are not satisfactorily resolved. In recent periods, we have seen an increase in the number of gross customer cancellations of our subscription services due in part to an increasingly large subscriber base, an increase in involuntary credit card cancellations resulting in termination of service and increased prevalence and awareness of alternative “free” on-demand streaming music services. In addition, we must continue to obtain compelling digital media content for our video, music, and games services in order to maintain and increase usage and overall customer satisfaction for these products. Our online music service offerings available through our Rhapsody America venture depend on music licenses from the major

music labels and publishers, and the failure to renew these licenses under terms that are commercially reasonable and acceptable to us would harm Rhapsody America’s ability to generate revenues from its subscription services.

Music publishing royalty rates for music subscription services offered through RealNetworks and Rhapsody America are not yet fully established; an unexpected modification or application of settlement terms could negatively impact our operating results.

     Publishing royalty rates associated with music subscription services in the U.S. and abroad are not fully established and public performance licenses are negotiated individually with performance rights organizations (PROs). A court issued several rulings that set forth how royalties are to be calculated and address other matters relating to the application of the new rates to be paid to one of the PROs, the American Society of Composers, Authors and Publishers (ASCAP). After working with ASCAP to make a final determination of amounts owed under the court’s rulings, we reached a partial agreement with ASCAP on January 12, 2009. While we believe we have sufficiently accrued for expected royalties to be paid under the agreement, we plan to appeal some aspects of the court’s rulings that underlie the agreement, and the rulings remain subject to appeal and challenge by other participants. We also have license agreements to reproduce musical compositions with the Harry Fox Agency, an agency that represents music publishers, and with many independent music publishers as required in the creation and delivery of on-demand streams and tethered downloads, but these license agreements generally do not include final royalty rates. The license agreements anticipate industry-wide agreement on rates, which was reached among the Digital Media Association (DiMA), the Recording Industry Association of America (RIAA) and the National Music Publishers Association (NMPA). This settlement, along with the determination by the Copyright Royalty Board (CRB) on rates for full downloads, physical products and ringtones, was published by the CRB, and after some modifications by the U.S. Copyright Office, was collectively published as part of the CRB’s final determination in the Federal Register. The rate for ringtones and the imposition of a late fee on certain royalty payments contained in the final determination have been appealed by the RIAA. If terms of the settlement are modified or applied in a manner that we do not expect, we could incur increased expenses that could negatively impact our operating results. The publishing rates associated with our international music streaming services are also not yet determined and may be higher than our current estimates.

Copyright Royalty Board decisions regarding Internet radio royalties and minimum payments could result in material expenses that would harm our operating results and our ability to provide popular radio services.

     In April 2007, the Copyright Royalty Board (CRB) issued a decision setting new royalty rates for the use of sound recordings in Internet radio from 2006 through 2010. These rates were appealed and then affirmed by the D.C. Circuit Court of Appeals on July 10, 2009, except with respect to the minimum royalty rate per station, which has been remanded to the CRB. In a separate proceeding regarding international radio rates, on September 29, 2009, we filed briefs with the CRB with respect to royalty rates for the period 2011 through 2015. We expect to be a participant in this additional proceeding with the CRB until the radio royalty rates for the period 2011 through 2015 are ultimately determined, which we do not expect to occur prior to late 2010. The ultimate determination of the minimum royalty rate per station may be unfavorable to us, which could adversely impact our operating results and our ability to provide our radio services in the future.

Our RealDVD PC application is currently the subject of pending litigation, and we could incur significant expenses or be further prevented from selling RealDVD.

     On September 30, 2008, we announced the availability of RealDVD, a PC application that allows consumers to store, manage and play their DVDs on their computers. On the same day, we filed a motion for declaratory judgment against the DVD Copy Control Association and Disney Enterprises, Inc., Paramount Pictures Corp., Sony Pictures Entertainment, Inc., Twentieth Century Fox Film Corp., NBC Universal, Inc., Warner Bros., Entertainment, Inc. and Viacom, Inc. seeking a determination that, among other things, our RealDVD product

complies with the DVD Copy Control Association’s license agreement. Various movie studios filed suit against us alleging that RealDVD violates the Digital Millennium Copyright Act (DMCA) and also asked for and were granted a temporary restraining order preventing us from selling RealDVD until a full preliminary injunction hearing could be held. On August 11, 2009, the movie studios were granted their motion for a preliminary injunction, which enjoined us from selling or otherwise distributing RealDVD to the public. On September 10, 2009, we filed a notice of appeal on this ruling with the U.S. Court of Appeals for the Ninth Circuit. These claims could be costly and time-consuming to assert and defend and could require us to pay significant litigation expenses or damages or result in a permanent injunction against the sale of RealDVD, any of which would harm our operating results.

We may not be successful in maintaining and growing our distribution of digital media products.

     We cannot predict whether consumers will continue to download and use our digital media products consistent with past usage, especially in light of the fact that Microsoft bundles its competing Windows Media Player with its Windows operating system and the popularity of the Adobe Flash format. Our inability to maintain continued high volume distribution of our digital media products could hold back the growth and development of related revenue streams from these market segments, including the distribution of third-party products and sales of our subscription services, and therefore could harm our business and our prospects.

Our Rhapsody America joint venture may not have sufficient funds to continue to support its current operations.

     We and MTVN have formed Rhapsody America LLC, a Delaware limited liability company, which is currently 51% owned by us (through a wholly owned subsidiary) and 49% owned by MTVN (through a wholly owned subsidiary). Rhapsody America has generated losses since its inception in 2007 and may not have sufficient funds to continue to support its current operations in the near term. Currently, neither we nor MTVN have any contractual obligations to fund Rhapsody America’s operations further. We cannot provide assurance that Rhapsody America will be able to obtain additional funds on acceptable terms from us, MTVN or any other third party funding source. If Rhapsody America does not obtain additional funding in the near term and/or substantially restructure its operations, it will not be able to continue its current operations. To the extent Rhapsody America experiences a decline in its business operations or incurs liabilities resulting from a lack of liquidity, our business and operating results would be materially harmed.

We face risks with respect to certain matters in the governance and management of our Rhapsody America joint venture and the integration and operation of assets that have been combined to form Rhapsody America.

     We and MTVN agreed to terms and conditions regarding the governance and management of Rhapsody America as part of the formation of Rhapsody America. We are entitled to appoint the general manager to manage the day-to-day operations of Rhapsody America. Rhapsody America is governed by a limited liability company agreement which, among other things, requires unanimous approval of the members for certain key operational activities, such as adopting a budget and authorizing certain capital expenditures, and for significant company events, such as mergers, asset sales, distributions, affiliate transactions and issuance, sale and repurchase of membership interests of Rhapsody America. If we are not able to agree with MTVN on any of those items, if the members are unable to agree on any other significant operational or financial matter requiring approval of the members, or if there is any event that adversely impacts our relationship with MTVN, the business, results of operations and financial condition of Rhapsody America may be adversely affected and, consequently, our business may suffer. In addition, MTVN may have or develop economic or other business interests or goals that are inconsistent with our or Rhapsody America’s business interests or goals.

     Neither we nor the current management of Rhapsody America has extensive experience in managing and operating complex joint ventures of this nature, and the integration and operational activities may strain our internal resources, distract us from managing our day-to-day operations, and impact our ability to retain key employees in Rhapsody America. The nature of our and MTVN’s contributions of services and assets to Rhapsody America required detailed cost allocation agreements that are complex to implement and manage and may result in significant costs that could adversely affect our operating results. The allocation of these support service costs is based on various measures depending on the service provided, and require significant internal resources. Many of the allocation methodologies are complicated, which may result in inaccuracies in the total charges to be billed to Rhapsody America. In addition, the variable nature of these costs to be allocated to Rhapsody America may result in fluctuations in the period-over-period results of our Music business.

We and MTVN have certain contractual rights relating to the purchase and sale of MTVN’s membership interest in Rhapsody America that may be settled in part through the issuance of additional shares of our capital stock, which would dilute our other shareholders’ voting and economic interests in us, and may require us to pay MTVN a price that exceeds the appraised value of its proportionate interest in Rhapsody America.

     Pursuant to the terms of the Rhapsody America limited liability company agreement, we have a right to purchase from MTVN, and MTVN has a right to require us to purchase, MTVN’s membership interest in Rhapsody America. These call and put rights are exercisable upon the occurrence of certain events and during certain periods in each of 2012, 2013 and 2014 and every two years thereafter and may be settled, in part, through the issuance of shares of our capital stock, subject to specified limitations. If a portion of the purchase price for MTVN’s membership interest is payable in shares of our capital stock, such shares could represent up to 15% of the outstanding shares of our common stock immediately prior to the transaction. In addition, we may also be obligated to issue shares of our non-voting stock representing up to an additional 4.9% of the outstanding shares of our common stock immediately prior to the transaction. If we pay a portion of the purchase price for MTVN’s membership interest in shares of our common stock and non-voting stock, our other shareholders’ voting and economic interests in us will be diluted, and MTVN will become one of our significant shareholders. In certain situations, if MTVN exercises its right to require us to purchase its membership interests in Rhapsody America, we may be required to pay MTVN a price that provides a return to MTVN that is potentially significantly higher than the appraised value of MTVN’s proportionate interest in Rhapsody America, and as a result, we would pay greater than fair value to acquire MTVN’s interest.

We are in discussions with MTVN relating to a potential restructuring of Rhapsody America, which restructuring may not realize the intended benefits and/or may result in a material adverse effect on our results of operations or financial condition.

     We are currently in discussions with MTVN relating to the possible strategic reorganization of Rhapsody America. These negotiations are focused on a potential restructuring of our and MTVN’s relative economic rights in Rhapsody America and on the parties’ relative abilities to exercise control over decision-making to enable Rhapsody America to operate more independently of either party. If these discussions result in a definitive agreement, we may agree, among other things, to adjust the corporate governance and/or management structure of Rhapsody America and to reallocate the ownership of Rhapsody America between us and MTVN such that our percentage ownership of Rhapsody could be reduced from 51% resulting in both parties owning 50% or slightly less. These discussions are currently in the preliminary stages, and we cannot predict whether they will result in a definitive agreement or, if a definitive agreement is reached, the final terms and conditions of any such agreement, the impact of a restructuring on our financial statements or results of operations, or whether any of the risks described above will be mitigated by the potential restructuring. In addition, we cannot predict whether a new definitive agreement would actually improve Rhapsody America’s operations or ability to create a profitable digital music business. A restructuring of Rhapsody America would be expected to have financial impacts on us, and until the terms have been finalized we cannot evaluate the nature or extent of the potential financial impacts or whether they, or other aspects of the restructuring, will result in material adverse effects on our future operating performance or financial statements. In

addition, uncertainty concerning the terms and conditions of the restructuring could result in management and employee distraction and have an adverse effect on our operations and our ability to recruit and retain key employees involved with Rhapsody America.

Risks Related to Our Technology Products and Solutions Business

Contracts with our carrier customers subject us to significant risks that could negatively impact our revenue or otherwise harm our operating results.

     We derive a material portion of our revenue from carrier application services. Many of our carrier application services contracts provide for revenue sharing arrangements, but we have little control over the pricing decisions of our carrier customers. Furthermore, most of these contracts do not provide for guaranteed minimum payments or usage levels. Because most of our carrier customer contracts are nonexclusive, it is possible that our wireless carriers could purchase similar application services from third parties, and cease to use our services in the future. As a result, our revenue derived under these agreements could be substantially reduced depending on the pricing and usage decisions of our carrier customers.

     In addition, none of our carrier application services contracts obligates our carrier customers to market or distribute any of our applications. Despite the lack of marketing commitments, revenue related to our application services is, to a large extent, dependent upon the marketing and promotion activities of our carrier customers. In addition, many of our carrier contracts are short term and allow for early termination by the carrier with or without cause. These contracts are therefore subject to renegotiation of pricing or other key terms that could be adverse to our interests, and leave us vulnerable to non-renewal by the carriers. The loss of carrier customers, a reduction in marketing or promotion of our applications, or the termination, non-renewal or renegotiation of contract terms that are less favorable to us would likely result in the loss of future revenues from our carrier application services.

     Finally, certain of our carrier contracts obligate us to indemnify the carrier customer for certain liabilities and losses incurred by them, including liabilities resulting from third party claims for damages that arise out of the use of our technology. These indemnification terms provide us with certain procedural safeguards, including the right to control the defense of the indemnified party. We have accepted tenders of indemnification from two of our carrier customers related to one pending patent infringement proceeding, and we are vigorously defending them. This pending proceeding or future claims against which we may be obligated to defend our carrier customers could result in paying amounts pursuant to these obligations that could materially harm our operating results.

Our ongoing arbitration proceeding with VeriSign, Inc. could ultimately result in a damages award in favor of VeriSign that may be material to our financial condition and results of operations.

     In June 2008, we initiated an arbitration action in Seattle, Washington against VeriSign, Inc., to seek resolution of disputes regarding the proper interpretation of an Alliance Agreement entered into between the parties dating back to 2001. VeriSign asserted various counterclaims against us, including claims that we breached the Alliance Agreement and tortiously interfered with VeriSign’s prospective and existing business relationships and its proposed sale of certain business units. On May 7, 2009, the Arbitrator issued a ruling denying our claims for relief and granting VeriSign’s claims, including VeriSign’s tortious interference claims. Subsequent to that ruling, the Arbitrator further ruled that the limitation of liability clause contained in the Alliance Agreement does not apply to the potential damages VeriSign incurred. In response, VeriSign filed an amended statement of damages seeking a material amount in damages. A hearing to address VeriSign’s claimed damages began on July 13, 2009 and was adjourned on July 15. On September 10, 2009, the Arbitrator issued a Supplemental Order re: Scheduling and Actions for Final Resolution which set further hearings on damages which were completed on October 12-14, 2009. In that Order, the Arbitrator also determined that VeriSign had failed to prove that we caused any damages relating to VeriSign’s claim of tortious interference with its proposed sale of certain business units but allowed

further evidence regarding VeriSign’s claims of tortious interference with prospective and existing business relationships. The evidentiary hearings have now been concluded and we expect the Arbitrator to issue a final decision in the near future. In August 2009, we also filed a motion to vacate the Arbitrator’s interim awards relating to declaratory and injunctive relief in Federal District Court in New York City. That motion is currently under consideration by the federal court. We continue to believe that the limitation of liability clause in the Alliance Agreement should apply to limit the amount of VeriSign’s claimed monetary damages and that the Arbitrator does not have jurisdiction over tort claims. No assurance can be made as to the final outcome of the disputes until all rulings are final and all avenues of review have been exhausted, but we could ultimately be required to pay damages to VeriSign in an amount that may be material to our financial condition and results of operations.

The mobile entertainment market is highly competitive.

     The market for mobile entertainment services, including ringback tone and music-on-demand solutions, is highly competitive. Current and potential future competitors include major media companies, Internet portal companies, content aggregators, wireless software providers and other pure-play wireless entertainment publishers. In connection with music-on-demand in particular, we may in the future compete with current providers of music-on-demand services for online or other non-mobile platforms, some of which have greater financial resources than we do. In addition, the major music labels may demand more aggressive revenue sharing arrangements or impose an alternative business model less favorable to us. Furthermore, while most of our carrier customers do not offer internally developed application services that compete with ours, if our carrier customers begin developing these application services internally, we could be forced to lower our prices or increase the amount of service we provide in order to maintain our business with those carrier customers. Increased competition has in the past resulted in pricing pressure, forcing us to lower the selling price of our services.

A majority of the revenue that we generate in our Technology Products and Solutions business is dependent upon our relationship with a few customers, including SK Telecom; any deterioration of these relationships could materially harm our business.

     We generate a significant portion of our revenue from sales of our mobile entertainment services to a few of our mobile carrier customers, including SK Telecom, a leading wireless carrier in South Korea. In the near term, we expect that we will continue to generate a significant portion of our total revenue from these customers, particularly SK Telecom. If these customers fail to market or distribute our applications or terminate their business contracts with us, or if our relationships with these customers deteriorate in any significant way, we may be unable to replace the affected business arrangements with acceptable alternatives. Furthermore, our relationship with SK Telecom may be affected by the general state of the economy of South Korea. Failure to maintain our relationships with these customers could have a material negative impact on our revenue and operating results.

Our traditional system software licensing business has been negatively impacted by competitive factors, and we may not experience improved sales of our system software products.

     We believe that our traditional system software sales have been negatively impacted primarily by the competitive effects of Microsoft, which markets and often bundles its competing technology with its market leading operating systems and server software. Although the settlement agreement we entered into with Microsoft relating to our claims regarding Microsoft’s anticompetitive practices contained substantial cash payments to us and a series of technology agreements, Microsoft will continue to be an aggressive competitor with our traditional systems software business. We cannot be sure whether the portions of the settlement agreement designed to limit Microsoft’s ability to leverage its market power will be effective, and we cannot predict when, or if, we will experience increased demand for our system software products in a way that improves our operating results or shareholder return on an investment in our stock.

Risks Related to Our Business in General

Our operating results are difficult to predict and may fluctuate, which may contribute to volatility in our stock price.

     The trading price for our common stock has been volatile, ranging from $1.97 to $5.12 per share during the 52-week period ended September 30, 2009. As a result of the rapidly changing markets in which we compete, our operating results may fluctuate from period-to-period, which may continue to contribute to the volatility of our stock price. In past periods, our operating results have been affected by personnel reductions and related charges, charges relating to losses on excess office facilities, and impairment charges for certain of our equity investments, goodwill and other long-lived assets. Our operating results may be adversely affected by similar or other charges or events in future periods, including, but not limited to:

	•		impairments of long-lived assets,
	•		integrating and operating newly acquired businesses and assets,
	•		the seasonality of our business, which has experienced increased revenues in the fourth quarter of our fiscal year, and
	•		the general difficulty in forecasting our operating results and metrics, which could result in actual results that differ significantly from expected results.

     Certain of our expense decisions (for example, research and development and sales and marketing efforts) are based on predictions regarding business and the markets in which we compete. Fluctuations in our operating results, particularly when experienced beyond what we expected, could cause the trading price of our stock to continue to fluctuate.

Uncertainty and adverse conditions in the economy could have a material adverse impact on our business, financial condition and results of operations.

     The national and global economic downturn has resulted in a decline in overall consumer and corporate spending, declines in consumer and corporate access to credit, fluctuations in foreign exchange rates, declines in the value of assets and increased liquidity risks, all of which could materially impact our business, financial condition and results of operations. We provide digital entertainment services to consumers, and payment for our products and services may be considered discretionary on the part of many of our current and potential customers. As a result, consumers considering whether to purchase our products or services may be influenced by macroeconomic factors that affect consumer spending such as unemployment, continuing increases in fuel costs, conditions in the residential real estate and mortgage markets and access to credit. To the extent conditions in the economy remain uncertain or the economy continues to deteriorate, our business could be impacted as customers choose to leave our services, to reduce their service level or to stop purchasing our products. In addition, our efforts to attract new customers may be adversely affected. Declines in consumer spending may also negatively impact our business customers, including our mobile carrier customers, who may experience decreases in demand for the services we provide that are offered to their subscribers. We are also experiencing a decline in advertising revenue as businesses are reducing their sales and marketing spending in response to the contracting economy. A significant decrease in the demand for our products or services or declines in our advertising revenue could have a material adverse impact on our operating results and financial condition.

     Uncertainty and adverse economic conditions may also lead to a decreased ability to collect payment for our products and services due primarily to a decline in the ability of consumers to use or access credit, including

through credit cards, which is how most of our customers pay for our products and services. We also expect to continue to experience volatility in foreign exchange rates, which could negatively impact the amount of revenue and net assets we record in future periods. The functional currency of our foreign subsidiaries is the local currency of the country in which each subsidiary operates. We translate our subsidiaries’ revenues into U.S. dollars in our financial statements, and continued volatility in foreign exchange rates, particularly if the U.S. dollar strengthens against the euro or the Korean won, may result in lower reported revenue. If economic conditions continue to deteriorate or remain uncertain for a sustained period of time, we may also record additional impairments to our assets in future periods. Economic conditions may also negatively impact our liquidity due to (1) declines in interest income, (2) an increased risk that we may not be able to access cash balances held in U.S. or foreign financial institutions or that our investments in debt securities issued by financial institutions may become worthless due to the nationalization or failure of such financial institutions, and (3) decreased ability to sell the securities and the institutional money market funds we hold as short-term investments. In addition, the decline in the trading price of shares of our common stock may make it difficult to use our common stock as purchase price consideration for future acquisitions and to raise funds through equity financings. If any of these risks are realized, we may experience a material adverse impact on our financial condition and results of operations.

New products and services may not achieve market acceptance or may be subject to legal challenge that could negatively affect our operating results.

     The process of developing new, and enhancing existing, products and services is complex, costly and uncertain. Our business depends on providing products and services that are attractive to subscribers and consumers, which, in part, is subject to unpredictable and volatile factors beyond our control, including end-user preferences and competing products and services. Any failure by us to timely respond to or accurately anticipate consumers’ changing needs and emerging technological trends could significantly harm our current market share or result in the loss of market opportunities. In addition, we must make long-term investments, develop or obtain appropriate intellectual property and commit significant resources before knowing whether our predictions will accurately reflect consumer demand for our products and services, which may result in no return or a loss on our investments. Furthermore, new products and services may be subject to legal challenge. Responding to these potential claims may require us to enter into royalty and licensing agreements on unfavorable terms, require us to stop distributing or selling, or to redesign our products or services, or to pay damages.

We depend upon our executive officers and key personnel, but may be unable to attract and retain them, which could significantly harm our business and results of operations.

     Our success depends on the continued employment of certain executive officers and key employees, including Robert Glaser, our founder, Chairman of the Board and Chief Executive Officer. The loss of the services of Mr. Glaser or other key executive officers or employees could harm our business.

     Our success is also dependent upon our ability to identify, attract and retain highly skilled management, technical, and sales personnel, both in our domestic operations and as we expand internationally. Qualified individuals are in high demand and competition for such qualified personnel in our industry is intense, and we may incur significant costs to retain or attract them. There can be no assurance that we will be able to attract and retain the key personnel necessary to sustain our business or support future growth.

Acquisitions involve costs and risks that could harm our business and impair our ability to realize potential benefits from acquisitions.

     As part of our business strategy, we have acquired technologies and businesses in the past and expect that we will continue to do so in the future. In the period from 2006 through the second quarter of 2008, we completed the acquisition of substantially all of WiderThan and the acquisitions of Sony NetServices GmbH, Exomi Oy,

Game Trust Inc. and substantially all of the assets of Trymedia Systems, Inc. The failure to adequately manage the costs and address the financial, legal and operational risks raised by acquisitions of technology and businesses could harm our business and prevent us from realizing the benefits of the acquisitions.

     Acquisition-related costs and financial risks related to completed and potential future acquisitions may harm our financial position, reported operating results, or stock price. Previous acquisitions have resulted in significant expenses, including amortization of purchased technology, amortization of acquired identifiable intangible assets and the incurrence of non-cash charges for the impairment of goodwill and other intangible assets in the fourth quarter of 2008, which are reflected in our operating expenses. New acquisitions and any potential additional future impairment of the value of purchased assets, including goodwill, could have a significant negative impact on our future operating results.

     Acquisitions also involve operational risks that could harm our existing operations or prevent realization of anticipated benefits from an acquisition. These operational risks include:

	•		difficulties and expenses in assimilating the operations, products, technology, information systems, and/or personnel of the acquired company;
	•		retaining key management or employees of the acquired company;
	•		entrance into unfamiliar markets, industry segments, or types of businesses;
	•		operating and integrating acquired businesses in remote locations;
	•		integrating and managing businesses based in countries in which we have little or no prior experience;
	•		diversion of management time and other resources from existing operations to integration activities for acquired businesses;
	•		impairment of relationships with employees, affiliates, advertisers or content providers of our business or acquired business; and
	•		assumption of known and unknown liabilities of the acquired company, including intellectual property claims.

An impairment in the carrying value of our long-lived assets could adversely affect our financial condition and results of operations.

     Long-lived assets consist primarily of equipment, software and leasehold improvements, as well as amortizable intangible assets acquired in business combinations. Long-lived assets are amortized on a straight line basis over their estimated useful lives. We review long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. If the carrying amount of an asset is not recoverable, an impairment loss is recognized based on the excess of the carrying amount of the long-lived asset over its respective fair value, which is generally determined as the present value of estimated future undiscounted cash flows. During the quarter ended December 31, 2008, we concluded that the net book value related to certain intangible assets exceeded the fair value attributable to such intangible assets. As a result, we recorded charges of $57.6 million as impairments of long-lived assets within our consolidated statements of operations and comprehensive income in 2008. No such impairments were recognized in either the quarter or nine months ended September 30, 2009.

     The impairment analysis of long-lived assets is based upon estimates and assumptions relating to our future revenue, cash flows, operating expenses, costs of capital and capital purchases. These estimates and assumptions are complex and subject to a significant degree of judgment with respect to certain factors including, but not limited to, the cash flows of our long-term operating plans, market and interest rate risk, and risk-commensurate discount rates and cost of capital. Significant or sustained declines in future revenue or cash flows, or adverse changes in our business climate, among other factors, and their resulting impact on the estimates and assumptions relating to the value of our long-lived assets could result in the need to perform an impairment analysis in future interim periods which could result in a significant impairment. While we believe our estimates and assumptions are reasonable, due to their complexity and subjectivity, these estimates and assumptions could vary period to period.

We need to develop relationships and technical standards with manufacturers of non-PC media and communication devices and interoperability of our services with these devices to grow our business.

     Access to the Internet through devices other than a PC, such as personal digital assistants, cellular phones, television set-top devices, game consoles, Internet appliances and portable music and games devices has increased dramatically and is expected to continue to increase. If a substantial number of alternative device manufacturers do not license and incorporate our technology and services into their devices, we may fail to capitalize on the opportunity to deliver digital media to non-PC devices which could harm our business prospects. In addition, in order for our services, in particular, the digital music services offered through Rhapsody America, to continue to grow, we must design services that interoperate effectively with a variety of hardware devices. To achieve this interoperability, we and Rhapsody America depend on significant cooperation with manufacturers of these products and with software manufacturers that create the operating systems for such hardware devices to achieve our objectives. If we do not successfully make our products and technologies compatible with emerging standards and the most popular devices used to access digital media or successfully design our service to interoperate with the music playback devices that our customers own, we may miss market opportunities and our business and results will suffer.

We may be unable to adequately protect our proprietary rights or leverage our patent portfolio, and may face risks associated with third-party claims relating to our intellectual property.

     Our ability to compete partly depends on the superiority, uniqueness and value of our patent portfolio and other technology, including both internally developed technology and technology licensed from third parties. To protect our proprietary rights, we rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions. However, our efforts to protect our intellectual property rights may not assure our ownership rights in our intellectual property, protect or enhance the competitive position of our products and services or effectively prevent misappropriation of our technology. As disputes regarding the validity and scope of patents or the ownership of technologies and rights associated with streaming media, digital distribution, and online businesses are common and likely to arise in the future, we may be forced to litigate to enforce or defend our patents and other intellectual property rights or to determine the validity and scope of other parties’ proprietary rights, enter into royalty or licensing agreements on unfavorable terms or redesign our product features and services. Any such dispute would likely be costly and distract our management, and the outcome of any such dispute could fail to improve our business prospects or otherwise harm our business.

     From time to time we receive claims and inquiries from third parties alleging that our technology may infringe the third parties’ proprietary rights, especially patents. Third parties have also asserted and most likely will continue to assert claims against us alleging infringement of copyrights, trademark rights, trade secret rights or other proprietary rights, or alleging unfair competition or violations of privacy rights. Currently we are

investigating or litigating a variety of such pending claims, some of which are more fully described in Note 14 to the financial statements in our quarterly report on Form 10-Q for the quarter ended September 30, 2009.

Our business and operating results will suffer if our systems or networks fail, become unavailable, unsecured or perform poorly so that current or potential users do not have adequate access to our products, services and websites.

     Our ability to provide our products and services to our customers and operate our business depends on the continued operation and security of our information systems and networks. A significant or repeated reduction in the performance, reliability, security or availability of our information systems and network infrastructure could harm our ability to conduct our business, and harm our reputation and ability to attract and retain users, customers, advertisers and content providers. We have on occasion experienced system errors and failures that caused interruption in availability of products or content or an increase in response time. Problems with our systems and networks could result from our failure to adequately maintain and enhance these systems and networks, natural disasters and similar events, power failures, HVAC failures, intentional actions to disrupt our systems and networks and many other causes. The vulnerability of a large portion of our computer and communications infrastructure is enhanced because much of it is located at a single leased facility in Seattle, Washington, an area that is at heightened risk of earthquake, flood, and volcanic events. Many of our services do not currently have fully redundant systems or a formal disaster recovery plan, and we may not have adequate business interruption insurance to compensate us for losses that may occur from a system outage.

The growth of our business is dependent in part on successfully implementing our international expansion strategy.

     Our international operations involve risks inherent in doing business on an international level, including difficulties in managing operations due to distance, language, and cultural differences, different or conflicting laws and regulations, taxes, and exchange rate fluctuations. Any of these factors could harm operating results and financial condition. Our foreign currency exchange risk management program reduces, but does not eliminate, the impact of currency exchange rate movements.

We may be subject to market risk and legal liability in connection with the data collection capabilities of our products and services.

     Many of our products are interactive Internet applications that by their very nature require communication between a client and server to operate. To provide better consumer experiences and to operate effectively, our products send information to our servers. Many of the services we provide also require that a user provide certain information to us. We have an extensive privacy policy concerning the collection, use and disclosure of user data involved in interactions between our client and server products. Any failure by us to comply with our posted privacy policy and existing or new legislation regarding privacy issues could impact the market for our products and services, subject us to litigation, and harm our business.

We may be subject to assessment of sales and other taxes for the sale of our products, license of technology or provision of services.

     Currently we do not collect sales, value-added tax (VAT), transactional or other taxes on the sale of our products, license of technology or provision of services in states and countries other than those in which we have offices, employees or other taxable presence. However, one or more states or foreign countries may seek to impose sales, VAT, transactional or other tax collection obligations on us in the future. A successful assertion by one or more states or foreign countries that we should be collecting sales, VAT, transactional or other taxes on the sale of our products, licenses of technology, provision of services or from our Internet commerce activities could result in

substantial tax liabilities for past sales, discourage customers from purchasing our products from us or otherwise substantially harm our business.

     Currently, decisions by the U.S. Supreme Court restrict the ability of states to force remote sellers to collect state and local sales and use taxes. However, a number of states and the U.S. Congress have been considering various initiatives that could limit or supersede the Supreme Court’s position regarding sales and use taxes on products and services sold through the Internet. If these initiatives are successful, we could be required to collect and remit sales and use taxes in additional states. States are also continuing to define the taxability of digital goods. Taxation of digital goods is subject to complex evolving tax rules that could result in additional taxation of our products and services. The imposition of additional tax obligations related to our business activities by state and local governments could materially adversely affect our operating results, create administrative burdens for us and decrease our future sales.

     In those countries where we have taxable presence, we collect VAT on sales of “electronically supplied services” provided to European Union residents, including software products, games, data, publications, music, video and fee-based broadcasting services. The collection and remittance of VAT subjects us to additional currency fluctuation risks.

We may be subject to additional income tax assessments.

     We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes, income taxes payable, and net deferred tax assets. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different than that which is reflected in our historical financial statements. An audit or litigation can result in significant additional income taxes payable in the U.S. or foreign jurisdictions which could have a material adverse effect on our financial condition and results of operations.

Risks Related to Our Previously Announced Separation of Our Games Business

We announced our intention to separate our global Games business into an independent company and to distribute shares of the newly created games company to our shareholders. If such transactions are postponed for a significant period of time or not completed, our stock price and business may be adversely affected, and we may not realize the anticipated benefits of the separation transactions.

     In May 2008, we announced our intention to separate our global Games business into an independent company and to distribute shares of the newly created games company to our shareholders. In February 2009, we announced that we postponed work with our outside advisors, stopped external spending on the proposed transactions and wrote off the capitalized transaction-related costs in the fourth quarter of 2008. While we still intend to create a separate games company, current conditions do not support the separation transactions.

     In addition, our business and operations may be harmed to the extent there is customer or employee uncertainty surrounding the future direction of our product and service offerings and strategy for our Games business. Even if we resume working with our outside advisors on the separation transactions, we may not complete the transactions, which are subject to a number of factors including business and market conditions, the final approval of our board of directors, the effectiveness of a registration statement, the receipt of a favorable letter ruling from the Internal Revenue Service and the execution of inter-company agreements. If the separation transactions are not completed, we and our shareholders will not realize the anticipated financial, operational and other benefits from such transactions.

Risks Related to the Securities Markets and Ownership of Our Common Stock

Our directors and executive officers beneficially own more than 38% of our stock, which gives them significant control over certain major decisions on which our shareholders may vote, may discourage an acquisition of us, and any significant sales of stock by our officers and directors could have a negative effect on our stock price.

     Our executive officers, directors and affiliated persons beneficially own more than 38% of our common stock. Robert Glaser, our Chief Executive Officer and Chairman of the Board, beneficially owns more than 38% of our common stock himself. As a result, our executive officers, directors and affiliated persons will have significant influence to:

	•		elect or defeat the election of our directors;
	•		amend or prevent amendment of our articles of incorporation or bylaws;
	•		effect or prevent a merger, sale of assets or other corporate transaction; and
	•		control the outcome of any other matter submitted to the shareholders for vote.

     Management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of RealNetworks, which in turn could reduce our stock price or prevent our shareholders from realizing a premium over our stock price.

Provisions of our charter documents, Shareholder Rights Plan, and Washington law could discourage our acquisition by a third-party.

     Our articles of incorporation provide for a strategic transaction committee of the board of directors. Without the prior approval of this committee, and subject to certain limited exceptions, the board of directors does not have the authority to:

	•		adopt a plan of merger;
	•		authorize the sale, lease, exchange or mortgage of assets representing more than 50% of the book value of our assets prior to the transaction or on which our long-term business strategy is substantially dependent;
	•		authorize our voluntary dissolution; or
	•		take any action that has the effect of any of the above.

     In addition, Mr. Glaser has special rights under our articles of incorporation to appoint or remove members of the strategic transaction committee at his discretion that could make it more difficult for RealNetworks to be sold or to complete another change of control transaction without Mr. Glaser’s consent.

     RealNetworks has also entered into an agreement providing Mr. Glaser with certain contractual rights relating to the enforcement of our charter documents and Mr. Glaser’s roles and authority within RealNetworks.

     We have adopted a shareholder rights plan, which was amended and restated in December 2008, that provides that shares of our common stock have associated preferred stock purchase rights. The exercise of these rights would make the acquisition of RealNetworks by a third-party more expensive to that party and has the effect

of discouraging third parties from acquiring RealNetworks without the approval of our board of directors, which has the power to redeem these rights and prevent their exercise.

     Washington law imposes restrictions on some transactions between a corporation and certain significant shareholders. The foregoing provisions of our charter documents, shareholder rights plan, our agreement with Mr. Glaser, and Washington law, as well as our charter provisions that provide for a classified board of directors and the availability of “blank check” preferred stock, could have the effect of making it more difficult or more expensive for a third-party to acquire, or of discouraging a third-party from attempting to acquire, control of us. These provisions may therefore have the effect of limiting the price that investors might be willing to pay in the future for our common stock.

THE OFFER

1.

Eligibility.

     You are an “Eligible Employee” and may participate in the offer if you are an active employee of RealNetworks (or one of its subsidiaries) whose principal work location is in an Eligible Country as of the start of the offer and remain so through the Cancellation Date. Our Section 16 officers and directors may not participate in this offer. Our Section 16 officers and directors are listed on Schedule A of this Offer to Exchange.

     To receive a grant of New Options, you must remain employed by RealNetworks, one of its subsidiaries, or a successor entity through the New Option Grant Date. The New Option Grant Date will be the same U.S. calendar day as the Cancellation Date. If you do not remain employed by RealNetworks, one of its subsidiaries, or a successor entity through the New Option Grant Date, you will keep your current Eligible Options and they will vest and expire in accordance with their terms. If we do not extend the offer, the New Option Grant Date is expected to be December 17, 2009. Except as provided by applicable law and/or any employment agreement between you and RealNetworks (or one of its subsidiaries), your employment with RealNetworks (or one of its subsidiaries) will remain “at-will” regardless of your participation in the offer and can be terminated by you or your employer at any time with or without cause or notice. In order to vest in your New Options, you generally must remain an employee of RealNetworks (or one of its subsidiaries) through each relevant vesting date.

2.

Number of New Options; Expiration Date.

     Subject to the terms and conditions of this offer, we will accept for exchange options granted with an exercise price greater than $4.48 per share (the 52-week high of our per share stock price as of the launch of this offer) under the Plans that are held by Eligible Employees, are outstanding and unexercised as of the Expiration Date, and that are properly elected to be exchanged, and are not validly withdrawn, before the Expiration Date. In order to be eligible, options must be outstanding on the Expiration Date. For example, if a particular option grant expires during the Offering Period, that option grant is not eligible for exchange.

     Participation in this offer is completely voluntary. You may decide which of your Eligible Option Grants you wish to exchange. If you hold more than one Eligible Option Grant, however, you may choose to exchange one or more of such Eligible Option Grants without having to exchange all of your Eligible Option Grants. If you elect to participate in this offer, you must exchange all of the shares subject to any particular Eligible Option Grant that you choose to exchange. We will not accept partial tenders of option grants. If you elect to participate in this offer with respect to any partially exercised Eligible Option Grant, you must exchange the entire remaining portion of such option grant.

     For example, if you hold (1) an Eligible Option Grant to purchase 1,000 shares, 700 of which you have already exercised, (2) an Eligible Option Grant to purchase 1,000 shares, and (3) an Eligible Option Grant to purchase 3,000 shares, you may choose to exchange all three option grants, or only two of the three option grants, or only one of the three grants, or none at all. You may not elect to exchange a partial amount under any option grant (such as an election to exchange only 150 shares of the remaining 300 shares under the first option grant).

     If you have an option that is subject to a domestic relations order (or comparable legal document as the result of the end of a marriage) and a person who is not an Eligible Employee of RealNetworks (or one of its subsidiaries) beneficially owns a portion of that option, you may accept this offer with respect to the entire remaining outstanding portion of the option grant if so directed by the beneficial owner as to his or her portion in accordance with the domestic relations order or comparable legal documents. As described above, we will not accept partial tenders of option grants, so you may not accept this offer with respect to a portion of an Eligible Option Grant that is beneficially owned by you while rejecting it with respect to the portion beneficially owned by

someone else. As you are the legal owner of the Eligible Options, we will respect an election to exchange such Eligible Option Grant pursuant to the offer that is made by you and accepted by us and we will not be responsible to you or the beneficial owner of the Eligible Option Grant for any action taken by you with respect to such Eligible Option Grant.

     For example, if you are an Eligible Employee and you hold an Eligible Option Grant to purchase 3,000 shares that is subject to a domestic relations order, 1,000 shares of which are beneficially owned by your former spouse, and you have exercised 500 of the remaining 2,000 shares, then you may elect to exchange the 2,500 shares that remain outstanding subject to the Eligible Option Grant, or you may elect not to participate in the offer at all with respect to this option grant. These are your only choices with respect to this option grant.

      New Options

     All Eligible Employees who properly tender Eligible Options pursuant to this offer will receive New Options. The per share exercise price of the New Options will be the fair market value of a share of RealNetworks’ common stock on the New Option Grant Date, which is currently expected to be December 17, 2009.

      Exchange Ratios

     Subject to the terms of this offer and upon our acceptance of your properly tendered options, each Exchanged Option will be cancelled and replaced with a New Option to purchase a reduced number of shares of our common stock equal to (a) the number of options you exchange divided by (b) an exchange ratio. For purposes of applying the exchange ratios, fractional shares subject to New Options will be rounded down to the nearest whole share. The exchange ratios will be applied on a grant-by-grant basis. This means that the various Eligible Options you hold may be subject to different exchange ratios. The exchange ratios for your Eligible Options will be provided on the RealNetworks offer website when you make your election as described in Question and Answer 2, which begins on page 2. We used a binomial valuation model to determine the exchange ratios. The most favorable exchange ratio that will apply to Eligible Options is fixed at 1.5-to-1.0, even if the binomial model returned a more favorable exchange ratio. In addition, exchange ratios were established by grouping together Eligible Options with similar binomial model values, with exchange ratios rounded up to the next higher band. For example, if the binomial model value of a particular Eligible Option grant indicated the exchange ratio for that grant was 2.3-to-1.0, the actual exchange ratio for that grant was set at 2.5-to-1.0. For purposes of this offer, including the exchange ratios, the term “option” generally refers to an option to purchase one share of our common stock.

     The following table represents the exchange ratios applicable to the offer.

Exchange Ratios Using Binomial Model
Exchange Ratio														Number of New Stock
(Eligible Options		Number of Shares Underlying				Weighted Average				Weighted Average				Options that May be
for New Options)		Eligible Options (1)				Exercise Price				Remaining Term				Granted (2)
1.5-for-1			6,623,716			$	6.49				13.13	(3)			4,415,775
2.0-for-1			3,821,605			$	6.70				5.69				1,910,802
2.5-for-1			5,735,966			$	6.58				4.91				2,294,386
3.0-for-1			3,463,949			$	6.93				3.66				1,154,635
3.5-for-1			110,374			$	11.03				4.15				31,535
4.0-for-1			1,381,772			$	9.27				3.59				345,441
4.5-for-1			4,919,716			$	10.38				3.67				1,093,252
5.0-for-1			262,500			$	10.27				3.35				52,500
Total: 2.3-for-1			26,319,598			$	7.53				6.61				11,298,326
Total stock options surrendered:															26,319,598
Total stock options re-issued:															11,298,326
Total stock options surrendered and available for re-grant:															10,514,890
Total stock options retired and not available for future grant:															4,506,382

      Example

If you exchange an option grant covering 1,000 shares that fits within the 5.0-for-1 exchange ratio category, on the New Option Grant Date you will receive a new option for 200 shares of our common stock. This is equal to the 1,000 shares divided by the 5.0-for-1 exchange ratio.

     All New Options will be subject to the terms of our 2005 Stock Incentive Plan, as approved by the shareholders of the Company on September 21, 2009 and to be effective upon the completion of the offer (the “ 2005 Plan ”), and to an option agreement entered into between you and RealNetworks. The current forms of option agreement under the 2005 Plan are filed as exhibits to the Schedule TO with which this Offer to Exchange has been filed. If you are an employee outside the U.S., your New Options may be subject to additional terms and conditions set forth in a country-specific appendix to the option agreement to comply or facilitate compliance with local law.

     The Expiration Date will be 9:00 p.m., U.S. Pacific Time, on December 17, 2009, unless we extend the offer. We may, in our discretion, extend the offer, in which event the Expiration Date will refer to the latest time and date at which the extended offer expires. See Section 15 of this Offer to Exchange for a description of our rights to extend, terminate, and amend the offer.

3.

Purpose of the offer.

     The primary purpose of this offer is to improve the retention and incentive benefits of our equity awards. We believe that this offer will foster retention of valuable employees of RealNetworks and its subsidiaries, provide meaningful incentive to them, and better align the interests of employees and shareholders to maximize shareholder value. The offer also will have the added benefit of reducing the number of shares subject to outstanding equity awards (we refer to this as our “overhang”). A reduced overhang will decrease the potential dilution of shareholders’ interests.

     We issued the currently outstanding options to attract and retain the best available personnel and to provide incentive to employees and other service providers of RealNetworks and its subsidiaries. Our stock price, like that of many other companies in the technology industry, has dropped substantially as a result of the national and global economic downturn. In response, we have taken actions in an effort to manage our business more efficiently and cost-effectively; however, our stock price remains at a relatively low level on a historical basis. Some of our outstanding options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current market price for our stock. These options are commonly referred to as being “underwater.” By making this offer, we intend to provide Eligible Employees with the opportunity to own New Options that over time may have a greater potential than the underwater options to increase in value.

     Except as otherwise disclosed in this offer or in our SEC filings, we presently have no plans or proposals that relate to or would result in:

	•		Any extraordinary transaction, such as a merger, reorganization or liquidation involving RealNetworks;
	•		Any purchase, sale or transfer of a material amount of our assets;
	•		Any material change in our present dividend rate or policy, or our indebtedness or capitalization;
	•		Any change in our present board of directors or management, including, but not limited to, any plans or proposals to change the number or term of directors or to fill any existing board vacancies or to change any named executive officer’s material terms of employment;
	•		Any other material change in our corporate structure or business;
	•		Our common stock being delisted from the NASDAQ Global Select Market or not being authorized for quotation in an automated quotation system operated by a national securities association;
	•		Our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act;
	•		The suspension of our obligation to file reports pursuant to Section 15(d) of the Exchange Act;
	•		The acquisition by any person of a material amount of our securities or the disposition of a material amount of any of our securities; or
	•		Any change in our articles of incorporation or bylaws, or any actions that may impede the acquisition of control of us by any person.

      Neither we nor our board of directors makes any recommendation as to whether you should accept this offer, nor have we authorized any person to make any such recommendation. You should evaluate carefully all of the information in this offer and consult your own investment and tax advisors. You must make your own decision about whether to participate in this offer.

4.

Procedures for electing to exchange options.

      Proper election to exchange options .

     Participation in this offer is voluntary. If you are an Eligible Employee, at the start of the offer you will receive an email from Sid Ferrales, our Senior Vice President of Human Resources, announcing the offer. If you want to participate in the offer, you must make an election in one of the manners described below before the Expiration Date, currently expected to be 9:00 p.m., U.S. Pacific Time, on December 17, 2009.

Elections via Offer Website

     1. To submit an election via the offer website, click on the link to the offer website in the email you received from Sid Ferrales announcing this offer or go to the offer website at https://realnetworks.equitybenefits.com .

     2. Log into the offer website using the login instructions provided to you in the email you received from stock@real.com on November 19, 2009.

     3. After logging into the offer website, click on the “MAKE AN ELECTION” button. You will be directed to your election form that contains the following personalized information with respect to each Eligible Option you hold, including:

	•		the option number of the Eligible Option;
	•		the grant date of the Eligible Option;
	•		the total number of outstanding shares subject to the Eligible Option;
	•		the current exercise price per share of the Eligible Option; and
	•		the expiration date and remaining life of the Eligible Option.

     4. Select the appropriate box next to each of your Eligible Option Grants to indicate your choice whether to exchange your Eligible Options in accordance with the terms of this offer. Select the “NEXT” button to proceed to the next page.

     5. After completing the election form, you will have the opportunity to review the elections you have made with respect to your Eligible Options. If you are satisfied with your elections, continue the election process as instructed through the offer website. Select the “I AGREE” button to agree to the Agreement to Terms of Election and to submit your election.

     6. You will be directed to the Confirmation Statement page. Please print and keep a copy of the Confirmation Statement for your records.

Elections via Fax or Email

     Alternatively, you may submit your election form via fax or email by doing the following:

     1. Properly complete, sign and date the election form that you received in the email from Sid Ferrales, dated November 19, 2009, announcing the offer.

     2. Submit the properly completed election form to Stock Plan Administration by email at stock@real.com or by fax to (206) 674-2695. We must receive your properly completed and submitted election form by the Expiration Date, currently expected to be 9:00 p.m., U.S. Pacific Time, on December 17, 2009.

     If you want to use the offer website but are unable to submit your election via the offer website as a result of technical failures of the offer website, such as the offer website being unavailable or the offer website not accepting your election, or if you do not have access to the offer website for any reason, you may submit your election by email or facsimile by following the instructions provided above. To obtain a paper election form, please contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695.

     If you elect to exchange any Eligible Option Grant in this offer, you must elect to exchange all shares subject to that Eligible Option Grant. If you hold more than one Eligible Option Grant, however, you may choose to exchange one or more of such Eligible Option Grants without having to exchange all of your Eligible Option Grants. To help you recall your outstanding Eligible Options and give you the information necessary to make an informed decision, please refer to the grant information available via the offer website that lists your Eligible Option Grants, the grant date of your Eligible Options, the current exercise price per share of your Eligible Options, and the number of outstanding shares subject to your Eligible Options. Each time you make an

election on the RealNetworks Offer website, please be sure to make an election with respect to each of your eligible options. If you need an election form or other offer documents or are unable to access your grant information via the offer website, you may contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695.

     This is a one-time offer, and we will strictly enforce the Offering Period. We reserve the right to reject any elections to exchange options that we determine are not in appropriate form or that we determine are unlawful to accept, as determined by the Company in its sole discretion. For example, and in no way limiting the Company’s ability to reject a form that it determines is not appropriate, if you fail to fully complete or alter in any way the election form or any of the related documents, the Company has the right to reject your election form. Subject to the terms and conditions of this offer, we will accept all properly tendered Eligible Options promptly after the expiration of this offer.

     We may extend this offer. If we extend this offer, we will issue a press release, email or other communication disclosing the extension no later than 6:00 a.m., U.S. Pacific Time, on the U.S. business day following the previously scheduled Expiration Date.

      Your delivery of all documents regarding the offer, including elections and withdrawals, is at your risk. If you submit your election or withdrawal via the offer website, you should print and keep a copy of the Confirmation Statement on the offer website at the time that you complete and submit your election or withdrawal. The printed Confirmation Statement will provide evidence that you submitted your election or withdrawal. If you submit your election or withdrawal via email or facsimile, we intend to confirm the receipt of your election or withdrawal by email within two U.S. business days of receiving your election or withdrawal. If you have not received a confirmation, it is your responsibility to confirm that we have received your election and/or any withdrawal. You should contact Stock Plan Administration by email at stock@real.com or by facsimile at (206) 674-2695. Note that if you submit any election and/or withdrawal via email or facsimile within the last two U.S. business days prior to the expiration of the offer, time constraints may prevent RealNetworks from providing you with an email confirmation prior to the expiration of the offer. Only responses that are properly completed and actually received by RealNetworks by the deadline by the offer website, email, or facsimile will be accepted. Responses submitted by any other means, including hand delivery, interoffice or U.S. mail (or other post) and Federal Express (or similar delivery service), are not permitted.

     Our receipt of your election form is not by itself an acceptance of your options for exchange. For purposes of this offer, we will be deemed to have accepted options for exchange that are validly elected to be exchanged and are not properly withdrawn as of the time when we give oral or written notice to the option holders generally of our acceptance of options for exchange. We may issue this notice of acceptance by press release, email or other form of communication. Options accepted for exchange will be cancelled on the Cancellation Date, which we presently expect will be December 17, 2009.

      Determination of validity; rejection of options; waiver of defects; no obligation to give notice of defects .

     We will determine, in our discretion, all questions as to the validity, form, eligibility (including time of receipt) and acceptance of any options. Our determination of these matters will be given the maximum deference permitted by law. However, you have all rights accorded to you under applicable law to challenge a determination in a court of competent jurisdiction. Only a court of competent jurisdiction can make a determination that will be final and binding upon the parties. We reserve the right to reject any election form or any options elected to be exchanged that we determine are not in appropriate form or that we determine are unlawful to accept. We will accept all properly tendered options that are not validly withdrawn. We also reserve the right to waive any of the conditions of the offer or any defect or irregularity in any tender of any particular options or for any particular

option holder, provided that if we grant any such waiver, it will be granted with respect to all option holders and tendered options. No tender of options will be deemed to have been properly made until all defects or irregularities have been cured by the tendering option holder or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in tenders, nor will anyone incur any liability for failure to give any notice. This is a one-time offer. We will strictly enforce the Offering Period, subject only to an extension that we may grant in our discretion.

      Our acceptance constitutes an agreement .

     Your election to exchange options through the procedures described above constitutes your acceptance of the terms and conditions of this offer. Our acceptance of your options for exchange will constitute a binding agreement between RealNetworks and you upon the terms and subject to the conditions of this offer.

5.

Withdrawal rights and change of election.

     You may withdraw some or all of the options that you previously elected to exchange only in accordance with the provisions of this section. You may withdraw some or all of the options that you previously elected to exchange at any time by the expiration of the offer, which is expected to occur at 9:00 p.m., U.S. Pacific Time, on December 17, 2009. If we extend the offer, you may withdraw your options at any time until the extended expiration date.

     In addition, although we intend to accept all validly tendered options promptly after the expiration of this offer, if we have not accepted your options by 9:00 p.m., U.S. Pacific Time, on January 19, 2010, you may withdraw your options at any time thereafter.

     To withdraw some or all of the options that you previously elected to exchange, you must do one of the following before the Expiration Date, currently expected to be 9:00 p.m., U.S. Pacific Time, on December 17, 2009.

      Withdrawals via Offer Website

     1. Log into the offer website via the link provided in the email announcing the offer or via https://realnetworks.equitybenefits.com , by using the login instructions provided to you in the email you received from stock@real.com on November 19, 2009.

     2. After logging into the offer website, click on the “MAKE AN ELECTION” button. You will be directed to your election form that contains the following personalized information with respect to each Eligible Option you hold, including:

	•		the option number of the Eligible Option;
	•		the grant date of the Eligible Option;
	•		the total number of outstanding shares subject to the Eligible Option;
	•		the current exercise price per share of the Eligible Option; and
	•		the expiration date and remaining life of the Eligible Option.

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