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A digital play plan

RealNetworks acquires developer GameHouse

In a continued sign of its shift toward selling digital content online, RealNetworks is acquiring downloadable game developer GameHouse for $35.6 million in stock and cash.

Purchase strengthens company’s RealArcade service, which distributes arcade games from GameHouse and other developers.

Since its launch two years ago, RealArcade has sold over 2 million games to subscribers, who pay $6.95 to download one game each month. Its biggest developer is GameHouse, which has sold 1 million games through distributors such as Real, MSN and Shockwave.

“The combination of our deep consumer experience and GameHouse’s proven creative excellence will ensure a continuous stream of top quality content for RealArcade customers and our partners,” said Andrew Wright, RealNetworks VP of games.

GameHouse generated over $10 million in revenue and $5.5 million in net income in 2003. Like Real, it is located in Seattle, and it will continue to operate as a wholly owned subsidiary of RealNetworks after the deal’s closing, which is expected to occur in the next two weeks.

Real will pay $14.6 million in cash and 3.3 million shares of its common stock to acquire GameHouse. Approximately $18.3 million of the purchase price is tied to restrictions over the next four years, including retaining GameHouse’s top management.

Company said it expects the acquisition will add 1¢ per share in earnings this year after acquisition costs.

While it continues to provide streaming media technology, Real has spent the past year expanding its digital content offerings, including the recent launch of an online music store and continuing expansion of its RealOne video service.

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