1046327--3/16/2006--REALNETWORKS

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{product, market, service}

{system, service, information}

{stock, price, operating}

{acquisition, growth, future}

{tax, income, asset}

{property, intellectual, protect}

{regulation, change, law}

{control, financial, internal}

{loss, insurance, financial}

{cost, operation, labor}

{gas, price, oil}

{provision, law, control}

{personnel, key, retain}

{cost, contract, operation}

{stock, price, share}

{customer, product, revenue}

Risks Related to Our Consumer Products and Services Business Our online consumer businesses have grown substantially in recent periods and these businesses compete in rapidly evolving markets, which makes their prospects difficult to evaluate. Our online consumer businesses have generally lower margins than our traditional software license business. Our subscription levels may vary due to seasonality. The success of our subscription services businesses depends upon our ability to add new subscribers and minimize subscriber churn. Our digital content subscription businesses depend on our continuing ability to license compelling content on commercially reasonable terms. Our online music services depend upon our licensing agreements with the major music label and music publishing companies. Music publishing royalty rates for music subscription services are not yet fully established; a determination of high royalty rates could negatively impact our operating results. Our consumer businesses face substantial competitive challenges that may prevent us from being successful in those businesses. We may not be successful in the market for downloadable media and personal music management software. Our consumer businesses depend upon effective digital rights management solutions. Our Harmony Technology may not achieve consumer or market acceptance. The success of our music services depend, in part, on interoperability with our customer s music playback hardware. Risks Related to Our Business Products and Services Business Our system software business has been negatively impacted by the effects of our competitors and our recent settlement agreement with Microsoft may not improve our sales of our system software products. Our Helix open source initiative is subject to risks associated with open source technology. Sales of our commercial system products could be negatively affected by open source technologies. Risks Related to Our Business in General We have a history of losses, and we cannot be sure that we will be able to sustain profitability in the future. Our operating results are difficult to predict and may fluctuate, which may contribute to fluctuations in our stock price. Our settlement agreement with Microsoft may not improve our business prospects. Our products and services must compete with the products and services of strong or dominant competitors. Microsoft is one of our strongest competitors, and employs highly aggressive tactics against us. Any development delays or cost overruns may affect our operating results. Our business is dependent in part on third party vendors whom we do not control. If our products are not able to support the most popular digital media formats, our business will be substantially impaired. Our mobile digital media products and services are new and innovative and might not be successful. We depend on key personnel who may not continue to work for us. Our industry is experiencing consolidation that may cause us to lose key relationships and intensify competition. Potential acquisitions involve risks that could harm our business and impair our ability to realize potential benefits from acquisitions. Our recent acquisitions create unique challenges for us and if we fail to integrate and successfully operate the acquired companies, our business will be harmed. Acquisition-related costs could cause significant fluctuation in our net income (loss). Our strategic investments may not be successful and we may have to recognize expenses in our income statement in connection with these investments. We need to develop relationships and technical standards with manufacturers of non-PC media and communication devices to grow our business. If we are not successful in maintaining, managing and adding to our strategic relationships, our business and operating results will be adversely affected. Our business and operating results will suffer if our systems or networks fail, become unavailable, unsecure or perform poorly so that current or potential users do not have adequate access to our products, services and websites. We rely on the continued reliable operation of third parties systems and networks and, if these systems and networks fail to operate or operate poorly, our business and operating results will be harmed. Our network is subject to security risks that could harm our business and reputation and expose us to litigation or liability. The growth of our business is dependent in part on successfully implementing our international expansion strategy. We may be unable to adequately protect our proprietary rights. We may be forced to litigate to defend our intellectual property rights, or to defend against claims by third parties against us relating to intellectual property rights. Interpretation of existing laws that did not originally contemplate the Internet could harm our business and operating results. It is not yet clear how laws designed to protect children that use the Internet may be interpreted, and such laws may apply to our business in ways that may harm our business. We may be subject to market risk and legal liability in connection with the data collection capabilities of our products and services. We may be subject to legal liability for the provision of third-party products, services or content. When we account for employee stock options using the fair value method, it could significantly reduce our results of operations. We may be subject to assessment of sales and other taxes for the sale of our products, license of technology or provision of services. We donate a portion of our net income to charity. Risks Related to the Securities Markets and Ownership of Our Common Stock Our directors and executive officers beneficially own approximately one third 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. Provisions of our charter documents, Shareholder Rights Plan, and Washington law could discourage our acquisition by a third party. We are exposed to potential risks from recent legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002. Our stock price has been volatile in the past and may continue to be volatile. Financial forecasting of our operating results will be difficult because of the changing nature of our products and business, and our actual results may differ from forecasts.

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1046327--3/16/2006--REALNETWORKS_INC