Listen Up: Plans Public Stock Offer

When we said that RealNetworks was really four or five businesses in one in a recent report, part of that observation was based on the broadcasting network gurgling under its software side. But nobody really knows about it in a branded way. Coming in with no static at all, however, is Internet audio-video network firm, which just filed for an initial public offering.

We estimate may seek to go public at 20x estimated 1998 revenue that we target at $13.5 million. That suggests’s IPO market value could be about $220 million if it goes at the $13 maximum price per share noted in its filing. A boatload of options and warrants dilute total shares outstanding further, however, and bring the effective market cap to $281 million or 21x revenue.

IPO estimates



Greenshoe (underwriters over-allotment)


Total offer with greenshoe


Maximum IPO price per share

$ 13.00

IPO gross proceeds w/ greenshoe

$ 37.38



$ 6.86

Three months ending 3/31/98

$ 3.18

Estimated 1998 revenue

$ 13.50



$ (6.47)

Three months ending 3/31/98

$ (2.72)

(c) 1998 Mecklermedia.
; figures in millions, except share price

Here’s how works: It offers live and on-demand audio and video programming, including sports, talk and music radio, television, business events, full-length CDs, news, commentary and full-length audio-books via the Internet 24 hours a day, seven days a week.

Programming includes more than 345 radio stations and networks, 17 television stations and cable networks, and game broadcasts and other programming for over 350 college and professional sports teams.

Most content is licensed in exclusive multi-year agreements and the site has more than 440,000 unique daily users, according to the company filing. It also does business services in conference calls, investor meetings, company audio, and more. has licensed content from CNN, BBC, and various sports leagues for broadcast to consumers. Business customers include AOL, AT&T and DELL to name a few.

Forty two percent of revenue is from Web ads, 36% from business services, 16% from traditional media advertising and the remainder from what it dubs “other.”

Contrast that with RealNetworks (NASDAQ:RNWK), a pioneer in audio/video software that sends sounds streaming over the Internet. It trades at 19x in our view with a market cap of $988 million. RealNetworks is a deeper company because it owns the software side and runs “broadcast-like” networks off that, although not with a high degree of visibility., formerly AudioNet, began operations in 1995 at about the same time as RealNetworks, and as in most things Internet, your clients are sometimes your competitors in one arena– licenses software from RealNetworks.

Underwriters are Morgan Stanley, DLJ and Hambrecht & Quist. Directors and company executives own 43.8% after the IPO. Motorola will own 14% and Intel 5.2%. Yahoo! will also own a small amount of shares through a warrant.

Pros: has aggregated an impressive list of content feeds for the next several years. It could be one of the first audio-video “portals” on the Web in a much larger way.

Cons: We see the larger media companies extending their franchises onto the Web with audio-video feeds already with more likely to follow. And the larger Web media networks (our name for “portals” from AltaVista to Yahoo!) will also probably deliver more multimedia in the future also. The race is to build a brand so users tune in.

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