The departure of founder Rob Glaser as RealNetworks CEO sets the stage for the company to improve its focus in an attempt to revive its business more than a decade after pioneering digital media on the internet.

New leaders will grapple with the future of RealNetworks’ video-game division, its high-profile Rhapsody music partnership with MTV, and its long-running legal battle with major Hollywood studios. Business units may be spun off, ceded to partners or sold — resulting in a leaner company with a smaller scope.

Moves made in the coming weeks and months will ultimately determine whether the 1,600-person company can survive in the rapidly changing tech industry and remain a mainstay of the Seattle tech community.

Overseeing these challenges, at least for now, is Bob Kimball, 46, an 11-year RealNetworks veteran who was named president and acting CEO when Glaser stepped down. In a statement accompanying the announcement, Kimball promised to make RealNetworks “a more focused and more profitable company.”

Bob Kimball, acting CEO

Wall Street appears ready for that kind of change.

“Investors’ concern over the last few years has been that Real has had too much of a ‘shotgun’ approach in targeting new markets, and has been willing to support money-losing businesses for too long,” analysts for investment firm Morgan Keenan & Co., of Memphis, Tenn., wrote in a research note. “We have thought for some time that there is significant unlocked value in Real’s business, and we hope the appointment of Kimball and his comments of improved focus and profitability prove true.”

Glaser, who remains the company’s chairman, said in a Jan. 13 message to employees that his departure as CEO followed “an extremely rigorous strategy review” that created “a very exciting road map for the future.”

Spokesman Bill Hankes said RealNetworks wasn’t ready to detail its plans, but the company has dropped some big hints. In a November filing with the Securities and Exchange Commission, RealNetworks said it was holding talks about giving up majority control of its Rhapsody joint venture with Viacom’s MTV Networks, allowing the digital-music subscription service to operate more independently.

[Related: Real broadens Rhapsody exec's role in another sign of change]

Also on the table is a spinoff of RealNetworks’ online games business, which has been planned since 2008 but was put on hold when the capital markets dried up.

And in the short run, the company will need to decide whether to stick with or give up on RealDVD, its technology for storing copies of movies on computer hard drives. Sales were halted by a federal court as the company suffered a series of legal setbacks in an ongoing battle against major movie studios that oppose the technology.

RealNetworks struggled during the recent downturn, posting five straight quarterly losses, but rebounded in the third quarter of 2009 to post a slim $1.5 million profit on $140.3 million in revenue.

Apart from games and Rhapsody, the company’s other major products and businesses include its RealPlayer consumer media software and its Helix technology for distributing digital media to computers and devices.

RealNetworks’ biggest business segment is its Technology Products and Solutions unit, which includes technology that lets wireless carriers distribute digital content. That unit posted $137 million in revenue for the nine months ended Sept. 30, down from $154 million in the same period the previous year.

In addition, the company has been hiring for a new “media cloud team,” described in a job posting as “building a product and service that will provide the casual user the ability to backup their most prized content (Photos, Music, etc.) and access that content on their computer, mobile device or living room device.”

Kimball’s appointment as president and a RealNetworks board member is considered permanent. He’s also expected to be among the candidates as the RealNetworks board searches for a permanent chief executive.

Kimball, previously RealNetworks’ general counsel, has a reputation for being “highly collaborative, always accepting of feedback and incredibly approachable,” said Ben Rotholtz, vice president of marketing at Seattle-based PopCap Games, who previously worked with Kimball at RealNetworks.

“It is hard to imagine a better steward of that company,” Rotholtz said. “He understands the (intellectual property) and he’s been there for a long time.”

RealNetworks’ choice of permanent CEO will say a lot about what direction the company will take in the future, said Andy Hargreaves, senior research analyst with Pacific Crest Securities in Portland, Ore.

“It depends who they bring in. If they bring someone in from the outside that has a history of deal making, then you can probably expect a lot of changes,” Hargreaves said. “If they promote someone from the inside, if Kimball’s promoted as (permanent) CEO, the change is going to be a lot less significant.”

Rhapsody has seen its subscriber base decline steadily, from 800,000 at the beginning of 2009 to 700,000 at the end of the third quarter. Rhapsody is based primarily on a subscription model, offering access to its catalog for $13 a month, focusing less on the pay-per-download model made popular by Apple.

“The best thing that could happen (to Rhapsody) is Apple launching a subscription service of its own. It would elevate interest in streaming as a delivery option in general,” Hargreaves said. “Other than that, it’s hard to see that business going anywhere.”

In the casual games business, RealNetworks operates in a highly competitive segment, promoting and distributing games from other developers.

For the nine months ended Sept. 30, the games business at RealNetworks recorded revenue of $92 million. That was down from $100 million for the same period in 2008.

“There is some saturation for the types of games that they do,” said Bob Chamberlain, PopCap’s chief financial officer. “It is kind of the special of the day, so it is very price driven and it has become very competitive. I think that is a tough one to really grow your revenues and really have some sustainable value.”

Chamberlain said he’d expect the RealNetworks board to carve up the company: “How does Rhapsody have anything to do with games?” he said. “I didn’t see the connection between them all.”

The next key date to watch will be Feb. 11, when RealNetworks announces earnings for its fourth quarter and the full year. Some analysts are expecting new signals about the company's plans when it releases those financial results.

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