RealNetworks says it's spinning off its Rhapsody music joint venture into a separate company to be based in downtown Seattle and operated independently.

RealNetworks will maintain a considerable stake in the Rhapsody business, but will reduce its ownership to slightly less than 50 percent, equal to its partner, Viacom's MTV Networks. The Seattle company currently has a controlling stake of 51 percent in the joint venture.

About 150 of RealNetworks' approximately 1,600 employees will shift to the new company. The move, which follows the departure of founder Rob Glaser as CEO, is part of an effort by the Seattle company to streamline its business following an extensive review of its operations during Glaser's tenure.

In a news release, the company hinted that this won't be the end of that process.

"Separating Rhapsody into its own independent company is a significant first step in making RealNetworks a more focused and profitable company,” said Robert Kimball, the company's president and acting CEO, in the news release. “Rhapsody will be the largest pure play digital music service in the market. We have provided Rhapsody with the right team, and financial and intellectual property assets to succeed in the competitive market for digital music.”

To form the new company, RealNetworks will contribute $18 million in cash, plus the Rhapsody brand. MTV Networks will contribute $33 million in advertising. Here are the other financial details of the spin-off, as disclosed this afternoon in a Securities and Exchange Commission filing by RealNetworks.

At the closing of the transactions contemplated by the Transaction Agreement, Rhapsody will be converted from a limited liability company to a corporation, and the Parties expect that Real and MTVN and one or more minority stockholders will hold the outstanding shares of Rhapsody such that Real and MTVN will own slightly less than 50%, but an equal amount, of such outstanding shares. Real will contribute $18 million in cash, the Rhapsody brand and certain other assets in exchange for shares of convertible preferred stock of Rhapsody, carrying a $10 million preference upon certain liquidation events. A portion of Real’s cash contribution is to repurchase the international radio business that was previously contributed to Rhapsody. MTVN will contribute a $33 million advertising commitment in exchange for shares of common stock of Rhapsody, and MTVN’s previous obligation to provide advertising of approximately $111 million as of December 31, 2009 will be cancelled. In addition, both the Stockholder Agreement, dated as of August 20, 2007, between Real and Viacom International Inc., on behalf of MTVN, and the Limited Liability Company Agreement, dated as of August 20, 2007, among the Parties will be terminated, including the put and call rights held by Real and MTVN and MTVN’s rights to receive a preferred return in connection with the exercise of Real’s put right.

Rhapsody had disclosed the possibility of such a deal in a November SEC filing, so it wasn't a complete surprise.

The companies say they expect the deal to close by the end of this quarter. 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.

RealNetworks previously put on hold plans to spin off its games unit in an initial public offering, but that possibility remains on the plate. The company announces quarterly earnings on Thursday afternoon.

Previously: RealNetworks at a crossroads: Sharper focus, uncertain future