Seattle-based Internet veteran RealNetworks this year has practically perfected the art of getting smaller — shedding unprofitable product lines, spinning off its music subscription business, and recently cutting the jobs of one-quarter of its executives in one fell swoop.

In fact, the biggest question now dogging the digital pioneer is not what to dump, but how to grow a stronger business from what remains. So what, exactly, is RealNetworks trying to become?

“You can picture us as a company that’s going to help you move, play and manage your media, and share and publish it, on any platform, on any network, on any device,” said Mike Lunsford, RealNetworks executive vice president, in an interview this week. “That’s what we’re aligning the company around now.”

Translation: RealNetworks is getting out of the business of selling digital content -- which helps to explain its Rhapsody music spin-off and the planned separation of its GameHouse video-game unit. Instead, the new RealNetworks plans to stick to making technology that lets people and companies do stuff with content.

Long term, RealNetworks has broad ambitions. The company has dropped hints that it’s working on a cloud-computing project — described in a job listing as a service that will let consumers synchronize and back up photos, music and other digital content across mobile phones, computers and living-room devices.

Makeover starts with mobile

Among its existing products and services, the company's big bet right now is on mobile phones. That might sound like a sure thing, given all the growth in that part of the tech industry. But the mobile market is shifting away from RealNetworks’ areas of strength -- which will require the company to adjust even as it tries to rebuild.

On mobile phones, RealNetworks provides the technology and services for wireless carriers to offer their customers video, audio and other digital content, such as “ringback” tones — music clips that mobile phone users can play for the people calling them. The company has relationships with mobile carriers such as AT&T and Verizon, and more than 80 others, tracing back to its 2006 acquisition of mobile content provider WiderThan Co.

The challenge for the company is that devices such as the iPhone and Google Android phones are increasingly replacing standard cell phones for many people, particularly in the United States. And those advanced phones come with their own application marketplaces, such as the Apple App Store, that largely replace the carrier marketplaces that RealNetworks powers with its technology.

“The world has changed,” Lunsford acknowledged. “A lot of those things that we’ve sold in the past are now sold through app stores. For us to continue to be successful and help our carriers earn revenue, we have to be in those stores.”

Among other initiatives, Lunsford said, RealNetworks is aiming to work with wireless carriers to help them establish a presence in those app stores.

That was one of the underlying reasons for RealNetworks’ June 22 restructuring, combining its Technology Products & Solutions business — the group responsible for its work with carriers — with its Media Software & Services business, a division of the company with experience in smart-phone apps.

But in the long run, the market could change even more dramatically. Over time, carriers are less likely to provide content and media, focusing instead on helping their customers find and use apps, boosting their data usage, said Duane Edwards, senior vice president of product development at Globys, a Seattle-based company that works with wireless carriers to analyze user data and market to their customers.

“You saw carriers get into that content business,” Edwards said, “but I think more and more they’re getting out of that and recognizing that ultimately where they will be getting their revenues long term is through data.”

However, Lunsford noted that some content, such as ringback tones, is integrated into the network and therefore best sold by carriers.

A narrower corporate focus

The ultimate success or failure of RealNetworks’ new approach will determine the fate of a company that has been a longtime fixture in Seattle’s technology economy, dating back to the original internet boom of the mid 1990s. Investors and analysts have given high marks to Bob Kimball, RealNetworks president and interim CEO, for bringing new focus to the company after the departure of founder Rob Glaser as chief executive.

Bob Kimball

But they’re reserving judgment, for now, on the ultimate outcome of the changes.

“Everything that (Kimball) has said is what I’ve wanted to hear from them for a long time,” said Andy Hargreaves, an analyst with Pacific Crest Securities in Portland. “Whether or not he has the pieces to work with is the question.”

Of the remaining pieces, RealNetworks’ Technology Products & Solutions business was the largest of the company’s four divisions in its 2009 fiscal year, with $191.5 million in net revenue, but the division posted a loss of $39.1 million for the year. In addition to the company’s services for wireless carriers, the division includes the RealNetworks Helix media-streaming technology.

Media Software & Services, the other large division where RealNetworks is continuing to focus, includes the venerable RealPlayer software and related technologies for playing audio and video on PCs and mobile devices. It posted $87 million in revenue for the year, and a net loss of $47.3 million.

Kimball told analysts in May that the company expects to see positive financial effects from its changes “beginning to take hold in the third quarter.”

The company spun off its Rhapsody music joint venture with MTV Networks earlier this year, while remaining a major investor in the new company, Seattle-based Rhapsody International. At the same time, RealNetworks has taken steps to let its games unit, now known as GameHouse, operate more independently as a prelude to a possible spinoff, sale, or some other form of separation down the road.

With all of the changes, RealNetworks now employs about 1,365 people, or about 300 fewer than at the beginning of the year. The June 22 restructuring eliminated 85 jobs, including 25 percent of the company’s executives.