Barely a year after taking the job, RealNetworks Chief Executive Bob Kimball has resigned, the company announced today.

Kimball was in the process of restructuring and rebuilding Real, which has zigged, zagged and lurched through several management changes over the last two years.

Real announced the change after regular trading closed Monday. Its stock dove today after the market opened. At last check it was down 7 percent, to $3.67.

Company executives said Kimball left on his own accord after largely completing the restructuring. They said he decided after more than a decade at Real that he wanted to do something else and spend more time with family.

The move comes as Real's entering an intense several years that will test its plan to operate as a smaller company that's more focused on phone companies and other business customers, as well as games and consumer services.

During Kimball's tenure, the company also developed a new online media service that may compete with upcoming media services from Amazon.com, Google and Apple, but the company's stock has bobbed below $4 for most of his tenure as chief executive.

During 2010, sales fell 29 percent to $401.7 million and the company reported an operating loss of $34.5 million. Its margin improved to 64 percent, up from 60 percent the year before, when it lost $237.2 million.

A former IBM attorney, Kimball was Real's chief lawyer for 10 years until founder Rob Glaser resigned as chief executive on Jan. 13, 2010. Kimball stepped in as acting chief executive, then was chosen as the permanent replacement.

Glaser said he's not interested in becoming chief executive again and will remain chairman. He praised Kimball, saying "he's been associated with some of Real's most important and exciting developments."

"I'm hightly empathetic to the fact there comes a time when you want to step back and get on a different boat," Glaser said.

Kimball is "a great guy and the company will miss him but we built a strong bench, we built the company up for success particularly in this next chapter," Glaser said. "I think it's fair to say that's a different kind of animal and it's something where you need to sign up for a three, four-year cycle around that."

The transition shouldn't slow Real's rebuilding, Glaser said. Hiring a new executive from outside the company is actually "likely to accelerate change," he said.

Kimball wasn't available for an interview but issued a statement in the press release, saying that he "took on this role to lead a restructuring and transformation of RealNetworks into a more lean, efficient and effective business and we have completed that phase of RealNetworks' transformation. Over the past year we have simplified our business, removed more than $70 million in annualized operating expenses and created an entirely new, award-winning product called Unifi. We are delivering on our promise to build products people love."

Real's executive vice president, Mike Lunsford, 43, will serve as interim chief executive while Kimball's replacement is found. Lunsford said he's not interested in the permanent job.

Lunsford (left) was interim chief executive of Earthlink before joining Real in 2008. He has led the company's core business including RealPlayer, Helix and enterprise messaging services provided to phone companies.

Lunsford also recently began leading Unifi. The service is close to launching with phone company Vodafone Germany and a U.S. launch is planned for mid summer.

No major changes are planned while a new chief executive is found, "to keep things consistent and stable here," Lunsford said.

There was no fallout that led to Kimball's resignation, Lunsford said. "No, this is entirely Bob's doing," he said. "We've had a difficult year with the restructurings, resimplification, all those things. Signing up for the next part - which is the ongoing and hard work to grow the company - is just a daunting task for anybody."

Following the path of other wealthy, semi-retired tech entrepreneurs, RealNetworks founder Rob Glaser is joining Palo Alto, Calif.-based venture firm Accel Partners as a venture partner.

Glaser will mremain in Seattle, where he'll look for promising investments in the Northwest for Accel and commute as needed to Palo Alto. He's particularly interested in the intersection of mobile and social companies, and will work as an adviser to existing Accel companies, a spokeswoman said.

Accel was an early backer of Real, investing in the company in 1995.

"Rob's extensive experience as a digital and social media pioneer should prove to be an asset for Accel's renowned and growing technology portfolio," Accel Managing Partner Jim Breyer said in a press release.

In other VC news, Voyager Capital partner Geoff Entress has joined Seattle's Founders Co-op as general partner. He'll stay with Voyager while helping Founders founders Andy Sack and Chris DeVore lead the seed-stage venture fund they started in 2008.

In his first public speech since stepping down as chief executive of RealNetworks in January, Rob Glaser addressed the Mobile Breakfast event at the Seattle Marriott this morning, talking about changes he sees over the next five to 10 years.

Glaser said the rise of "superphones," mobile applications and the digitization of our lives (as described by John Battelle's "database of intentions") have created several business opportunities to pursue.

One is around the notion of "digital persistence," the expectation that once you create something digital you expect it to be available everywhere. Another involves providing users with universal access to their digital content across different devices. The third is making it easy to search and discover content.

"There's no question we're getting to that phase where consumers are going to expect this stuff, 'it just works everywhere,' " he said.

As an example, he mentioned an incident last year with his son, who was then 2 1/2 years old. They were in the bathroom watching "Sesame Street" on a TV that didn't have a digital video recorder attached.

The son prefers the animated portions of the show over the live action segments, one of which came on while they were in the bathroom.

"My son looked at me and said, 'Make it go back, go back.' I explained to him this is regular television; regular televison doesn't go back," Glaser said.

"The kids that are born this millenium -- they just assume all this stuff, that it's a cloud of video, they can go back and get it."

Still to be determined is whether the next evolution will come from vertical companies like Apple or a more open, horizontal industry approach. Glaser argued that the vertical approach will result in a "much lower pace of innovation."

To avoid having carriers become commoditized into dumb pipes and handset manufacturers scrambling for the low end of the market "it's incumbent for all of us to work together and reach across segments ... otherwise vertical's going to remain on the march."

Despite Apple's huge success, it's still unclear which approach is going to dominate in the coming years.

"I dont think it's inevitable which way its going to go -- it's still very much a jump ball," he said.

"Whereas the PC went horizontal and the MP3 player went vertical, I think it's an open question whether the industry pulls together and makes the horizontal experience as good," he added later.

RealNetworks just announced that it's going to restructure Rhapsody and spin the subscription music service off into a standalone company.

Real is the majority owner of Rhapsody, which is also partly owned by MTV. The venture was formed after Real bought Rhapsody -- formerly known as Listen.com -- in 2003 for about $36 million.

Rhapsody sells monthly subscriptions starting at $13 providing unlimited access to a vast library of digital music.

The subscription approach didn't catch on while Apple dominated the music business with a model selling individual tracks, but some have speculated Apple could enter the subscription business itself and invigorate the approach. Meanwhile, subscription ventures are in fierce competition with ad-supported services offering free music online and competitors such as Best Buy's Napster service that undercut Rhapsody's price.

Subscriptions to Rhapsody have settled to about 700,000 after peaking at more than 800,000 in the first quarter of 2009.

The spinoff is the first major change since a Jan. 13 executive shakeup in which founder Rob Glaser passed chief executive duties to chief counsel Robert Kimball. That was presented as the beginning of an effort to restructure Real to focus on core businesses.

Real's remaining operations include its music business selling digital content, ads and other subscriptions; PC and mobile games; media software including RealPlayer and technology services and products sold to corporations.

"Separating Rhapsody into its own independent company is a significant first step in making RealNetworks a more focused and profitable company," Kimball said in a 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."

Rhapsody will be based in Seattle and have about 150 employees, including current Rhapsody staff and some members of Real's music group, which will move to the new company. The total includes a San Francisco office that has fewer than 50 employees.

Employees were notified during a music group meeting about two hours ago and by an e-mail from Kimball.

It's a complicated deal -- Kimball told employees today, "It was brain surgery trying to disentangle a decade-old music business from the rest of Real" -- but basically Real and MTV's parent company Viacom are unwinding a partnership that split their ownership of Rhapsody 51 to 49 percent.

When it's done, sometime in the first quarter, both companies will own an equal number of shares in Rhapsody. Real is contributing $18 million and the Rhapsody brand, and MTV is contributing $33 million worth of advertising support (and canceling a $111 million advertising commitment to Rhapsody).

How the deal will affect Real's earnings will be discussed further in a conference call with investors on Thursday, spokesman Ryan Luckin said.

Asked if Rhapsody is being positioned to go public or be acquired, Luckin said the plan is to set the venture up to operate as a standalone business.

"It's got the IP [intellectual property] and the cash to go forward and try to be successful in the digital music space," he said.

At the end of 2008, the Rhapsody America venture with MTV had lost $17.8 million and had remaining equity of $384.3 million, according to Real's November's earnings report.

Being removed from the RealNetworks umbrella will give Rhapsody more flexibility to partner with other companies, Luckin noted.

Subscribers to Rhapsody won't see a change, he said.

Here's the e-mail Kimball sent to employees:

Today's column is a Q&A with RealNetworks founder Rob Glaser on his departure as chief executive, plans for the future and outlook for the digital media industry.

Here's a longer version with more Q&A than what fit into the paper:

Rob Glaser's resignation last week from RealNetworks seemed abrupt, but it was actually in the works for several years.

Glaser said he had the first "serious conversation" with Real board members about stepping down more than two years ago, not long after his first kids were born.

But the discussion was interrupted before it went too far.

"When the great recession hit, I just put my head down and I'm like 'I can't even think about this for 2008, most of 2009. I've just got to focus on helping the company through this rough period of time,'." Glaser said Friday in a wide-ranging interview about his past, future and final days running the pioneering Seattle digital media company he founded in 1994.

Glaser, who turned 48 Saturday, stepped down as chief executive Wednesday afternoon, then flew to Washington, D.C., for a White House meeting with a group of executives providing advice on federal technology spending plans. It was the longtime Democrat's second visit in the last month; President Obama also invited him and his wife to a Christmas party in December.

On Friday, Glaser was back in Seattle, reflecting on where he and the digital media industry are headed next. He already helped Real develop a new strategy that will be revealed in a few weeks by Bob Kimball, its general counsel and now acting chief executive.

Glaser has been under pressure from investors who watched Real's leadership position and value erode over the past decade. But he characterized the decision to find a new chief executive as his, and one made amicably.

"I feel very, very happy with the decision," he said. "It's something I wanted to do for a long time. I'm very proud of the company and thrilled I get to stay associated with the company in my capacity as chairman, a signicantly shareholder."

Here's an edited transcript of the interview:

Q: It seemed abrupt when you stepped down and immediately left town.

A: Literally, I sent the message to employees and did the final tweeting of it sitting on the plane going to D.C. It was one of those photo-finish kind of deals.

Q: You said you'll get more involved in civic projects. Like what?

A: There are two or three projects associated with the [Glaser Progress] Foundation that I'm very excited about. There's some AIDS relief work we're involved with in Rwanda, a team on the ground in Kigali that does amazing work. I'm hoping to get there this summer. That's an example. Rather than going to Rwanda every five years maybe I can go every one or two years now.
After our kids were born in 2006 I pulled back. I have not engaged in much of that because my life was 110 percent full being a husband and a dad and my day job.
Before 2006 we would give two, three or four political fundraisers a year; since then we've probably given one a year. To some extent it's about getting back to the level of civic engagement I had before we had kids.

Q: Will you run for office?

A: I think that's pretty unlikely. As much respect as I have for [politicians]) and as mch respect I have for the importance of what they do, I'm not sure that role on an executive level or a legislative level is the best fit for me personally.
I think you've got to say 'never say never' when you're 48 years old, and you've had the incredibly lucky life that I've had, but I would say it's definitely in the unlikely category.

Q: What's next for Real?

A: We kicked off a strategy process in the middle of last year, the most thorough and rigorous review in the company's history. We did great work. Bob and the team will talk more about it soon, when the time is right. It's not my place to initiate the discussion about it.

Q: Is there animosity between you and the board?

A: These are people I've known for a long time . The right way to think about this is, once you decide to do something like this, the interesting debate is, "Do you do it slow or do you do it fast"?

Q: Looking back, what are you most proud of, and what would you do differently?

A: I can give you the proudest one: I'm incredibly proud of the team here and the innovation that we've created. I can think of three or four things we've done that had never done before, going back to creating streaming audio 1995, making streaming video practical in 1997, what we did with sort of birthing the casual games industry in the early 2000s, weathering the dot-com crash in some pretty intense competition that might have involved questionable practices from an antitrust standpoint.
But rather than curling up in a ball we weathered that and came out stronger on the other side, pivoted the company in some interesting ways around first consumer services and then carrier applications and services solution like ringback tones and music on demand and video on demand and the like.
There's some stuff in the pipeline that will rival those innovations in my view if we do a good job with it, rolling it out in the market, so I feel like I'm passing the baton at a time where not only did we weather the downturn . The pipeline for where we go next is in great shape.

Q: What's going to happen to the digital media business five years out?

A: Speaking from a conceptual level, when I got involved in this I thought digital media is going to be a 25-year thing, which is to say there's going to be a long period of time before the innovation flattens out. We're 15 years in -- we launched RealAudio in April 1995. The industry as a whole has taken tremendous strides and there's a lot of work to do.
Think of it from a consumer standpoint. You want to be able to watch any piece of video you have a right to watch anywhere at any time. There are pieces of the solution, but the thing you really want is that seamless "it just works." It's not 10 minute videos on YouTube or buying things on your iPhone that you may already own.
There's enough of the pieces in place where you can envision how it all comes together, but it will be three to five years before that seamless thing that Jeff Bewkes of Time Warner dubbed "TV Everywhere." Rhapsody is the best of that in the music world, but today those are not mainstream, seamless experinces that work for tens, 100s of millions of people. Big picture, for audio-video, that's the biggest set of things that I think are coming.

Q: It seems like pieces are falling into place like 3G and 4G networks and cloud services.

A: I would say the barriers at this point are as much business models and alignment of rights as they are technology. I knew it 16 years ago, but I would say I understand it more vividly now. The technology is a necessary foundation element but it's not sufficient.
You have these industries that set up windowing of content, methods of distribution, different rules for rental vs. purchase that make sense in a physical context. But in a digital world you need to harmonize and integrate all those rules and business models and it's a hard thing to do that.
Really, in my view, it's the intersection of the technology and the business model/economics. That's where the complexity lies and frankly where the opportunity lies if you can fit those pieces together in a way that works for everybody.

Q: Why is Apple now the dominant digital media company and not Real?

A: Fundamentally we've been in area where it didn't all work seamlessly. The best way to make it work seamlessly was to go vertical. You make the hardware, you make the software, you connect it to your services. That's a totally different business than the historical business that most companies were in that were in the software-services business.
On one hand, you can count all the companies that have fit all those pieces together. It's a huge undertanking. I'd say BlackBerry pulled it togoether in their space of messaging. Apple's done it twice, first witht the iPod and now with the iPhone/iPod Touch, and you could say Amazon's on the road to doing it with the Kindle.
Think of the IT industry. IBM was vertical. The minicomputer industry was vertical, then the PC came along and it was horizontal. Those of us that grew up in that area made the supposition that the horizontal model was going to the dominant model in this business.
It's very complicated to go from being horizontal -- like Google is or like Microsoft and Real -- to go vertical. There are many successful companies but you have to say that in the digital media space the biggest successes have been these vertical successes. That's something that's incredibly hard for a startup to do.
If I knew in 1995 what I know now, would I have approached the vertical-horizontal thing differently? Maybe, but the wreckage of companies that tried to go vertical - Go/Eo, WebTV, I can go down the list, there are dozens of companies -- it's super, super hard to do that vertical thing. I'm very proud of the success and scale we got to taking the horizontal approach we did.
If you take the long view - the next five or 10 years view -- I think there's going to be a renaissance of that horizontal model as the standards come together to link together all these things.
This next decade, I think it's a very interesting strategic question, which model is going to be dominant.

Q: Has Seattle's opportunity passed?

A: No, I would say the opposite. The Seattle high-tech community is alive and well for sure. Hopefully, we played a role helping seed the ecosystem.

Q: Will you get involved with other companies, as well as civic affairs?

A: I don't know what the mix is going to be yet. I turn 48 tomorrow [Saturday], not 84. I feel like I have time in my life to pursue a mix of things depending in what captures my passion."