Earlier today, Kara Swisher reported in BoomTown that RealNetworks (RNWK) would sack four percent of its workforce–70 employees out of its 1,700-person staff.

Below, the official internal memo from RealNetworks Founder, Chairman and CEO Rob Glaser, breaking the bad news:

Team–

I’m writing to share some important and unpleasant news with all of you. Today we are implementing a reduction in force primarily within our TPS and MSS divisions, as well as in a few of our shared services groups. Approximately 70 employees around the globe are impacted, which represents about 4% of our total workforce. Of these 70 employees, 51% are located within the US and 49% came from our international locations.

These staff reductions are a result of some trends and strategic decisions in our TPS and MSS businesses. I’d bucket the reductions into three categories–efficiency gains associated with eliminating or streamlining duplication of effort, businesses that have been impacted by the recession and/or cyclical downturns where we need to lower our costs and get more efficient, and slower growth businesses in which we have decided to reduce our investments so we can instead invest in areas with better growth prospects.

As a result of these changes being made today, the TPS and MSS divisions are now better positioned to continue to weather the economic storm in the short-term and to thrive and grow in the long-term. On behalf of everyone on the senior management team I would like to extend my thanks and appreciation to everyone being affected by today’s actions for their contributions to our company. We are offering all impacted employees generous severance packages and we are working closely with the affected teams to ensure a smooth and professional transition. Additionally, we are encouraging impacted employees to look for other roles within the company, and HR will assist them in this process.

Thank for your support and understanding.

Rob

Historically, Apple (AAPL) has shunned subscription music services, and fearing they might compete for dollars best spent on iTunes, made it impossible for them to interoperate with the iPod. A few months back, Apple would have likely done the same with Rhapsody, if only to tweak Real Networks (RNWK) CEO Rob Glaser, who infamously disparaged CEO Steve Jobs for his “pigheadedness” at the Digital Living Conference in 2005.

But things are a bit different today. With the Federal Communications Commission’s inquiry into Apple’s rejection continuing consideration of Google Voice for iPhone still fresh in its mind and the outcome of that inquiry still undetermined, Apple might be a bit more inclined to allow Rhapsody into the App Store. It certainly can’t withhold it by claiming it replaces core iPhone functions, as it did with the Google (GOOG) app.

And so we find Apple in a uniquely uncomfortable spot: Accept into the App Store an on-demand streaming music application that will compete for the attention of iTunes users or reject it and suffer further unwanted scrutiny by the FCC, not to mention a nasty public relations nightmare.

Affected employees were notified this morning, and executives are meeting with remaining staff this afternoon to do damage control.

Slowing consumer and business spending due to the econalypse is the obvious explanation for today’s cuts, though Rhapsody’s struggle to compete with other music services, among them Apple’s (AAPL) iTunes, clearly played a role here as well.

RealNetworks last implemented layoffs in December 2008 when it cut 7.5 percent of its workforce.

UPDATE: A Real spokesperson has confirmed the cuts, noting that the company is “placing greater emphasis on mobile devices and Web platforms and less on editorial and heavy client software.”

Tim Quirk, VP of music programming for Rhapsody, has taken to Twitter to try to drum up some job leads for the folks he just had to let go.

Marked by panic selling and wet-your-pants fear, it was one of the worst weeks in the financial world’s history–a week that cut the legs out from under Google (GOOG), beat Yahoo until its market cap bled purple and caused the Dow Jones Industrial Average to swing more than one thousand points on an intra-day basis.

It was a week that saw Sequoia Capital warn its portfolio companies to prepare for a protracted downturn or, in the words of partner Michael Moritz, be “spattered on windshields and radiator grills and be forgotten.” Turns out Bubble 2.0 sounds a lot like Bubble 1.0 when it pops.

Beneath the screams of agony echoing across Wall Street, there was other news worth noting:

• Advanced Micro Devices (AMD) announced plans to spin off its manufacturing operations.
• “Legal” turned out to be a poor choice of adjectives for RealNetworks’ RealDVD (RNWK), the company’s new “legal” DVD ripper. A judge extended the temporary restraining order barring the company from distributing it.
• This just in: Time Warner’s (TWX) AOL and Yahoo (YHOO) are still talking about a merger and Generalissimo Francisco Franco is still dead.
  Where is Microsoft (MSFT) in all this? Sitting on the sidelines hoping the deal will go through.
• Finally, activist investor Eric Jackson, the creator of the Yahoo! Plan B investor community, revealed Yahoo! Plan C: his hedge fund’s divestiture of its Yahoo stake.

“I am extending the temporary restraining order because I’m not satisfied in the fact that this technology is not in violation,” Patel explained. “There are serious questions about copyright violations. There are questions about violations of the (Digital Millennium Copyright Act), and violations of these companies’ agreement.”

PREVIOUSLY:

• Rent. Rip. Restraining Order.
• StealDVD? Well, You Were Asking for It…
• Sue. Rent. Rip. Return.
• Rent. Rip. Return.

Due to recent legal action taken by the Hollywood movie studios against us, RealDVD is temporarily unavailable. Rest assured, we will continue to work diligently to provide you with software that allows you to make a legal copy of your DVDs for your own use.”

Good luck with that, folks.

As I’ve noted here before, RealDVD is a nice idea–a $30 software program that easily copies entire DVDs, right down to the menus, bonus features and cover art. And it does so in an ostensibly legal way. What it doesn’t do, though, is prohibit users from ripping DVDs that they rent. Effectively, users are on the honor system, which isn’t exactly a Hollywood-approved DRM scheme.

The MPAA “RealNetworks’ RealDVD should be called StealDVD,” said MPAA Executive Vice President and General Counsel Greg Goeckner in a statement. “RealNetworks knows its product violates the law and undermines the hard-won trust that has been growing between America’s movie makers and the technology community. The major motion picture studios have been making major investments in technologies that allow people to access entertainment in a variety of new and legal ways. This includes online video-on-demand, download-to-own, as well as legitimate digital copies for storage and use on computers and portable devices that are increasingly being made available on or with DVDs. Our industry will continue on this path because it gives consumers greater choices than ever. However, we will vigorously defend our right to stop companies from bringing products to market that mislead consumers and clearly violate the law.”

“RealNetworks took this legal action to protect consumers’ ability to exercise their fair-use rights for their purchased DVDs,” the company said in a statement. “We are disappointed that the movie industry is following in the footsteps of the music industry and trying to shut down advances in technology rather than embracing changes that provide consumers with more value and flexibility for their purchases. For nearly 15 years RealNetworks has created innovative products that are fully legal, great for consumers, and respectful of the legitimate interests of content creators and rights holders. RealDVD follows in that tradition. We expect to successfully defend our right to make RealDVD available to consumers and consumers’ rights to use it.”

We’ll see, I guess. Clearly the silly little “RealDVD is for saving a DVD you own” disclaimer attached to the software isn’t going to cut it with Hollywood. I imagine we’ll be hearing from the Motion Picture Association of America before the day is out.

Like other DVD rippers, the $30 software program easily copies entire DVDs–right down to the menus, bonus features and cover art. But unlike those rippers, RealDVD does so in an ostensibly legal way. It copies them without breaking their digital rights management schemes by installing a second layer of DRM on the ripped files that prevents users from sharing the DVDs online.

What it doesn’t do, though, is prohibit users from ripping DVDs that they rent. Effectively, users are on the honor system. And last I checked, the honor system isn’t a Hollywood-approved DRM scheme.

It was an astonishing offer at the time, especially coming from Glaser, who had been a vocal critic of Apple and its decision to make digital music sold through its iTunes store playable only on iPod (”I bought an iPod and can only shop at one store,” Glaser once said. “What is this? The Soviet Union?”)

But it was an offer that Jobs found unappealing. The Apple CEO rebuffed Glaser, declining even to meet with him over lunch to discuss it.

Glaser, of course, took it poorly and spent the next few years slagging Apple and Jobs for declining the partnership. “We think Apple Computer, and Steve personally, are making a mistake by making the software proprietary,” Glaser said at the Digital Living Conference in 2005. “There’s no reason we should penalize Apple customers for Steve’s pigheadeness.”

Course, in the end Real didn’t penalize Apple’s customers. Apple’s customers penalized Real. And today Apple’s iTunes is the largest music retailer in the states. And Real? Well, Real’s “embracing” the iPod.

Funny how that worked out.

This morning the company announced a new MP3 store whose unprotected music files can be played anywhere–even on an iPod. Like Apple’s iTunes, the Rhapsody MP3 Store offers music from all four major music labels at 99 cents per track, or $9.99 for an album. Over five million songs will be made available, at 256k-bit rates. Visitors can preview them in their entirety instead of the 30-second samples offered by iTunes and the like. And, if they’re Verizon (VZ) subscribers, they can download music directly to their phones with the company’s V CAST Music with Rhapsody service.

“We’re no longer competing with the iPod,” said Rhapsody Vice President Neil Smith. “We’re embracing it.”

Pigheadeness, be damned.