RealTime IT News

Real to Apple: It's On

An old-fashioned price war is gearing up in the digital music download business, with RealNetworks on the offensive. With rival Apple in its crosshairs, RealNetworks has slashed the price on songs sold from its RealPlayer store by 50 percent and launched an all-out marketing blitz to create a public outcry against the iPod maker.

The 49 cents a song price point ($4.99 for most full-length albums) is not available from the company's Rhapsody service.

The limited-time price cut, which coincides with an anti-Apple blog and a nationwide print ad campaign, is part of Real's public push to force Apple to open up its Fairplay digital rights management format to third-party music stores.

In recent weeks, RealNetworks said the new Harmony DRM translation technology would allow consumers to securely transfer purchased music to multiple devices, including Apple's red-hot iPod. Unamused, Apple accused the rival firm of hacking tactics and threatened to block access to iPods that connect to Real's software and technology.

"We are stunned that RealNetworks has adopted the tactics and ethics of a hacker to break into the iPod, and we are investigating the implications of their actions under the DMCA and other laws," Apple said in a statement.

But RealNetworks is forging ahead, even though the latest price cut will lead to a financial loss. Licensing deals with the major labels typically set the fee at around 50 cents on the dollar download, meaning that when overheads and bandwidth costs are calculated, the music services end up making next to nothing.

Before it was acquired by RealNetworks, Listen.com teamed up with Lycos to tinker with a 49 cents a song promotion, and company executives later admitted that that price point could only be justified as part of a limited-time promotion.

RealNetworks spokesman Matt Graves told internetnews.com that the losses from the three-week price cut were a "relatively affordable investment" to reach consumers with the Harmony technology embedded in new versions of RealPlayer.

"Traditionally, we have not done a lot of outbound direct-to-consumer marketing with price cuts," said Graves. "We did some in partnership with Comcast, Best Buy and Lycos. We don't mind spending the money because it has proven to be a worthwhile investment."

Graves declined on the cost of the campaign, which includes full-page ads in the New York Times, Rolling Stone and more than 150 alternative news weeklies nationwide.

He said the company was also open to licensing the Harmony technology to third-party music stores like Napster or AOL's MusicNet service.