Real Throws Weight Into Music Competition

RealNetworks expanded its Rhapsody music service
to compete with subscription offerings from Napster and
digital music stores like Apple’s iTunes .

Seattle-based Real said it now has three tiers to its online digital
music service — Rhapsody 25, Rhapsody Unlimited and Rhapsody To Go — for its RealAudio 10 player. All of Real’s downloads are 192 kbps AAC
encoded and MP3-compatible.

“With the new Rhapsody, millions of people can now experience and
share digital music legally and with no strings attached,”
Rob Glaser, RealNetworks chairman and CEO, said in a statement. “We believe
that once consumers experience Rhapsody and share it with their friends,
many people will upgrade to one of our premium Rhapsody tiers.”

Glaser has been looking for ways to keep Real’s edge in the digital
music business. Despite its good relationships with the recording and
film industries, the CEO has not had the runaway success that Apple CEO
Steve Jobs has had with iTunes and iPod.

That may change now that Glaser said he was able to work closely with
the music industry to create a more flexible model for consumers to try
Rhapsody for free.

As part of their arrangement, the music industry is paid for each
song at a rate that is generally comparable to full on-demand
subscription services.

“This works for Real and the music industry because the company
believes that the new Rhapsody will drive significant increases in
consumer usage, subscriptions and purchases of music,” Real said in a
statement.

Additional costs for running the service are being augmented with the
help of Google and a new sponsorship relationship with
DaimlerChrysler’s Chrysler.

“RealNetworks is enhancing the Web experience for users in compelling
new ways,” Google co-founder Sergey Brin said in a statement. “Providing
free, legal music at such a large scale is an impressive
accomplishment.”

With a basic download of the latest RealPlayer jukebox, customers can
listen to 25 full tracks from Rhapsody’s library of more than one million
songs each month. The service also allows for unlimited access to the
jukebox’s other features for free.

For a $15 a month subscription, customers can use Rhapsody To Go. The
service allows for transfer of an unlimited number of downloads to
compatible portable music players. Currently, Real is only recommending
MP3 players like the iriver H10 and the Creative Zen Micro portable. The
company said it was currently seeking contracts with other digital music
player manufacturers.

“This is not a replacement for the CD. Think of it more as a
replacement for broadcast radio,” JupiterResearch analyst David
Card told internetnews.com. JupiterResearch and
internetnews.com are owned by the same parent company.

For those who like to own their music, Real said its Rhapsody
Unlimited subscribers can now download an unlimited number of songs to
their PC’s hard drive from Rhapsody’s library and enjoy them offline for
as long as they remain subscribers.

The Unlimited set is also able to
create custom Internet radio stations based on their favorite artists,
access over 50,000 artist-based radio stations or nearly 100 free
pre-programmed Internet radio stations, and view more than 1,500 music
videos within the application.

In addition, Rhapsody Unlimited subscribers get a 10 percent discount
on purchases. Downloaded songs are only 89 cents and most albums are
$8.99. The company said its Rhapsody All Access subscribers can convert
to Rhapsody Unlimited at no charge.

Real’s double-down strategy of a subscription service and a music
download service is expected to do its fair share for new MP3 player
sales.

A recent JupiterResearch report estimates U.S. shipments of MP3
players will grow 35 percent to 18.2 million in 2005 and maintain a
compound annual growth rate of over 10 percent through 2010, reaching an
installed base of 56.1 million by then, up from 16.2 million in 2004.

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