RealNetworks rolls out Rhapsody over MusicNet
By Sue Zeidler
LOS ANGELES, May 28 (Reuters) - In a bid to boost its online music presence, RealNetworks Inc <RNWK.O> said on Wednesday it would begin distributing its newly-acquired Rhapsody service and phase out the struggling MusicNet service in which it owns a minority stake.
Real's roll-out of Rhapsody, which also cut its CD burning fee to 79 cents from 99 cents per track, comes as the music industry struggles to find a compelling alternative to unauthorized file-swapping services made popular by Napster, which was shuttered by copyright litigation in 2001.
The stakes have been raised by Apple Computer Inc's <AAPL.O> new music service, which has dealt a blow to the established model of subscription services by using a simpler pay-as-you-download model that sold more than 2 million songs at 99 cents each in just two weeks.
Since Real announced its acquisition of Rhapsody-developer Listen.com for $36 million last month, music industry watchers had expected Real to sever ties with money-losing MusicNet.
MusicNet, which got about $10 million in new funding last week, was launched over a year ago by Real along with three major music labels, AOL Time Warner's <AOL.N> Warner Music, Bertelsmann AG <BERT.UL> and EMI Group Plc.<EMI.L>
Real said it would end its distribution deal with MusicNet but would remain a partner and technology provider.
Relations between the two sides had grown more distant after MusicNet opted to offer music in formats other than Real's proprietary file format.
Real Chief Executive Rob Glaser recently stepped down as MusicNet chairman and Real also withdrew its representation from the MusicNet board. MusicNet is also distributed by AOL.
TAKING A BITE OF APPLE?
Apple has said it will release a directly competitive Windows version of its online music store, but by cutting its fees, Rhapsody said it was offering a lower per-burn price with more flexibility.
"There's this idea from (Apple CEO) Steve Jobs that there's only one kind of product and that is a digital download store and one type of consumer, who only wants to buy 99-cent tracks. That makes zero sense," said Sean Ryan, chief executive officer of Listen.com.
In addition to offering streaming and track burning, Rhapsody subscribers can burn full albums or mix CDs, build their own custom Internet radio stations, listen to professionally-programmed stations, and browse music information and editorial recommendations, Ryan said.
While Rhapsody is considered by critics to be among the easiest-to-use subscription services, it has garnered under 100,000 subscribers, according to analysts.
"We think Apple is certainly getting a massive amount of attention, but as long as we execute and get lots of distribution now, we should be in great shape regardless of when Apple enters the Windows market," said Dan Sheeran, vice president of marketing for RealNetworks.
