Rhapsody's long and winding road continues, as the company parted ways with its former partners, MTV/Viacom, and RealNetworks in a formal SEC filing entered by Real on Tuesday morning.
The new solo venture, Rhapsody International, will continue offering music subscriptions at a reduced price, consistent with other new unlimited music subscriptions -- $10 per month, down from $15 -- and hopes to beat a growing number of competitors to the punch as smartphones and other connected devices make music subscriptions more attractive than ever before.
The new independent Rhapsody hopes exclusive access to its own engineers will help it double down on portable music subscriptions just as they are heating up, with MOG announcing its new service at SXSW, ThumbPlay's March launch of an unlimited PC-plus-mobile subscription, and Spotify reportedly buying up server space across the United States in preparation for a launch here too.
"Right now is the right time [to spin off]," Rhapsody president Jon Irwin, who joined the company last year, told Wired.com. "The advent of networks, smartphones, app stores, awareness of subscription services and record label support -- all of those are pointing to this being the right time." He added that Rhapsody had been preparing for the move for about a year.
Rhapsody's competition are all startups, Irwin notes. To compete, he's turned this long-in-the-tooth company back into a startup, which it hasn't been since it was acquired by the publicly traded RealNetworks seven years ago this month. Apparently, Real's gaming and other divisions had caused delays with Rhapsody's development, as tends to happen in large companies where multiple departments share the same resources; having a team of dedicated engineers could help it keep pace with fresher competition.
Rhapsody has several key advantages over its competition to own the suddenly buzzworthy music-subscription market, according to Irwin. Although its subscriber base has been declining -- which could be why Real and Viacom wanted out -- Rhapsody is still by far the market leader in music subscriptions, with an estimated 650,000, plus partnerships with Verizon, Vizio, Sony, Sonos and other television and cellphone companies with whom it wishes to strike up partnerships in the future.
The new company is independently wealthy, with plenty of money to cover operational costs and marketing. RealNetworks put $18 million into the bank for Rhapsody, which is also still owed $33 million in free advertising on Viacom properties such as Comedy Central and MTV, which it plans to start spending later this quarter to publicize its new smartphone-friendly, $10/month Rhapsody Premier service.
Following the deal, which insiders say closed last Wednesday though Real filed a report with the SEC today, Rhapsody International will move its 150-person team from RealNetworks' Seattle offices to a new headquarters in downtown Seattle, while maintaining auxiliary offices in New York and new offices in San Francisco, closing the old San Francisco Listen.com offices.
The company's new standalone status will be familiar to whichever employees have been clinging on since Rhapsody (then Listen.com) acquired TuneTo in order to launch a music subscription service in 2001, only to be acquired by RealNetworks and then partnered with 49 percent owner MTV/Viacom in 2007 to create the now-dissolved Rhapsody America.
The main obstacle for all those years was that Apple released the first iPod two months before Rhapsody launched, and Rhapsody didn't run on the iPod.
Real made several attempts to force integration with Steve Jobs' market-dominating music player, but Apple kept changing its digital rights management so that Rhapsody couldn't simulate it. (And because the iPod lacked a secure digital hardware clock, Apple's device couldn't manage subscriptions on its own.)
Enter the iPhone, and later, the Android, along with the app stores that accompanied them, busting the smartphone open for developers whose apps were approved, and most were.
"It's a huge factor -- it's a game-changer in the space," said Irwin. "The capability of the networks that connect these smartphones, the design of the iPhone and new Android devices, the app stores … it could really kick-start the [music] subscription business."
Smartphones and other connected devices obviate the need for noticeable DRM -- traditionally one of the major barriers to subscriptions -- because they don't require users to move music files between devices. Mobile apps from Rhapsody, Spotify, MOG and others might cache playlists or albums on a device for offline playback, but music plays back or occasionally gets verified for playback over the internet or a cellphone's data connection.
"A lot of what seemed like a matter of settled fact in 2005 has changed," said Rhapsody spokesman Matt Graves, formerly of Rhapsody, by way of Imeem. "[The ideas that] 'Apple's never going to do subscriptions, and these services are never going to work on iPods' -- all that has come around. These services [such as Rhapsody] work on iPods, and Apple's looking at music in the cloud."
To accompany its iPhone app, newly single Rhapsody International unveiled a new Android app on Tuesday that lets Android users stream any of Rhapsody's over 9.5 million tracks, on-demand, in playlists, or in albums. It's free for seven days after which users must pony up $10/month for Rhapsody Premier, which supports an unlimited number of tracks on a single portable device. (Rhapsody Premier Plus supports up to three portable devices for $15/month.) Unlike the current iPhone version, Rhapsody's new Android app can play music in the background while you're otherwise occupied thanks to that platform's multitasking ability.
Rhapsody International's pockets aren't limitless, but it has a solid brand, having survived to the point when technology is making portable music subscriptions feasible, attractive and less expensive. These new platforms are already showing promise for subscriptions, even in these early days. Smartphone users have shown twice the engagement level with the Rhapsody portable app as they have with other versions of the service, says Irwin, and the app has been downloaded over a million times so far.
See Also:
- Sneak Peek: Rhapsody's Upcoming iPhone App
- Rhapsody iPhone App Underwhelms, for Now
- Rhapsody to Apple: 'Get Off of My Cloud'
- Inch-by-Inch: Spotify Now Buying Server Space in United States
- U.S. Exclusive: Hands-On with the Spotify iPhone App
- SXSW: MOG's Mobile Music Apps Go Beyond the Playlist
- MOG Integrates Rhapsody for Full Track Playback
- Liveblog: The Future of Mobile Music
