Eschewing the format wars that have marked the digital music business--and much of RealNetworks' own past--the company is tapping Microsoft for technology that allows songs to be transferred to some MP3 players. Until recently, most monthly music subscription services barred songs from being transferred from a computer to a portable device.
But RealNetworks is also extending a bridge to cost-conscious digital music newcomers, offering people the ability to listen to 25 songs a month without paying anything at all.
RealNetworks has released an updated version of Rhapsody that lets people listen to 25 songs a month without paying anything at all, a move meant to challenge Apple's iTunes.
The Net multimedia company has tapped rival Microsoft for technology that allows songs to be shifted to MP3 players, eschewing the format wars that have marked the digital music business.
"We believe that once consumers experience Rhapsody and share it with their friends, many people will upgrade," RealNetworks Chief Executive Officer Rob Glaser said in a statement Tuesday. "We thank our partners in the music industry who worked closely with us to create an innovative...approach that works for both the industry and consumers."
Consumer response to the new service is critical for the company, which has built its broader Net multimedia business around music and downloadable games, and which looks to Rhapsody as the centerpiece of those businesses.
RealNetworks isn't alone in making a high-stakes bet on music. Apple itself has seen its fortunes soar on the back of iPod sales, aided in part by its successful. Software company Roxio last year sold all parts of its business not dedicated to online music, and changed its name altogether to Napster, to focus on the music business.
The new release of Rhapsody marks the first time that RealNetworks has substantially revised the program since buying it in April 2003 along with San Francisco company Listen.com. Since that time, the company has seen steady growth, announcing last week that it had 1 million subscribers to its music products, which also include a premium Net radio service.
The previous version of Rhapsody, despite its critical plaudits, was more limited than other services in some ways. Based on streaming media technology, it required a computer to be connected to the Internet at all times.
Rival subscription services from Napster and Microsoft allowed downloads of songs, so that they could be played offline.
The new version of Rhapsody allows that kind of ordinary download, but also takes advantage of Microsoft's "Janus" technology, a digital rights management tool that has enabled the song "rental" model first introduced by Napster.
That technology will make Rhapsody similar to the, offering an unlimited amount of music that can be transferred to portable MP3 players, but that can only be listened to as long as a customer continues to pay subscription fees.
This model has been dismissed by Apple CEO Steve Jobs, whose company offers only the ability to buy permanent downloads for $1 each. Consumers want to own their music, not rent it, he has said.
Some analysts have, however, that subscription services are gaining in popularity and may ultimately outstrip revenue for per-song download stores.
According to RealNetworks, the new Rhapsody will come in three tiers--the free service, offering access to just 25 songs a month, a version similar to the original allowing unlimited listening for $9.99 per month, and the new portable version, which is $14.99 per month.
Some analysts said it could be difficult to explain those separate versions and delineate a clear upgrade path for consumers. The free service is a good first step, but it faces increasing competition from other services that offer more, one analyst said.
"I understand that from a marketing perspective it is important to help get people into it," said GartnerG2 analyst Mike McGuire. "But I think is going to be a challenge. They aren't facing just the challenge of free peer-to-peer, but also legitimate free online radio stations."
Unlike the older Rhapsody service, the new version also will allow people to import other songs from a hard drive into the jukebox software and play them alongside the subscription-based songs.
That means the company now views Rhapsody, rather than its broader RealPlayer suite, as its primary music software. The move is part of a broader strategy to move customers interested in a particular area--primarily music or games--to applications focused on that area, the company said.
"What we've learned is that solutions with a specific purpose allow you to create the best solution for customers," said RealNetworks Chief Strategy Officer Richard Wolpert. "When someone comes and knows they're into music, to say to them, 'This is the music thing' is an easier proposition than saying, 'Here's something that's for everything.'"