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Rhapsody sheds staff, execs amid difficult music market

The digital-music subscription service trims its work force by 15 percent, or about 30 employees, including its president.

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Steven Musil
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Rhapsody, a pioneer in the digital-music subscription market, has laid off 15 percent of its staff -- about 30 employees -- including President Jon Irwin, as it struggles to compete in an increasingly crowded sector.

Rhapsody International, the parent company of the on-demand music service, revealed the cuts Monday while announcing that Columbus Nova Technology Partners, an investment company that owns the maker of the Rock Band game franchise, had taken a significant stake in the company. As part of the deal, CNTP's Jason Epstein and Andrew Intrater will join Rhapsody's board of directors.

Irwin will remain with the company as an adviser. Also out is Rhapsody CFO Adi Dehejia, according to The Verge, which broke the news of the layoffs.

The company's board is restructuring operations to "accelerate its efforts in Europe and emerging markets," the company said in a release.

"Rhapsody International is poised for tremendous growth," Epstein said in a statement. "We've recently launched the Napster music streaming service in 15 additional countries in Europe, rolled out a partnership with MTV in conjunction with German wireless carrier ePlus and have a strong pipeline of product innovations and global partnerships in place."

The company pioneered the legal subscription-based music model when in launched in 2001 but has fallen behind in a market now dominated by the likes of Spotify and Pandora. Unlike its rivals, Rhapsody has largely rejected a free, ad-supported music service.

The company reversed a slide that saw its subscriber logs dip to 675,000 in 2009, claiming in 2010 to have reached 1 million paid subscribers. While it hasn't officially revealed updated subscriber numbers since then, Spotify has 24 million active users, including 6 million paying subscribers.

RealNetworks, which owns a 45 percent share of Rhapsody, revealed in August that the music service recorded $9.2 million in net losses for the first half of 2013 on $68.6 million in net revenue. However, Spotify has also struggled with profitability, losing $88 million last year on revenue of $577 million.

The market will grow more crowded with the arrival of iTunes Radio, which will come out this week with the release of iOS 7.