RealNetworks spins off Rhapsody music service as solo act

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RealNetworks on Tuesday said it will spin off its Rhapsody subscription music service as a separate, privately held company.

The move, expected to be completed by March 31, is the first of several being planned by Real’s management in Seattle in order to more tightly focus its business, which currently encompasses music, games, video and mobile messaging.

Bob Kimball, who took over last month as acting chief executive when the company’s founder Rob Glaser resigned, is expected to articulate the company’s streamlined plans on Thursday during the company’s fourth quarter earnings announcement.

As the cornerstone of Real’s digital music venture, Rhapsody has been struggling to compete with a slate of digital music services, including Napster and Microsoft’s Zune.

Perhaps a bigger roadblock for Rhapsody ambitions, however, has been its inability to persuade consumers to pay $12.99 a month for unlimited access to millions of songs, as Times editorial writer Jon Healey pointed out when Rhapsody rolled out its iLike feature.

Rhapsody had 700,000 subscribers as of Sept. 30. RealNetworks owns 51% of the venture, and Viacom’s MTV Networks owns 49%. After the spinoff, Real plans to reduce its stake to less than majority share.

-- Alex Pham