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Newly independent Rhapsody cuts fees to $10 a month to be more in tune with listeners

April 6, 2010 |  6:00 am

Rhapsody Logo In an attempt to turn up the volume for its all-you-can-listen music subscription service, Rhapsody is slashing its fees Tuesday by as much as a third to $10 a month.

The fee includes the ability for each subscriber to listen to music on any computer, plus one portable device, such as iPhones and assorted MP3 players. It also announced Tuesday that its service is available on smart phones that run Google's Android operating system.

Rhapsody had earlier charged $12.99 a month to stream from the company's catalog of 9.5 million songs to any computer. Adding an MP3 player would raise the fee to $14.99 a month.

Rhapsody kicked off the new pricing scheme as it finalized its previously announced spinoff from RealNetworks, a Seattle technology company that is also in the process of shedding its games division as a separate company.

In documents filed Tuesday with the Securities and Exchange Commission, Rhapsody declared itself an independent company, with Viacom's MTV Networks owning 47.5% of the company, RealNetworks owning just under 47.5% and the remainder split between Universal Music Group and a private individual investor.  

Rhapsody, one of the first to offer online music subscriptions, is trying to avoid the all-too-common fate of Internet pioneers -- that of perishing from all the arrows in its back. Since launching as a start-up in 2001, Rhapsody has ...

... struggled to find a broad audience, particularly as free Internet radio began to flourish. Its paying subscriber base dwindled from 800,000 in early 2009 to 675,000 by the end of the year.

Today, the market for music subscriptions, including those who pay for Microsoft's Zune, Thumbplay Music or the new incarnation of Napster, is a paltry 2 million subscribers, according to Jon Irwin, president of the newly independent Rhapsody.

That number could grow if Apple and Spotify, a Swedish music service, enter the fray. Since purchasing LaLa, Apple has been rumored to be working on a cloud-based music service that would either mimic Rhapsody or give iTunes music buyers the ability to stream songs they've purchased via an Internet connection.

Meanwhile, Spotify, a free advertising-supported service operating in Europe, has been busy laying plans for a U.S. launch this year. MOG, a Berkeley start-up, last month announced plans to launch an all-you-can-download $5-a-month mobile music service for iPhones and Android phones later this spring.

To gain an early lead on potential rivals, Rhapsody's first two moves as an independent company have  been to slash prices and give its subscribers the ability to listen on more mobile devices, including Android.

"The actions we’re taking are the direct result" of listening to what customers have said they wanted, Irwin said. "They wanted it to be more affordable. We’ve made it more affordable. They wanted the service on their mobile device. We added Android. BlackBerry is next. We’re offering our customers the ability to listen to all the music they want, wherever they want, whenever they want."

Rhapsody iPhone Icon Will the new approach work? Since adding the ability to stream to Apple's iPhone in September, Rhapsody's application, which offers a seven-day free trial, has been downloaded 1.5 million times, Irwin said. He didn't disclose how many of those downloads converted into paying subscribers.

Add an advertising blitz worth $30 million that's set to launch in the next couple of weeks across Viacom's network of media channels, including MTV Network and Comedy Central, and Irwin is projecting enough growth for Rhapsody to turn the tide of red ink and become profitable by the end of the year.

"The time is right for us to grow the subscription business," he said.

-- Alex Pham

Follow my random thoughts on games, gear and technology on Twitter @AlexPham.