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Rhapsody Tries to Drown Out iTunes

By Renay San Miguel MacNewsWorld ECT News Network
Jun 30, 2008 11:27 AM PT

RealNetworks' Rhapsody thinks it knows how to end Apple's dominance of the online music distribution scene: remove the digital locks on its songs; make key deals with A-list names in media, wireless providers and social networks; and let consumers preview entire songs, not just 30-second snippets.

Rhapsody Tries to Drown Out iTunes

Rhapsody, a leader in subscription-based online music, on Monday announced a "Music Without Limits" digital download strategy that its executives hope will put a scare in Apple's iTunes. All its songs from the four major music labels will be free of digital rights management (DRM) protection; they can be played on any device, including Apple iPods.

Rhapsody will also provide songs for Verizon Wireless' V Cast service for cell phones; Viacom's family of well-known music Web sites, including MTV and VH1; and Yahoo's music store. Also, in a nod to the popularity of social networks, Rhapsody's deal with the makers of the iLike application allows Facebook users to listen to entire songs and buy them at Rhapsody's store.

Game-Changing Strategy or Hail Mary Attempt?

Throwing off the DRM shackles could be a potent weapon against iTunes, Michael Gartenberg, vice president and research director at JupiterResearch, told MacNewsWorld. "It's clear that DRM-free music downloads are becoming more and more inevitable. ... The record labels are attempting to some degree to rein in Apple and perhaps give competitors something that at the moment Apple doesn't have."

The Verizon Wireless partnership is also intriguing, providing that Rhapsody can enthusiastically market it to consumers. "Verizon is a great partner with lots of subscribers, a fast infrastructure, and they're starting to deploy some cool handsets. If you don't have an iPhone, this may be an alternative."

Rhapsody vs. iTunes User Experience

However, Gartenberg doesn't consider allowing consumers to listen to entire songs before deciding to purchase a game-changing strategic move, even with Rhapsody's offer of 25 free "listens" per month.

"At this point, the devices still drive people to the [online] store, not the other way around. The other part to remember is that the iTunes experience works really well for consumers," he said. "There's nothing potentially broken in the consumers' eyes. If you're going to lure them away, you're gonna have to do something Apple's not doing."

Gartner analyst Mike McGuire echoed that sentiment. "Any competition for mindshare is competition for iTunes," McGuire told MacNewsWorld. "But the user experience standard has been pretty much set by Apple. ... [Rhapsody is] really going to have to move the needle."

McGuire sees potential for Verizon Wireless to cut its customer acquisition costs with the Rhapsody service. "If I can get you hooked on DRM-free songs at 99 cents a pop, and then upsell you to the subscription service, then it becomes a very interesting proposition."

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