Rhapsody becoming visible on the Web

RealNetworks is moving today to increase the visibility of its Rhapsody music service, hoping to gain more paying subscribers with a greater presence on blogs and other Web sites.

The company is rolling out a Web-services platform that will allow third-party Web sites to link directly to albums and songs on Rhapsody. A blogger writing about a new song, for example, could post a link to a track that, when clicked on, will begin playing in a pop-up window.

Central to the initiative is an overhaul of the Rhapsody.com site so that users can listen to songs directly from the Rhapsody site — up to 25 a month free. Previously, users had to download a standalone software program to use Rhapsody.

The moves signify that RealNetworks continues to move from the closed, subscriber-only business models to more flexible, advertising-reliant offerings that give away some content free. Its goal, executives say, is to weave Rhapsody throughout the fabric of the Web.

RealNetworks looked to Google, one of its business partners, as a model.

Many people were first exposed to Google by seeing its search box on third-party sites, said Dan Sheeran, RealNetworks' senior vice president for music and video. Soon, the Google brand began to be associated with search, and eventually people went directly to Google's site to search the Web.

In the same way, Sheeran hopes that with enough exposure on third-party Web sites, Rhapsody will become closely associated with playing and discovering music.

"We want to put a little piece of Rhapsody throughout the Web on thousands of Web sites," he said.

Revised pricing

The project began a year ago and accelerated in April when RealNetworks changed the pricing structure of Rhapsody to allow anyone to listen to 25 songs a month free. A subscription costs $10 a month for unlimited song plays and $15 a month for the ability to move the songs to compatible portable devices.

But even with the credit-card barrier removed, people balked at the software download Rhapsody required.

"At the end of the day, downloading software was a task that takes time and fortitude from consumers," said Karim Meghji, a vice president at RealNetworks.

The Rhapsody team set out to bring the service, or parts of it, to Web browsers. And it wanted to do it in a way that kept record labels and content owners happy, which meant paying close attention to how music was played and protected from piracy.

The company is debuting the browser-based music player that pops up in a separate window, and RealNetworks is maintaining the limit of 25 free songs a month for people who aren't paying subscribers.

Taking baby steps

There are limitations to the browser format. Users won't be able to buy a song, transfer music or save a playlist unless they use Rhapsody's standalone software program. But on the plus side for the company, the browser format has made Rhapsody available for the first time to Mac and Linux users.

RealNetworks pays the music industry an undisclosed amount every time a song is played, and loses money each time a non-subscriber listens to a song for free.

The company plans to partly offset that loss by running banner advertising on its Rhapsody.com site and on the pop-up player window. It also expects the new exposure to increase the number of paying subscribers, though some analysts aren't so sure.

"I don't think the Web product will expand the user base that much," said David Card, a music-industry analyst with Jupiter Research.

The Web initiative is mainly a branding and marketing tool, he said, at least until RealNetworks adds more sophisticated tools for third-party developers. Such tools could better integrate Rhapsody into other Web sites and on a deeper level than simply linking to songs.

"This is a baby step toward real music services," he said.

Subscriber growth

About 1.3 million people pay RealNetworks for music, but the company doesn't specify how many are Rhapsody subscribers and how many pay for other features, such as online radio. Its music subscribers have grown from 1.15 million at the end of June and 975,000 at the end of March.

RealNetworks says it leads the market in digital-music subscriptions, and many analysts agree, but the claim can't be verified because many contenders don't give specific subscriber numbers.

Its rivals include Napster, Yahoo! and MusicNet. Apple's iTunes Music Store isn't considered a competitor because it sells songs per track and not on a subscription basis.

A standalone Rhapsody program is valuable to RealNetworks because the company has total control over its usage and can offer more features, said Aram Sinnreich, managing director at Los Angeles-based Radar Research. But the software download is another hurdle users have to jump over in order to access music.

Adding Web browser access is a "no-brainer" attempt to extend the value of Rhapsody, he said.

Multiple entries

RealNetworks is trying to provide as many ways as possible for people to discover Rhapsody, said Mike McGuire, an analyst covering the market at Gartner. But what's unclear is how the Web services initiative will drive RealNetworks' subscriber numbers, he added.

"The business question is, OK, what's the conversion rate going to be?" he asked.

RealNetworks' new business relationship with Microsoft — a result of a recent antitrust legal settlement between the companies — is also giving Rhapsody more exposure on the Web. In coming weeks, Rhapsody will be added to the list of music providers in Microsoft's Windows Media Player program. The MSN division will also integrate Rhapsody into its search and messenger programs.

Kim Peterson: 206-464-2360