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Rhapsody, the music subscription service, says its free iPhone application has been downloaded more than 330,000 times since its launch Sept. 9, making it the No. 2 music app in the iTunes store. But while that’s an enthusiastic display of interest in a fairly moribund music […]

rhapsody Rhapsody, the music subscription service, says its free iPhone application has been downloaded more than 330,000 times since its launch Sept. 9, making it the No. 2 music app in the iTunes store. But while that’s an enthusiastic display of interest in a fairly moribund music rental model service (especially given that Rhapsody has 746,000 paying subscribers), broadly speaking, most users are still experimenting with mobile streaming rather than buying subscriptions.

Indeed, just 7,000 people — or 1 percent — of Rhapsody subscribers who pay a flat monthly fee of $13-$15 for desktop streaming are also accessing the service through their iPhones each day. If consumers aren’t terribly keen on desktop-based all-you-can-eat subscriptions, are they finally ready to pay a monthly fee for ubiquitous access to a massive library of music?

The addition of on-demand mobile streams via smartphone apps represents a huge shot in the arm for Rhapsody and longtime rival Napster, which is planning but has yet to deliver such an app. Subscribers have long been able to take songs with them on portable devices, but access to songs over-the-air is a new wrinkle that’s expected to spur interest in such services. A mobile component is also the key driver of Spotify’s “freemium” business model, which includes on-demand streams to premium users’ phones. (One-year-old Spotify is thriving in Europe, but its model may look different when it arrives in the U.S.) With tens of millions of devices that can support on-demand streams already sitting in consumers’ hands, and so many other consumer services moving to the cloud, it’s increasingly likely that the music-as-a-service model is ready for its moment at center stage.

For Rhapsody, being the first to offer on-demand streams to iPhone users in the U.S. has given the company a chance to audition for a huge new audience. Only 9 percent, or about 70,000, of its existing subscribers are iPhone owners, meaning that at least three quarters of those people downloading the new app — more than 260,000 — were non-subscribers testing out Rhapsody for a limited trial period, rather than adding a new mobile component to an existing Rhapsody subscription. It seems likely that a small percentage will stick with Rhapsody, others will comparison shop once other mobile streaming apps such as Spotify’s appear on the U.S. market, and most will revert to whatever they can stream for free.

In an interview, Rhapsody VP of business management Neil Smith told me the company’s subscriber base “could double or triple over a reasonable period of time” as on-demand mobile streaming boosts consumer interest, though he said expecting to reach such a goal within 12 months would be optimistic. Ultimately, he believes that less than a quarter of its customers will be desktop-only users, with an additional group sideloading tracks to mobile phones or MP3 players, but not streaming songs on demand on those devices. (Close to 20 percent of Rhapsody’s existing customer base signed up for the service via a partnership with Verizon that bundled it into music-enabled phones — which clearly aren’t iPhones. It will roll out to other smartphone models as well, according to Smith.)

The burst of interest in Rhapsody’s app certainly reveals pent-up demand for mobile streams. Some consumers will surely be willing to pay for the chance to hear what they want, when they want, wherever they are. But many would still rather own their music, and some will be content with more restrictive, but free, options. It’s possible that the success of mobile streaming apps will mean that the music-as-a-service model’s time has finally come. We’ll know it has when people stop experimenting, and start paying.

  1. +5 for Smiths/Morrissey/Marr reference.

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  2. [...] For Mobile Music-As-a-Service, How Soon Is Now? | Gigaom With the Internet transforming how we manage our data and the movement of music to the cloud, businesses are vying to wrap their head around new models of making money. Rhapsody's free app is leading in the iPhone store with over 330,000 downloads, and Spotify is said to be the next big thing. Tags [...]

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  3. [...] mobile applications and the promise of on-demand access to any song, anytime, anywhere has helped stimulate consumer interest in subscriptions — and presented a potential threat to iTunes’ [...]

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  4. [...] For Mobile Music-As-a-Service, How Soon Is Now? [...]

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  5. [...] a popup window within Google’s results page, as well as links to hear the same songs via Imeem, RealNetworks’ Rhapsody, MySpace-owned iLike and web radio provider Pandora on their own web sites. Lala’s streams [...]

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  6. [...] showing that it’s different from its rivals in that respect. Paid subscriptions for music have always been a tough nut to crack, and mobile apps aren’t yet bringing in new customers. And as free desktop streaming services [...]

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  7. [...] satisfying content owners — and other music subscription services that are still seeing more experimentation than customer traction. And for a company that’s already admitted it’s long stopped innovating, MySpace would [...]

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  8. [...] entry further crowds a music subscription market that includes Spotify, incumbents Rhapsody (owned by RealNetworks) and Best Buy-owned Napster, new entrant MOG, and forthcoming Rdio. As [...]

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  9. [...] may be warming to them, especially as the price drops and the services improve. The battle may be decided in the mobile sphere, where MOG promises an app in the coming months. Use of the mobile service will require a higher [...]

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  10. [...] its iPhone application in September and saw quick uptake, with hundreds of thousands of consumers test-driving the app in its first few weeks of availability. But that didn’t translate into sales right [...]

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