6 Comments

Summary:

If music subscription service Rhapsody hoped that adding a mobile component would turn around its fortunes, new numbers suggest otherwise. Rhapsody’s subscriber base dipped below 700,000 by year’s end, meaning that its mobile applications aren’t winning over new customers fast enough to replace cancellations.

If music subscription service Rhapsody hoped that adding mobile phone applications would turn its fortunes around, a new quarterly report from primary stakeholder RealNetworks suggests otherwise. Newly independent Rhapsody’s subscriber base shrank for the third consecutive quarter in the final three months of 2009, falling below 700,000 by year’s end for the first time since mid-2008, meaning that its mobile apps aren’t winning over new customers fast enough to replace cancellations.

Rhapsody launched 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 away, as its paying customer base dipped to 700,000 during the third quarter of 2009 from more than 750,000. (RealNetworks typically reports the size of Rhapsody’s subscriber base as “greater than” some number.) Now that it’s had a full quarter to prove itself, the results are no better: Rhapsody now counts somewhere between 675,000 and 700,000 subscribers.

Music subscription services have generally hoped that the “any song, anytime, anywhere” promise of mobile applications would rekindle interest in a model that has flagged somewhat over the years. Rhapsody and longtime rival Napster now face competition from upstarts such as MOG and Spotify, which offer updated models that have attracted venture investment and attention.

RealNetworks announced this week that Rhapsody would be spun out as an independent company. The restructuring will make RealNetworks and current minority stakeholder Viacom into equal partners holding less than 50 percent of Rhapsody. RealNetworks pledged $18 million in cash to Rhapsody, while Viacom-owned MTV Networks “will contribute a $33 million advertising commitment.” The independent entity may seek outside investors as well.

Related GigaOM Pro content:

Forget Syncing, Let’s Put Music in the Cloud!

You’re subscribed! If you like, you can update your settings

  1. Barbara Broido Friday, February 12, 2010

    Dear Paul,

    If RealNetworks would like to know why its Rhapsody service is losing subscribers, I can tell them: The Rhapsody client for Windows. At best, it’s adequate. At worst, it’s full of bugs, its search feature, never very good, has recently been dumbed-down, making it nearly impossible for me to locate the music I like to listen to. It took them years to support 64-bit platforms (all the while telling us users to eat cake by using the even worse web interface and that 64-bit systems would never be mainstream). They NEVER respond to bug reports except to “apologize for the invonvenience” and NEVER fix any bugs I’ve reported multiple times.

    Basically, RealNetworks and their Rhapsody subsidiary subscribe to the notion, “build it and they will come.” What they forgot is that if they build it, and then let it deteriorate into a miserable slum, “they will leave.” My hope is that, when Rhapsody is spun-off, it will flower into a real (no pun intended) service, but I’m nearly certain that my hope is misplaced.

    Regards,
    Jeff Broido

  2. Thumbplay’s Mobile Music Service Goes Live – GigaOM Thursday, March 4, 2010

    [...] deep mobile experience is one key differentiator that sets it apart from incumbents such as Rhapsody and Napster as well as upstarts MOG and Spotify, the latter of which hasn’t launched in the U.S. [...]

  3. As MOG Goes Mobile, the U.S. Waits (and Waits) for Spotify – GigaOM Monday, March 15, 2010

    [...] Rhapsody service -– which added offline storage to its existing mobile apps this weekend -– has gotten little momentum from smartphone [...]

  4. “All You Can Eat” Music Services Still Don’t Have Everything You Want to Hear – GigaOM Wednesday, March 17, 2010

    [...] in the U.S. – have only two or three Bob Dylan albums, when its competitors have dozens? Why is Rhapsody the only one that has Grizzly Bear’s “Veckatimest,” an acclaimed independent-label [...]

  5. 5 Reasons I’m Still Not Paying for a Music Subscription Service – GigaOM Thursday, March 18, 2010

    [...] and mobile access is renewing interest in on-demand music subscriptions. Older services such as Rhapsody and Napster now appear prescient, though they never quite went mainstream, and newer ones such as [...]

  6. Rhapsody, Now Independent, Reboots With a Price Cut Tuesday, April 6, 2010

    [...] Rhapsody has officially become an independent company, two months after former parent RealNetworks revealed plans to cede majority control of the music subscription provider. Now a standalone entity in which [...]

Comments have been disabled for this post