Summary:

It’s taken ten years, and a last leg up by way of an acquisition of a competitor, but Rhapsody says that it has finally reached one million…

New Rhapsody Logo

It’s taken ten years, and a last leg up by way of an acquisition of a competitor, but Rhapsody says that it has finally reached one million subscribers for its music services in the U.S.

The rise shows that if Spotify is the music service that is getting all the attention at the moment, bringing lots of awareness of the streaming music model, it is also the case that its rising tide is also lifting other boats.

Rhapsody says that it is delivering on average more than 10 million tracks daily — meaning that it has a fairly high level of engagement from its paying users, with some 10 tracks listened to every day.

Rhapsody gives users the ability to stream unlimited amounts of music from its catalog of 13 million tracks for a flat fee of $9.99 per month. Unlike competitors like Spotify, it has not elected to run with a freemium model, although it does offer a free 14-day trial.

On the occasion of the million-subscriber milestone, I had a chat with Jon Irwin, Rhapsody’s president, about what the company has planned next:

On partnerships: Rhapsody claims to be available on more devices — more than 60 — than any other music service; but so far the company has yet to sign a deal with a device maker to preload and have a special prime place on the device. That’s a key area for music companies to explore, since many OEMs do not have their own music services but still are keen to compete against the likes of Apple (NSDQ: AAPL) with combined device and content offerings. Irwin says that the company is currently speaking with device makers and may have something to announce “in 2012″.

Pursuing mobile users looks like a safe bet for the company: the number of subscribers already using the service via mobile is 40 percent, pointing to a clear audience looking for those kinds of services and willing to pay for them. The company already has partnerships with others in the mobile ecosystem: a deal with MetroPCS, for example, bundles the service together with the carrier’s prepaid data and unlimited text plans, as a way of encouraging users to take their higher-tier services. Verizon also bundles Rhapsody on to its LTE devices.

On Napster: At the end of November, Rhapsody completed the U.S. part of its acquisition of music streaming company Napster from Best Buy. Irwin says the next step will be to complete the acquisition of Napster’s European business and use it as a lever to finally move into international markets. Napster in particular has a strong position in Germany as well as the UK. It is unclear whether Rhapsody will rebrand Napster or whether the two products will initially co-exist together.

On competition/consolidation: Irwin is clear to try to point out how his service differs from the many others on offer, from Spotify and Rdio to Mog and most recently Rara. But ultimately these services are more alike than they are different, and consolidation is inevitable, he says.

“Our business is to take content that other people own, artists and composers, and distribute it on a patform to fans. We might do that directly or via a partner, but we take a very thin piece of that. The cost for labels and artists is the majority of what we receive,” he says. “We have to be efficient and at scale… It’s either go big or go home.”

On funding. Since breaking from Real Networks in April 2010, Irwin says Rhapsody has not had to raise any money from VCs to operate: one of the advantages of having a paid-only model is that the company has an incoming revenue stream every month and it operates its company accordingly. In contrast, he points out that those competitors that have raised more VC funds and are running through that cash quickly in the race to build up scale will have to at some point be able to show some kinds of returns. “The cost of giving way free music to try to get those free subscribers to toconvert starts to get expensive,” he said.

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