Summary:

Rhapsody teams up with Telefonica to expand to Latin America and more of Europe. But will the partnership result in a true bundled offering?

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Music subscription service Rhapsody teamed up with Telefonica to expand into Latin America and grow its presence in Europe — but it’s not using the Rhapsody brand that it has been operating under in the U.S. for about a decade now. Instead, consumers in Latin America will be able to subscribe to a Napster-branded music service, and Telefonica will replace its own Sonora service in Brazil, Argentina, Colombia, Peru and Mexico with Napster.

The deal will immediately add “hundreds of thousands of subscribers” to Rhapsody’s customer base, according to a spokesperson, and Telefonica will promote Rhapsody’s Napster service to its mobile phone customers, which are said to be in the hundreds of millions. In exchange, Telefonica is getting an equity stake in Rhapsody.

Napster launched as a music file sharing service in late 1999, but was forced to shut down by the courts in 2001. The brand was later repurposed for a licensed music subscription service, which failed to gain significant traction, and was eventually bought by Rhapsody in 2011. Rhapsody quickly moved Napster’s U.S. customer over to its own service, but decided to keep the brand alive in Europe.

However, Rhapsody has had its own set of challenges. It’s growth has been stagnant, and it recently had to lay off 15 percent of its staff. Rhapsody’s President Jon Irwin stepped down last month. Will the partnership with Telefonica be a first step to reverse that trend? That may in the end depend on how aggressive the mobile carrier is going to promote Rhapsody.

Music subscription services have pursued mobile partnerships around the globe, and carrier billing has made it easier to sign up for these services; but the only real success story that has come out of the combination of music and mobile has been Muve Music, the subscription music service owned and operated by Cricket Wireless. Muve now has two million paying subscribers in the U.S., thanks to the fact that Cricket has made music subscriptions a default feature for its wireless service. Sign up for a data plan, and you’ll get a music subscription as part of the deal.

Asked whether the Rhapsody partnership with Telefonica will result in a similar arrangement, I got a diplomatic answer from a Rhapsody spokesperson:

“Each Telefonica operator that participates in the partnership will have the option of what type of product they go to market with. In some instances it may be a bundled model where the customer receives the Napster music service as part of their data plan, in other situations the customer can elect to add the cost of the Napster music service to their monthly bill. Some operators may use both models simultaneously.”

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