Blog Post

RealNetworks Dropping Song Price to 49 Cents; Starts Ad Campaign Against Apple

(sub. req.) Update: Formal release from RNWK here, with more details…

RealNetworks is putting its money where its mouth is: against Apple. Starting today, and for the next three weeks, it will drop its online music store‘s song prices to 49 cents a song and $4.99 an album. That’s compared with the 99 cents a song and $9.99 an album that is standard on iTunes and on other sites.

The move is a surefire money-loser for RealNetworks in the near term because it will be charging consumers substantially less than it pays recording companies for the music.

RealNetworks will also start a multi-million dollar print ad campaign, some of which are targeted against Apple, and touting its own “Harmony” software, which has been the center of a raging controversy recently. “Half the price of Apple. Welcome to freedom of choice,” the print advertisements say. They also feature an illustration of an iPod altered to look like an open padlock.

RealNetworks will be losing about 40 cents on every song it sells. The company plans to tell investors its music fire-sale could directly add about a penny a share in losses to its third quarter financial results, equivalent to about $1.8 million.

New guidance from RNWK: “The company estimates the Freedom of Choice campaign may negatively impact projected third quarter net earnings by up to ($0.01) per share. As a result, today the company is issuing a revised estimate for third quarter 2004 GAAP net loss of between ($0.03) and ($0.05) per share.”

NYT: Glaser acknowledged the company would not benefit directly from selling music at a loss, but he said that he believed that it would help force Apple to change its policy about licensing the iPod to play music from competitors.

For all the buzz on RealNetworks and the Harmony controversy, read our dedicated RNWK page