Verizon Wireless Discusses VCast Music Deal With Rhapsody


imageVerizon Wireless hosted a conference call today to give some more details on its new partnership with Rhapsody America, a joint venture between RealNetworks (NSDQ: RNWK) and MTV. RealNetworks CEO Rob Glaser was on the phone along with John Harrobin, SVP of digital media and marketing for Verizon (NYSE: VZ). Release.

RealNetworks’ role: Glaser: This is a very big day for Rhapsody…..It’s a long-held vision beyond the PC, but to make it a mobile reality. We announced today our Music Without Limits strategy, and Verizon is at the center. By integrating Rhapsody on the PC and mobile, it allows people to get music where they want it and when they want it. Soon there will be millions of Rhapsody capable devices in the hands of consumers. Verizon has a strong history of providing innovative music to the consumers. They are a leader of ringback tones, which we’ve been providing them for years.

More from the call after the jump

The experience: Harrobin said that he’s been using it over the weekend. “The first thing I did was search for music on my PC for and I had old files in a protected format, and the software automatically placed the subscription version in my library for every song and playlist I had. I linked my phone to my PC with a cable, and I was able to drag and drop my favorite playlists right to my phone.

The basics: The service is available today, and for $14.99 — the same price of a CD — you get unlimited music on PC and mobile phone. For the $14.99 a month, you can authorize up to 3 PCs and three mobile devices. It can be home and work PCs or spouses or kid’s laptop. I sideloaded my music to my phone, my wife’s phone and my daughter’s MP3 player. This is significant for us. Customers with VCAST music, full tracks for $1.99 over the air, they get two copies, one gets sent to the phone, and a second copy gets sent to their PC, the second copy on PC is DRM-free MP3. Or on the PC, they can download songs, and those are DRM free. Verizon customers today have three great options: 1. Get unlimited music for $14.99 a month. 2. To buy songs a la cart, 99 cents on the PC, or $1.99 on the phone. 3. You can sideload songs you already own, right to their mobile phones, which is a free benefit. We have memory cards that are 8 gigs, and those hold up to 2,000 songs, and by the end of the year, we will have 16-gig cards. The Chocolate 3 by LG (SEO: 066570), which will become available in a couple of weeks, will see Rhapsody at it’s very best. We understand that not all customers will upgrade to the Chocolate. We are retrofitting some phones that will give good experience, but not optimal experience. The Chocolate 3 will give customers the best experience, and we’ll have it before the end of July, and we are rolling out many more devices throughout the remainder of the year. Music fans will see great value and robust offerings. The subscription service will not include over-the-air downloads.

Why Real?: Harrobin: When we launched our VCAST music service in January 2006, we were surprised that about 90 percent of purchases were made over the air. Clearly, people valued the ability to discover new music spontaneously, but we had to improve the PC experience because that’s where they manage their music. Real has an open platform, broad distribution and DRM-free focus, and we have the power of MTV’s marketing engine.

The old VCAST music service: Harrobin: The service we had up until today was our own offering, it wasn’t in conjunction with any partner. It was our own branded service. What we did today is bring in Real, which is renowned for its Desktop service. As you may not know, RealNetworks operates our ringback and full-song platform, so it was an easy integration service for us. There’s one joint music service, there’s no longer two services. We had VCAST Music, which is now VCAST Music with Rhapsody. You will be able to link out to ringback and ringtones from our Web site. In terms of how many VCAST customers we have today. There’s no monthly subscription, but we have millions of customers each quarter. You’ll see that Verizon is No. 1 in every audio category. Song ID, which allows you to ID a song, and then buy it — 7 million people have downloaded that application.

Nine months of development: Glaser: The reality of taking those three separate assets and weaving them together is harder than you would think. When we announced it, the day we signed an agreement on Sept. 1, it took us nine months to get from there to here. We thought it would take six months, but the day we launched, we wanted a broad set of handsets, and very optimized experiences. We could have put out a product in six months, but our view was to collectively put something out that let us hit the ground running.

Music deal with Microsoft?: Glaser: From a technology standpoint, what’s happened in the last year, we’ve gone horizontal, and Microsoft (NSDQ: MSFT) is going vertical with the Zune. Our focus is horizontal, that means we embrace a range of formats, one is MP3, any tracks that are purchased on the PC and moved to the mobile phone. The over-the-air piece is based on Microsoft format, and then we did a set of enhancements on top of that. We are practical and use any format that’s on the device. They don’t have to be RealNetworks technology and that’s fine with us.

Partnership with MTV: When you hear Rhapsody, think MTV, Glaser said. All the marketing programs that we are unveiling going forward, this partnership will be an important part. There’s $40 million plus a year in TV marketing, and VCAST music will be an important part of that, and then of course there’s the marketing that Verizon will do.

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