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Rhapsody Fails to See iPhone App-induced Bump

rhapsodyThe theory that mobile applications will boost interest in music subscriptions has its first test subject in RealNetworks’ (s RNWK) Rhapsody, which released an iPhone (s appl) app in early September that has since been downloaded more than half a million times. Most of those downloaders were non-subscribers testing out the service, making them potential new customers. But the early evidence shows that Rhapsody’s subscriber base isn’t expanding as a result of the app — in fact, it’s shrinking.

RealNetworks said this afternoon that its subscriber base as of the end of the third quarter was somewhere north of 700,000, down from 750,000 during the previous quarter and 800,000 in the first three months of the year. (RealNetworks always reports these numbers as “greater than” some round number; it never provides an exact figure.) The dwindling subscriber base suggests that Rhapsody’s paying customers are either switching to other services — possibly because the price point of such services has fallen — or opting to use free streaming services, legal or otherwise.

Such numbers don’t bode well for any music service expecting to rely on mobile apps to give their revenues a shot in the arm. European startup Spotify is dangling a mobile app that only works for paying customers in front of its free users in the hopes that it will get enough subscribers to cover the cost of its free streams, but recent estimates suggest that its conversion rate is still below 2 percent.

A Rhapsody spokesman declined to say how many people who downloaded the iPhone app became new customers, but RealNetworks CEO Rob Glaser said in a conference call that the company has “not yet seen a significant number of new subscribers” as a result of the app. RealNetworks’ overall net revenue from music, including Internet radio subscriptions, MP3 sales and other channels, dipped to $38.8 million in the latest quarter from $40.5 million during the previous quarter.

Rhapsody is still planning some upgrades to its app, and to be fair, it hasn’t even been out for a full quarter. But the early returns still indicate that all those app downloads aren’t yet enough to reverse the customer exodus, and suggests that most of those new users experimenting with Rhapsody aren’t buying yet.

14 Responses to “Rhapsody Fails to See iPhone App-induced Bump”

  1. Forget about using the new version on the Edge network. It wont even get past log in and it will crash or just hang. Even if you have logged in with a wifi connection it will die when going back to Edge.
    It will not run at all on just the edge network – Atleast version 1.0 was usable on the edge network.
    3G is not everywhere yet and when driving this use to be my favorite app.
    Slacker and Pandora does not have a problem over Edge and work quite well.
    I am really disappointed in these guys. This was my second attempt to give Rhapsody a chance. I had a portable mp3 and their service and the application was so bad at loading the player and managing lists that I dropped it for Napster.
    Looks like they are continuing their quest to shoot themselves in the foot. No wonder their subscriptions are declining so fast!

  2. I must say that the audio quality totally sucked on
    the iPhone app; totally unacceptable to the audiophile
    like me. I emailed Real Networks 5 times about the quality;
    each time I got an automated response that was totally unrelated
    to my question! (probably outsourced) I just downloaded the updated
    version, let’s hope the quality has improved!!

  3. J M Adam

    Instead of taking Adam’s advice and making it more engaging, v 1.1.0 of the Rhapsody iPhone app now has reminders to signup added! Makes me want to use it less.

  4. I know why there was little new subscribers. The rhapsody app service is terrible. I found myself getting frustrated over the slow connections and constant freezing. I actually cancelled my service even though I had the service long before the app came out. I was disappointed that Rhapsody pushed such an inferior product. I am now just buying mp3’s on itunes.