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Rhapsody, Now Independent, Reboots With a Price Cut

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Rhapsody has officially become an independent company, two months after former parent RealNetworks (s RNWK) revealed plans to cede majority control of the music subscription provider. Now a standalone entity in which RealNetworks and Viacom (s via) possess equal minority stakes, Rhapsody also said today that it will offer a $10 monthly subscription service in an effort to better compete with several innovative and inexpensive rivals that have sprung up in recent months.

The new price point reflects an industry-wide drop in the cost of all-you-can-eat music services, which deliver access to a large library of songs for a monthly fee, even as their providers add mobile functionality. Rhapsody has taken steps to evolve alongside newer subscription services such as MOG and Thumbplay, which offer cloud-based streams to both desktop PCs and mobile devices for about $10 per month, as well as free alternatives. Rhapsody traditionally delivered streams to the desktop, along with “tethered download” files that can be loaded onto certain mobile music players, for about $15, but added cloud-based access through its iPhone (s aapl) app beginning last September.

Rhapsody has also recently renegotiated its licensing fees with content owners, representing more realistic expectations from labels. While confidence in free streaming models is fading, Warner Music Group (s wmg) chief Edgar Bronfman Jr. said recently that the label is increasingly willing to experiment with paid subscription models.

Along with the ownership change and price cut, Rhapsody introduced an application that runs on Android phones, along with a new logo (pictured). Despite the overall reboot, existing subscribers will have to can either contact the company’s customer service department or update their accounts on the Rhapsody web site to sign up for the new pricing plan; otherwise they’ll continue to be billed at the old subscription rate.

Although some of its upstart rivals have garnered more attention lately, Rhapsody is still among the largest subscription providers in the market with more than 675,000 subscribers as of the end of 2009, according to RealNetworks, down from a peak of 800,000 earlier in the year. Competitor Napster, owned by Best Buy (s BBY) since fall 2008, no longer reports the size of its subscriber base, but was last known to have 708,000 subscribers around the time of its acquisition; Spotify recently said it had signed up 325,000 paying customers in Europe, and is still planning a U.S. launch, originally slated for late 2009.

Rhapsody’s spokesman said the company is forecasting profitability by the end of 2010, with revenues near $130 million. RealNetworks invested $18 million in cash as the company was spun out, while Viacom said it will contribute $33 million worth of advertising inventory to promote Rhapsody on its properties, including MTV Networks.

7 Responses to “Rhapsody, Now Independent, Reboots With a Price Cut”

  1. Paul Bonanos

    Greg and Scott, thanks for calling attention to this and sharing your frustrating experiences. You’ve provided an important level of detail that I didn’t discuss in my post.

    I understand that Rhapsody will continue to offer the old plans for people who want the service on multiple devices, but will promote the new, one-device, $10/month product as its primary service. (It looks like you’re grandfathered in on the old multiple-device plan, and you’ll be able to keep it if you like.) But Rhapsody has also told me that there won’t be any limits on what you can stream, and that its customer service reps simply gave you some bad information about the song limitations. I’m told they’re still in the process of updating their web site, too.

    Janko, Rhapsody has changed its offerings several times, so you might have had an old plan that isn’t offered anymore. It seems to me that $10 for desktop plus mobile is now the going rate for a music subscription (with MOG offering the $5 desktop-only plan). Wonder what Spotify will charge U.S. customers, if they ever launch here.

  2. You might want to dig a little further. I’ve been a Rhapsody customer since 2004, paying nearly $160/year for unlimited to-go service that is functional up to 3 computers and 2 mobile devices. Obviously when I read this, I was excited about getting a little money back for services I’ve loyally subscribed to for six-plus years. Well, after calling customer service, I had to explain the $9.99 plan – as the customer service agent knew nothing about it, nor ever had heard of it. After being put on hold, I was told that the $9.99 plan is limited to one device total and 3,333 plays/streams/transfers. I left my account alone at risk of losing the access I currently have to save a few bucks while I research this more. Still quite confused as Rhapsody has no mention of any price plan other than the $9.99 on its website now, and even more ominous, there is no reference to the limitations of that plan. Maybe you could learn more?

  3. Greg McDonald

    Rhapsody’s announcement isn’t what it seems. As a long-time Rhapsody To Go user, I called customer support this morning after reading this article to request the monthly pricing adjustment.

    The new plan is called “Rhapsody Premium.” Only after it was done did the overseas customer support rep inform me that the price reduction is also a downgrade in service.

    Instead of unlimited tracks and 3 mobile devices (we’re a two iPhone home), the new plan limits you to 3,000 tracks and 1 mobile device. 45 minutes later I was finally back on the old Rhapsody To Go plan at $15/month.

    As is typical with Rhapsody (love ’em and hate ’em), nothing is what it seems when it comes to dollars. And their overseas customer service is generally clueless about it all. Moreover, there is no way (as of this morning) to find out about these gotchas and plan restrictions on Rhapsody’s website.

    The bottom line is if you’re an existing Rhapsody To Go customer and use the service as intended, there is no price reduction. Shame on Rhapsody for this not-so-transparent means of generating some press attention. Shame on the press for doing a copy and paste job from a news release.

    Rhapsody users? Caveat emptor.