RealNetworks Inc. [RNWK] has added a download store to its Rhapsody music subscription service, becoming the latest company to offer consumers DRM-free MP3 music downloads. Competitor Napster Inc. [NAPS] launched its own store last month; both compete with DRM-free Amazon.com Inc.'s [AMZN] store as well as Apple Inc.'s iTunes, which still sells protected, limited-use song files.
The store's launch is part of a wider initiative, which also includes a mobile distribution agreement with Verizon Wireless and a marketing deal with music discovery service iLike Inc. Rhapsody will allow users to sample up to 25 full-length tracks each month, contrasting the brief samples offered by most other online retailers. All four major labels are on board, and RealNetworks partners including MTV Networks Inc. and Yahoo! Inc. [YHOO] will help promote sales.
The increased availability of DRM-free tracks increases pressure on market leader Apple to remove its restrictions on when and where iTunes song files can be played back. Currently, iTunes sells a mix of DRM-free and protected songs; EMI Music plc insists that iTunes carry its songs without DRM, while the other three majors' content is copy-protected.
Still, Rhapsody will have to prove itself as a vendor of a la carte downloads. It's built its brand as a subscription service, and users accustomed to paying one price for a large universe of content won't necessarily jump at the chance to pay extra to own the same songs they can enjoy for a flat monthly fee. Its network of partner sites is strong, but none is proved as a music-retailing brand. As the failure of MySpace's arrangement with Snocap proved, Web sites that offer streaming music don't always turn into good retailers. Rhapsody says it will embark on a $50 million marketing campaign, and will spend $15 million in the next three months alone, to spread awareness of its new store. - Paul Bonanos
See June 30 press release from RealNetworks
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