Real Dumps MusicNet for Rhapsody

By Nate Mook, BetaNews

May 28, 2003, 6:15 AM

RealNetworks on Wednesday launched a RealOne branded version of Rhapsody, the music subscription service the company plans to acquire with the purchase of Listen.com.

The move has put Real in a unique position of competing with itself, however, as RealOne Rhapsody will initially utilize Microsoft's Windows Media Audio format. Real has said it plans to eventually transition the service to its own RealAudio format, but did not give a timeframe for such an undertaking.

Real will also cease its MusicNet offerings entirely, despite holding a 40 percent stake in the company. MusicNet -- previously offered as RealOne Music -- was launched as a joint venture between Real, Bertelsmann, AOL and EMI. Real will continue to provide technology to MusicNet, but the switch to Rhapsody may prove a fatal blow for the struggling music service, which is now left with AOL as a sole partner.

Real aims to establish Rhapsody as the dominant Windows music service before Apple is able to bring its iTunes Music Store to the PC later this year. The company has already begun advertising songs at 79 cents a piece, undercutting Apple by 20 cents. But that figure is only for burning music to a single CD, as Rhapsody does not feature music downloads.

Unlike the iTunes Music Store, Rhapsody is a subscription based service that offers on-demand streaming rather than actual downloading of music to a computer. For $9.95 per month, subscribers can listen to an unlimited number of songs streamed over the Internet, and copy tracks to a CD for 79 cents each. Rhapsody boasts a library of over 330,000 songs, but only 200,000 are available for CD burning.

Due to their restrictive nature, subscription music offerings have been met with mixed reviews from critics. But Real is placing its bets on low-cost CD burning to spur signups. "We are especially excited about the availability of burns to CD for a mere 79 cents," said Merrill Brown, senior vice president of RealOne Services. "We believe this is a great offer to consumers who are now realizing the power of online music services."

RealOne Rhapsody requires a custom application designed specifically for the service, rather than integrating with an established media player like Apple has done with iTunes. While it takes on the appearance of a media player, Rhapsody cannot play back any files outside of the service and currently supports only Windows Media Audio.

Real is offering a Listen.com version of the client that can be used to preview Rhapsody without providing a credit card.

Competition will heat up later this year when Roxio launches its own online music service under the Napster brand name. Roxio's recent Pressplay acquisition will serve as the foundation for the new paid version of Napster.