RealNetworks Tries Giving Away Music

[newstech]

By SAUL HANSELL

RealNetworks has decided to fight free with free.

Real has been in the forefront of online music services that let computer users listen to songs from a vast library for a monthly fee. But such services have had a hard time competing with illegal file-sharing services and with Apple Computer's iTunes service, which sells songs at 99 cents each.

Yesterday, Real introduced a version of its Rhapsody music service that allows nonsubscribers to listen to 25 songs free each month. Users are welcome to listen to one song 25 times or any 25 songs from its million-song library once, or any combination. Real hopes that making it as easy to try its service as it is to obtain songs illicitly through a file-sharing network like Kazaa will draw new paying customers.

"Today, the number of people who use legal services like Rhapsody is in the millions, and the number of people who use pirate services is in the tens of millions," said Rob Glaser, Real's chief executive. "What we give people is the instant gratification of the illegal services, on a legal path."

Real and other services have tried programs that allow free trials for a few weeks, but users have to enter a credit card number that will be charged if they do not act to cancel.

Real, by contrast, will offer the 25 free songs every month to anyone who downloads its latest Rhapsody software, although they must be connected to the Internet while listening. The software, of course, will prompt users to sign up for the full service for $9.99 a month for unlimited listening or to purchase digital versions of the songs for 99 cents each.

The service also displays advertising as people listen to the free songs. Real will pay the music labels about a penny each time someone listens to a song in its new free program, the company said, roughly the same royalty Real pays for its subscription service.

Real is also introducing a $14.99 version of Rhapsody that lets subscribers copy as many songs as they like onto certain portable music players, including models from Creative and iRiver. This service, called Rhapsody to Go, mimics in both name and features the Napster to Go service introduced earlier this year.

Many in the music industry had high hopes for such subscriptions, because when looked at in one way they offered a great value to consumers. But they have been slow to catch on. One reason is that they work on only a handful of music players, none approaching the market share of the Apple iPod.

Moreover, all these services incorporate Microsoft antipiracy technology that has been difficult to use in its first versions. Most of all, many consumers have been wary of the concept of renting rather than buying music. (The songs in these services become unplayable if users fail to connect their players to the Internet periodically to receive a signal that they have paid their monthly bill.)

"We think portable subscriptions are neat," Mr. Glaser said. "But there is a small set of early-adopter types who think they are the cat's meow."

Rhapsody, nonetheless, represents a successful product and a clear direction for Real Networks, which has struggled in its initial business of providing software for Internet broadcasting of audio and later video. Real pioneered that technology - known as streaming - 10 years ago this month, but it lost ground to competition from Microsoft, Macromedia and others. It later tried to create an Internet video service, with news and sports programming, but found the consumer appeal modest.

Two years ago, it bought Listen.com, which had developed Rhapsody, and music has grown to represent 30 percent of Real's annual revenue.

Real claims a total of one million paying music subscribers, but that includes Rhapsody customers as well as those who buy a cheaper paid Internet radio service and those who use a version of that radio service bundled with Comcast high-speed Internet access.

Competition is heating up, however. Yahoo and America Online are expected to introduce versions of their subscription music services that include downloading to a portable device. Sony and Microsoft have indicated that they will add subscription services to their sold-by-the-song offerings. And even Apple is said by music industry executives to be exploring a subscription service, though it has criticized the concept in the past.

http://www.nytimes.com/2005/04/27/busin ... oref=login