RealNetworks announced Q4 2008 and full-year earnings last week (read SEC filing). Taking into account digital trends, RealNetworks' music gains are fairly disappointing. The company's music revenue increased 8% for the entire year and 8.2% in Q4. Those gains are well behind the increase in U.S. digital download revenue (about 30% in 2008) and the high adoption rates of free, ad-supported services for both PC and iPhone.

In 2008, RealNetworks launched an MP3 download store with a multi-million advertising campaign (from this press release, $50 million over a year and $15 million in Q3 alone). In addition, it has a partnership with Verizon Wireless that effectively gives it a nationwide sales force -- Verizon customers are now able to sign up for Rhapsody at Verizon retail locations and the Verizon Wireless web site.

Yet with all the new developments, RealNetworks is missing out on much of the the digital music boom. iTunes' growth most likely mirrors the 30% growth in digital downloads. Amazon.com has grabbed MP3 market share -- although it is taking a loss on many of those bargain album sales. New services are capturing the attention and affection of the media and marketplace. In comparison, Rhapsody is stuck in the mud.

The earnings release says music revenue increased 8% in 2008. Where is RealNetworks' revenue growth coming from? Based on the numbers provided in the earnings release, almost half of the growth has come from the Rhapsody subscription service and the rest is from digital downloads.

The company said it added 175,000 Rhapsody subscribers from Q4 2007 to Q4 2008. In Q3, 150,000 new subscribers were added. In Q4, another 25,000 subscribers were gained. If we assume those subscribers were obtained at an even rate over those six months (a mid-point method of estimation) and each paid $15 per month, that's an increase in Rhapsody revenue of $5.34 million for all of 2008.

RealNetworks' music revenue increased about $12.9 million in 2008. If you take out a $5.34 million increase in Rhapsody revenue, you're left with $7.5 million that is accounted for by MP3 store sales and Verizon over-the-air downloads. It's not a terrible number, but it shows what little success Rhapsody has had in selling more digital downloads. And that's a problem. Part of the company's music strategy is to lure MP3 buyers to its higher-margin subscription service. Few new MP3 buyers means few potential subscription customers.

The company just started disclosing the number of subscribers it has had going back to Q1 2007. The problem here is that its declared number of subscribers looks fishy. If we trust their numbers, we are to believe Rhapsody stayed flat at 600,000 subscribers from Q1 2007 through Q2 2008 and then jumped by 25% after its deals with Verizon and MTV Networks started. Those partnerships started in May 2008, which is in Q2 2008, but subscribers didn't jump to 750,000 until Q3 2008. Not only is the timing of the subscriber increase odd, six straight quarters level at 600,000 subscribers is really odd. Since RealNetworks' music revenue has steadily increased over time, I think it's safe to assume the number of Rhapsody subscribers has increased over time as well. A jump in Q3 is understandable given the Verizon partnership, but six straight quarters stuck at 600,000 subscribers is not believable.

Given all of the above, it's difficult to properly assess RealNetworks' performance in digital music over the last two years. We know revenue growth is lower than the overall growth in digital music spending. We could safely guess that Rhapsody's MP3 store isn't gaining much traction. Beyond those items, there's a lot of guessing going on.

Posted by Glenn at 11:27 AM | Link
|Earnings Releases||RealNetworks||Rhapsody|

Rafat Ali at paidContent has a good overview of RealNetworks' pre-earnings release. Notable is "a decline in the assumed valuation of the Rhapsody America venture" and a non-cash charge of $185 million to $200 million related to impairment in goodwill and acquired intangible assets (a few mobile acquisitions that aren't panning out). For you accounting geeks, the gain on sale of interest in Rhapsody America will be booked to shareholders' equity rather than as revenue on the income statement.

My thoughts on the access-and-hardware strategy are here. Rhapsody does not limit hardware to the extent of Zune, but its music service does not allow for total freedom in choosing your hardware. And that's a problem. (Price is a problem, too.)

Posted by Glenn at 7:32 AM | Link
|Earnings Releases||Rhapsody|

RealNetworks released Q3 2008 earnings today (press release) and reported improved revenues and subscribers from its music store and service. Those gains were offset by large expenses for net loss operating loss for the music segment.

The numbers show productive partnerships are going to be the key in improving Rhapsody's standing. RealNetworks' "Music Without Limits" initiative partners the company with Verizon, iLike and MTV Networks for a more seamless experience. The company claimed Rhapsody now has 22% of the U.S. MP3 download market at the end of September, a nine-point increase from July. The 125,000 increase in Rhapsody subscribers brings the total to two million.

Music revenue increased 10.4% year-over-year to $41.6 million (11.9% sequentially). That means music revenues increased by $3.78 million versus Q3 2007. More importantly, RealNetworks' music segment had a net operating loss of $24.5 million after a 43% gross margin, $15.2 million in advertising and $27.2 million in other operating expenses.

Rhapsody gained bout 125,000 new subscribers (net of churn). No breakdown was given for mobile subscriptions through VCast. Verizon has been the most successful customer acquisition partner, the company said. Some new subscribers could have come from new customers to the Rhapsody MP3 store (such upstreaming was one of its main goals).

If we pretend 100% of the $3.78 million increase in revenue came from MP3 sales, that would mean an additional 3.8 million tracks were sold in the first full quarter of Rhapsody's multi-pronged partnership with Verizon, MTV and iLike. That's a good start but not a home run. Let's keep in mind the $15.2 million spent on advertising for Rhapsody America and the exposure to tens of millions of iLike users. The increase in subscribers is far better because it's far more profitable. There is better margin in subscription services and it is recurring revenue.

Notes From the Earnings Call:

• Economic Downturn: Sees opportunities in the consolidation that tends to happen during economic downturns. Real sees itself as a good candidate for M&A activity.

• Music royalties: Everything landed...in a place that is acceptable. The economics of the business with regards to stat licenses are fairly similar to where they've been. Real negotiates rates and tends not to pay statutory rates. Doesn't fundamentally change the status quo.

• Music subscription growth: Glaser did not break it down by and say how many new subscribers Verizon accounts for. But they did say Verizon has been Real's most successful customer acquisition channel.

• Best Buy Relationship: The deal has not closed, and Glaser thinks if Best Buy acquires Napster it will lower its involvement with Rhapsody. That allows Rhapsody to pursue other opportunities. Glaser sees this as an elimination of Napster as a competitor due to it being in-house at Best Buy.

Posted by Glenn at 5:38 PM | Link
|Rhapsody|

Since Rhapsody started powering Verzion's VCast mobile music service, downloads have improved substantially. According to press releases for quarterly earnings announcements, Verizon Wireless customers "completed" 43 million audio and video downloads in Q3 2008, a 17.8% improvement over the 36.5 downloads in Q2 (the quarter in which the partnership took effect) and a 24.3% improvement over the 34.6 million bought in Q1. During that span, the number of total Verizon wireless subscribers increased only 5.4%.

Over-the-air downloads mentioned by Verizon are tracks purchased for $1.99, not subscription tracks. The Rhapsody-powered VCast music subscription service requires users to transfer subscription tracks and personal music files to the handset from the PC. Subscription tracks cannot be downloaded directly to the handset.

The increase in downloads could be an indication that VCast has more subscribers or that the new service is better at enticing users to purchase music (the former is the more likely). Verizon did not break out the number of subscribers to its VCast music service in its recent earnings release. Rhapsody has not yet given details on new VCast subscriptions but has publicly said they are happy with the early results. "Sign-ups for the first month have been very encouraging, exceeding our expectations," RealNetworks CEO Rob Glaser said in the Q2 2008 earnings call.

Posted by Glenn at 12:43 PM | Link
|Mobile Music||Rhapsody|

In this USA Today article about Rhapsody's new plan of attack for its subscription service, JupiterResearch's David Card predicts subscription revenue will grow 20% per year for the next five years, and Rhapsody will still be the #1 service. That would put consumer spending at $600 million in 2012.

In the same article, Inside Digital Media's Phil Leigh is less optimistic. "I think Rhapsody will wither away, and eventually reincarnate as an ad-supported business."

I'm neither as optimistic nor pessimistic as the two analysts, but I'm on the side of Leigh. Subscriptions, as they exist now, are going to have to survive with a cult following and can do so as long as the company isn't a pure play (a bad sign for Napster).

Analysts, I believe, are right in one aspect of their assessment: broad demand for subscriptions exists. But it's a latent demand, meaning current products will not satisfy the demand. If that 20% growth materializes it will likely come from a new generation of mobile subscriptions. If mobile subscriptions (think Nokia's Comes With Music) gain traction and even come close to expectations, growth will be more than 20% per year. If in the coming years the subscriptions category includes ISP-based services (fixed number of MP3 downloads for a monthly fee) then subscriptions definitely have growth potential exceeding 20% per year.

Neil Smith, VP of business management for Rhapsody America, said subscriber acquisitions were "doing much better than we had expected" but offered no details.

Analysts have been overly optimistic with their forecasts this entire decade (everybody but Leigh) and regularly tone down their forecasts. JupiterResearch has already lowered its January 2007 growth estimate from the 32% annual growth rate it predicted for 2007-2011. In November of 2005, Jupiter was saying subscriptions would come in at $250 million for the year. In 2002, Forrester forecasted 2007 subscription revenues at $313 million (to be fair, a forecast that far in advance is hard to get right). Right now, Forrester estimates 2008 subscription revenue will grow 15% to $287 million.

I'd be surprised if consumer spending in the U.S. reached $287 million, and I wonder about the estimates of market revenue. The RIAA put 2007 subscription trade revenue at only $103.3 million. That figure was $98.5 million in 2006. For the sake of argument, if we apply Napster's cost of revenue, most of which is royalties for subscription services, to the RIAA's 2007 trade revenue number, we get only $148 million in consumer spending. With RealNetwork's lower cost of revenue for music, we get consumer spending of $184 million. Even if you combine the music revenue from Napster and Rhapsody for their most recent fiscal years, you get only $276 million for all territories in the world -- and that includes revenue from a la carte downloads and advertising. (In 2007, RealNetworks got 63.5% of its revenue from the U.S.)

Verizon would have to do a great job selling Rhapsody to its mobile subscribers. It is, basically, the same product that consumers have greatly ignored for years. Verizon should gain some untapped demand just on the basis of its sales and marketing. Hopefully future SEC filings will shed some light on their progress.

Card sounded less optimistic in a recent Billboard article. "Rhapsody's a great product if you're a sophisticated music fan, but it has not proven to have mass-market appeal yet," he told Antony Bruno. "Putting it on a phone may not make that much difference."

Given Apple's domination and the iPod's entrenchment, the success of the iPhone and iPod Touch as music players, and the limited commercial appeal for binging on tethered downloads, I see little reason to believe subscriptions -- in their current incarnation -- have significant growth in them.

Posted by Glenn at 2:58 PM | Link
|Napster||Online Stores/Services||Rhapsody|

Bloomberg's Don Jeffrey has an excellent article on Napster's low stock price and financial woes. The company's market cap is so low -- currently about $18 million less than its cash holdings -- that it has become a prime target for a takeover. Some investors are snapping up shares in anticipation of an acquisition.

RealNetworks is a potential bidder and could certainly stand to add some or all of Napster's 760,000 customers to its Rhapsody service. But the company currently has different plans to grow its subscriber base. Rhapsody will spend $50 million -- or just $8 million less than Napster's market value -- to promote its "Music Without Limits" campaign that showcases its mobile service, PC-based services and MP3 store.

Posted by Glenn at 10:26 AM | Link
|Napster||Rhapsody|

Earlier today, Rhapsody launched a new MP3 store as well as many other initiatives (read the press release here). Users of Rhapsody's subscription service will feel at home, and users of its free streaming web site will notice similarities.

I spent the weekend browsing around the storen and testing its user experience, and I have written a three-page analysis. It costs $29.99 and can be purchased here. (During the post-MBA job search, there will be more papers like this for purchase.)

In a nutshell, I think it's a solid store that has some positive and negative aspects. Like other Rhapsody services and sites, the MP3 store is easy to use and geared toward music aficianados. Users can stream 25 songs per months -- without even creating an account -- after which the samples revert back to 30-second streams. Tracks are 256kbps MP3s and the catalog includes all four majors plus many indies. It has just about everything a store should have.

On the down side, the site offers practically nothing new, and the checkout process is laborious (it should be more of a simple buying process). The prices are $0.99 per track and $9.99 per album, and there are no sale items or promotions.

Welcome to an increasingly crowded market, Rhapsody MP3 store. Your brand name and good interface should help you gain some traction. As for upselling consumers to the subscription site, I'm undecided on the outlook.

Posted by Glenn at 5:01 PM | Link
|Rhapsody|

It's been a busy week for Yahoo. Layoffs. A Microsoft buyout offer. And now Yahoo has announced it will drop its music service and switch over to Rhapsody's subscription service. (This makes an acquisition by Microsoft all the more interesting since Rhapsody and the Zune Marketplace would become a sibling rivalry.)

This will be a good test for the subscription value proposition. Yahoo's huge user base creates an enormous potential market. How much of that potential can be tapped is still the big question. Digital music rental simply turns off consumers. If anything is going to work, I think Universal Music Group's Total Music stands the best chance.

Posted by Glenn at 1:50 AM | Link
|Online Stores/Services||Rhapsody|

• LiveNation and Ticketmaster will not renew their relationship when the current contract expires at the end of the year. That will open the door for LiveNation to beef up its own ticketing operation (which recent acquisitions should allow it to do). Sources say the 14-15 million LiveNation event tickets purchased annually give Ticketmaster around $100 million in service fee revenues. (Billboard.biz)

• SoundExchange is allowing small webcasters -- defined as those with annual revenues of $1.25 million or less -- to pay 10-12% of revenue instead of the per-performance royalties set earlier this year. The deal includes a usage cap to "ensure that this subsidy is used only by webcasters of a certain size who are forming or strengthening their businesses." (Radio Ink)

• It's goes without saying, but at least somebody included it in an article. From Bloomberg News on Wal-Mart MP3 downloads from WMG and UMG: "Kevin Swint, Wal-Mart's manager of digital media, said the company is in talks with Sony BMG Music Entertainment and Warner Music Group Corp. as well as other record companies to offer their products in the same unprotected format." (Bloomberg)

• The second annual, five-day Next Big Nashville music festival, a showcase of Nashville's rich music scene, will run September 5-9. Local bands The Pink Spiders, De Novo Dahl, Ghostfinger, Wax Fang, Jeremy Lister, The Features and Freedy Johnston (he recently moved to town) are among the 130-plus bands that will play at ten venues. A five-day wristband will cost only $30. (Next Big Nashville)

• Little Big Town will give away its new single, "I'm With The Band," as a free download tomorrow at the band's website. The freebie will start at midnight E.T. and last 24 hours. (Country Weekly)

• Can you tell something about an artist's longevity from last.fm plays per listener? I would think so, and after compiling a long list of numbers, David of Digital Audio Insider thinks plays/listener, though a crude metric, shows quite a bit about long-term potential. "The Last.fm numbers don't look good for the long-term prospects of the Bravery and the Walkmen. Of all the acts in this analysis with Last.fm audiences of more than 100,000 listeners, these were the only two with less than 20 plays per listener. My suspicion is that bands that receive a fair amount of mp3 blog attention might have their ratios pulled down because there are a large number of Last.fm listeners who have only heard a single track or two via a music blog." (Digital Audio Insider)

• BusinessWeek's Ronald Grover writes about Universal Music Group's International Music Feed, a reaction to MTV's lack of video play. The potential is there, he writes, but the viewers aren't. "According to IMF, it gets an anemic 47,474 unique visitors a month to its Web site. And while it has 17 music channels on the online TV site Joost, and two channels on British cell-phone company Vodafone (VOD), it has just about no U.S. TV presence. ... It ain't MTV, that's for sure. But give Universal credit for trying." (BusinessWeek.com, via paidContent)

• The Rhapsody America joint venture is a case of one company having the brains and one company have the brawn. Will it bring mobile music into the mainstream? (Big Red Horseshoe)

Posted by Glenn at 10:46 AM | Link
|Rhapsody||SoundExchange||Ticketing||Universal Music Group|

• RealNetworks, MTV and Verizon are teaming up for a mobile music service called Rhapsody America. MTV's URGE music service will join with RealNetworks' Rhapsody subscription service to create a music service that can be accessed via PC, mobile phone or (compatible) portable media device. Verizon's V CAST will be the service's mobile platform. (Press release)

• Wal-Mart has announced the launch of $0.94 MP3 downloads and $9.22 MP3 album downloads. The catalogs of EMI and Universal Music Group are available in the MP3 format at 256 kbps. The original, 128 kbps WMA tracks will also be available. The first things I noticed at the music download page were links to $3.88 MP3 albums (which are all EP's and singles), $5.88 MP3 albums (catalog titles like Bon Jovi's Slippery When Wet) and $7.88 MP3 albums (Norah Jones' Come Away With Me, for example). Unfortunately, Wal-Mart's updated digital store does not support Firefox. (Press release)

• Solange Knowles, sister of Beyonce, has signed a worldwide co-publishing deal with EMI Music Publishing. Knowles is currently promoting Baby Jamz, a hip hop-oriented toy line created by Planet Toys and Music World Entertainment, her father's company. (Press release)

• Another Madonna-to-LiveNation? article, but this one has some numbers and word of a rival. "One source estimated the value of the Live Nation offer to be $180 million, with the touring giant potentially licensing the recording rights for roughly $30 million. ... It is doubtful that WMG, the only label Madonna has ever been signed to, would give up the Material Girl without a fight. Sources say that the company has made a counter-offer to Madonna that also includes a touring component that could be helmed by rival promoter AEG Live." (Billboard.biz)

• Said the CFO of Emmis Comminications about satellite radio, "The people that utilize satellite radio often toggle between AM and FM and satellite radio, and it really hasn’t caused a measurable effect in our business yet. ... Satellite radio is a niche business focused on people willing to spend 13 dollars per month for the radio. Which for long-haul truckers or people who are advocates of a music format which may not reach a mass market – if you’re a passionate Blue Grass listener in New York City – it probably makes sense for you. But I think they’re still challenged. It’s a challenging business model to launch a billion-dollar asset in space and try to build up a mass-market audience quickly. And with 15 million subs it’s tough, which is why they’re trying to get the merger done. In large measure they’re trying to work with the government to solve a business model problem." (Radio Ink)

• Verve Music Group has named Mitchell Cohen as its VP of A&R. Cohen was previously SVP or A&R at Columbia Records. (Billboard.biz)

Posted by Glenn at 11:37 AM | Link
|Mobile Music||Publishing||Radio||RealNetworks||Rhapsody||URGE||Wal Mart|

• Garth Brooks' catalog will once again be available through all retailers through his own Pearl Records. For two years Brooks had an exclusive deal with Wal-Mart. His next release will be a three-CD, "best of" box set with a $12 wholesale cost (which puts it in the $20 list price area). His catalog will be reissued as well, with a $7.85 wholesale cost. Wal-Mart did not report Brooks' sales to Soundscan, but publicly Wal-Mart boasted that Brooks' six-CD box set quickly went platinum and "achieved Wal-Mart's highest volume of sales ever for the first day of a musical release." (Hollywood Reporter)

• LiveNation has introduced tools to help people search for and buy tickets. The Exclusive Concert Tools page has three items: a concert search module that can be inserted into personal web pages, a venue widget and a search bar add-in for Internet Explorer 7 and Firefox. Also available s a LiveNation Google Gadget, a U.S. concert and ticket search. (Press release)

• ASCAP and BMI have launched RapidCue, a website that allows members to enter cue sheets online. (Billboard.biz)

• Parallel Entertainment is launching a record label with Jeremy McCombs as the first artist. The production and management company is known for its work on the Blue Collar Comedy Tour. On Parallel's talent roster are Jeff Foxworthy, Bill Engvall, Larry the Cable Guy and Reno Collier. The company already has a record label, Jack Records, a venture with Warner Bros. Records that has released mostly comedy albums. (Music Row)

• Hypebot has a brief interview with RealNetworks about Rhapsody's plans for Universal Music Group's DRM-free downloads. Tracks will be 256kbs, DRM-free MP3s. Unlike the way iTunes sells EMI's DRM-free files, Rhapsody will offer only a DRM-free version and will not sell a protected version. Rhapsody subscribers will pay $0.89 per track for UMG's MP3s while non-subscribers will pay $0.99. (Hypebot)

• Clear Channel will host a shareholders meeting on September 25 to allow investors to vote on its $19.6 billion privatization plan. Two private equity groups already very involved in the music business, Bain Capital Partners, LLC and Thomas H. Lee Partners, will offer $39.20 per share. (Radio Ink)

Posted by Glenn at 10:13 AM | Link
|Brick-And-Mortor Retail||Rhapsody|

Hypebot asked RealNetworks why its Rhapsody music service has not added DRM-free download options as iTune has done. Here's an excerpt:

"We think it makes sense to wait until a sizable amount of music is available for sale DRM-free, and for now we're continuing to encourage the labels to embrace the DRM-free model. It would be good for their business and good for consumers, and would allow anyone to sell music that plays on the #1 portable player, the iPod. Based on our conversations with the labels, we feel that considerable progress is being made on that front, and predict that 2008 will be a landmark year in the transition to a DRM-free sales model. ...

As to why we're not out now with an indies + EMI-only DRM-free offering, while it's a substantial amount of music, from our perspective it doesn't yet reach that threshold of being able to offer most of what consumers are looking for."

My translation: We don't want to lift the curtain on DRM-free downloads until we get more than one of the four majors -- which we predict will happen next year.

Posted by Glenn at 12:53 PM | Link
|Rhapsody|

• Album sales were up 10% last week and were "only" 8% lower than the same week last year. For the year, album sales are down about 16%. Digital track sales rose 3% and were 43% higher year over year.

• Rolling Stone magazine has the first of a two-part series on the fall of the music industry, a situation for which "there's no hope in sight." It's a collection of previously told stories and publicly available sales statistics. As with many articles that attempt to describe labels' failed attempts over the years, the writers tell us that the industry's death blow was failing to work with the original Napster. I don't believe P2P is or ever was the cure-all it's made out to be. Assuming all or most P2P users would have or ever will pay a voluntary monthly fee is as pie-in-the-sky as it gets. (Rolling Stone)

• Quincy Jones is becoming a brand that will encompass digital media, how-to publishing, clothing and even (reportedly) shaving cream. The marketing push is being led by Jones' management team at The Firm. (Billboard.biz)

• Music and social networking continues to get more new ideas and more venture capital. One of the newest companies is Fuzz. The site allows bands to set up profiles and sell their music. (Fuzz, via CMJ)

• Seventy-two House members oppose a merger between satellite radio companies XM and Sirius. (Radio Ink)

• RealNetworks' Rob Glaser answers questions on the new Real Player 11, Real's file formats and the Rhapsody music service. (Rhapsody Blog, via paidContent)

• Australian rock band Airborne, dumped by Capital amidst the shake-up at EMI, just signed to Roadrunner. (The Age)

Posted by Glenn at 8:09 AM | Link
|Music 2.0||RealNetworks||Rhapsody||Satellite Radio|

• Bob Morelli has been promoted to president of RED Distribution, Sony BMG's indie distribution arm. He was previous EVP and GM. (Variety)

• The European Commission has brought charges against Apple and record labels, alleging the companies are restricting sales of music in Europe. Different countries have different iTunes stores, which can lead to difference pricing. Apple says it wants a pan-European store but is limited by record labels' requirements. An EMI spokesperson said, "We do not believe we have breached European competition law, and we will be making that case strongly." I can't believe France would really want to share its iTunes with other, non-Johnny Hallyday-loving countries. (Billboard.biz)

• RealNetworks is raising the price for the streaming version of its Rhapsody subscription service, to $12.99 from $9.99. The company rationalized the price increase by pointing out the value-added enhancements it has added, and the constant price of Rhapsody since the service was unveiled. (Digital Music News)

• In a move to facilitate licensing, Sony BMG will partner with a leading online music database to make available its music catalog for advertisers. (The Guardian)

• The Electronic Frontier Foundation found something to complain about in yesterday's move by EMI to drop DRM on its digital downloads: "Unfortunately, the industry is still giving consumers a raw deal. EMI will be charging fans a 30% premium to avoid DRM ($1.29 instead of 99 cents per track, or 30 cents to upgrade an old download) -- effectively a surcharge to buy back your rights." It followed that with its usual proposal of a voluntary collective license for file sharers...pretty much a pipe dream at this point. One thing at a time, and I'd bet labels would first want to promote download store growth before sending a signal that they are supporting P2P. (EFF Deep Links)

Posted by Glenn at 8:59 AM | Link
|Indies||Rhapsody||Sony BMG|

CES, the annual electronics convention in Las Vegas, is always a time for companies to reveal new products and announce new partnerships. For the music industry, yesterday's announcements showed that no one company can go it alone. As services and hardware become more integrated, we're going to see palpable shifts in how consumers -- all consumers, not the early adopters who dive head-first into any new gadget -- enjoy music. Here are a few of the key announcements thus far.

• Apple and Cingular. The Wall Street Journal reported Apple is launching a mobile phone service and a phone. Cingular will be the network provider.
• Microsoft and Clear Channel. Clear Channel will supply the HD radio content for Microsoft's MSN Direct service.
• Microsoft and Motorola. Motorola's new mobile phone will use Microsoft's Windows Media DRM to allow users to play music from such services as Rhapsody, Napster, Yahoo! Music and URGE.
• Morotola and Warner Music. The global agreement puts Warner Music content exclusively in Motorola mobile services.
• Rhapsody and TiVo. Later this year, the Rhapsody music service will be integrated with TiVo so three million songs will be accessible on consumers' televisions.
• Rhapsody and iriver. iriver announced two new Rhapsody-enhanced portable music players; one of the devices (pictured) will download music over the air from the Rhapsody music service. Both devices will be available by July 2006.
• Rhapsody and Logitech. Next week, users of Logitech's Squeezebox and Transporter players will be able to access Rhapsody without using a PC. The service will be priced at $9.99 per month.

Posted by Glenn at 9:40 AM | Link
|Apple||Digital Music||Mobile Music||Portable Music Players||RealNetworks||Rhapsody|

• Today's Wall Street Journal reveals Google is in talks with YouTube for about $1.6 billion. From a music perspective, there is a lot of potential in a Google purchase of YouTube. (The video angle is obvious: YouTube owns Google Video.) While Google has mastered free email, maps and text ads, it has yet to reach success in entertainment. Though its deep pockets may be tempting, I could imagine labels working with Google to promote their music on MySpace. (Read article at Wall Street Journal)

• The Future of Music Summit in Montreal started yesterday. cleverLazy, Fluxblog, Chromewaves and other bloggers will be there. Check their blogs for comments on the Summit, and check for Future of Music posts at Technorati.

• Partnerships about: Best Buy is the retailer of choice in the Rhapsody/SanDisk partnership and Samsung is working on an online store with MusicNet. Plus, Target is rumored to be working on an online music store. That's it, the market will officiallly be satiated when Target enters. (Read article at Red Herring)

Posted by Glenn at 12:38 PM | Link
|Conferences||Rhapsody||YouTube|

• Hits predicts Justin Timberlake's album should have done about 700,000 in its first week of release. John Mayer, who is getting some unexpected blog love, is looking at 240,000. Bob Segar should come in under 100,000. (Hits Rumor Mill)

• Qtrax continues to get more press than it is likely to get customers: The yet-to-be-released, ad-supported P2P service has inked a licensing deal with Warner Music Group. EMI and TVT are already on board. The iPod and the Zune, however, will not be on board. (Digital Music News)

• Maybe this is old news, but it's the first I saw it: Epic Records has dropped INXS in the U.S. (The Daily Telegraph)

• The biggest part of the news about the Rhapsody/Sandisk partnership that will create a portable music player that will be integrated with the online music service? Rhapsody is ditching Microsoft's PlaysForSure DRM for its own technology. And why not? PlaysForSure doesn't work with the iPod, and it won't work with the Zune. (Press Release)

• Jupiter Research finds that 83% of all iPod owners do not buy digital music at least once a month, and only 5% of the music on the typical iPod came from an online music store. (BBC News)

• Entertainment Weekly lists 25 albums it can't wait to hear. Topping the list is Jay-Z's Kingdom Come. (Entertainment Weekly)

Posted by Glenn at 9:13 AM | Link
|Portable Music Players||Rhapsody||Sony BMG||Warner Music Group|

• SOHH reports it appears The Game has left G-Unit/Aftermath and has signed a five-album deal with Geffen that includes a distribution deal for his label, Black Wall Street. (SOHH)

• EMI has agreed to license its North American catalog -- minus The Beatles, one can assume -- to P2P service Mashboxx. (Billboard.biz)

• Rick Rubin rumored to produce the next Velvet Revolver album, Liberated. (MetalUnderground.com)

• RealNetworks announced record revenue of $89.4 million for the second quarter ending June 30th. If income from the Microsoft settlement is adjusted out, earnings drops to $4.8 million. Music revenues rose 21% to $30.1 million. (Press release)

• Download a PDF of the IFPI's 2006 piracy report. (IFPI)

Posted by Glenn at 1:44 PM | Link
|EMI||P2P||Piracy||RealNetworks||Rhapsody|

A beta of a browser-based version of the Rhapsody online music store is now available at http://www.rhapsody.com. Coolfer's first impression: Nice interface, intuitively used and, typical to most betas, sometimes painfully slow.

The browser-based version in meant to provide Rhapsody access with the need to install a separate application. There is, to my knowledge, no limit to the number of computers from which a user can log in. Playing a CD in the browser-based Rhapsody won't work, nor will transfering songs to portable devices. The Rhapsody application would need to be used for those functions..

Artists should experiment with this. Imagine an artist's website, or an email to its fan list, that contained a link to its album at Rhapsody. Since the free version of Rhapsody offers up to 25 free streams a month, fans would be able to listen in an environment much better than MySpace. The catch: Registration is required. If enough bands used Rhapsody in this way the effect would be that people would be more likely to register, or would already be registered. That's the network effect, and it can make or break a product. Just ask MySpace.

Digital Music News has some thoughts on a browser-based Rhapsody:

"For starters, Rhapsody can now be enjoyed by Mac users (Coolfer: Linux users, too), at least those that are not hooked on iTunes. Meanwhile, the move lowers the barriers for new users, especially those that are hesitant to grab an application download. That could spark a nice viral wave, especially among bloggers and friends that want an easy way to share a song."

Will devoted Mac users stray from iTunes? Some, but not many. Rhapsody isn't Jobs-approved, after all. Bloggers, in my opinion, will stick with MP3 links. Streams just aren't very popular among the bloggerati. Rhapsody would be wise to target the more casual consumer with the browser-based version.

Posted by Glenn at 3:13 PM | Link
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