Friday, September 11, 2009

Rhapsody Sings in Harmony With iTunes on the iPhone

Apple has approved a music application from Rhapsody for distribution at the App Store. The subscription service may appear to be an iTunes competitor, but there's a key difference: iTunes facilitates downloads; the Rhapsody app will stream music selected by the user for a recurring monthly fee. If someone wants to buy the song and keep it saved, Rhapsody sends the user straight to iTunes.
It's been a big week for Apple (Nasdaq: AAPL) . CEO Steve Jobs returned to the spotlight Wednesday after a liver transplant, video cameras were added to an iPod nano for the first time ever, and now the iPhone App Store will feature a competing digital music service to iTunes: Real Networks' Rhapsody.
The app, available now at the App Store, is free for seven days; if users want to keep the service, they'll need to pay US$14.99 a month after that. However, Rhapsody officials say for that price, they'll get instant access to more than 8 million songs, without 30-second previews, on two of the more popular mobile platforms out there: the iPhone and the iPod touch.
The decision to allow Rhapsody on the iPhone comes after a summer full of criticism of the way Apple decides which apps make it to the App Store -- or which ones get pulled after initially gaining approval. The fact that Rhapsody is a rival to the iTunes digial music service is generating plenty of talk in the tech mediasphere, but Rhapsody officials are downplaying the negotiations that went on to make it happen.
"The approval process was very smooth," Rhapsody America vice president of business management told MacNewsWorld. "Following the submission of the app, our development team and the folks at Apple worked closely to make a few minor tweaks, and then it was approved."
The Song Remains the Same
With the Rhapsody app, iPhone users and iPod touch users who have WiFi access will be able to stream music to their devices. The fact that Rhapsody will send subscribers to iTunes for the actual purchase and download of songs raises a question: Is Rhapsody truly a competing music service? Not really, said Frost and Sullivan digital media analyst Mukul Krishna. He called it more "co-optition" than competition.
"If you have enough disposable income that you're paying 15 bucks for subscriptions and you're ready to purchase a song and download it locally, you'd be doing that through iTunes," Krishna told MacNewsWorld. "Rhapsody will send you there and there will be a revenue sharing model between Apple and Real for that. With the information available, it seems to be a win-win for everybody."
Apple's real goal, according to Krishna, is to use the relationship as a potential way of selling more iPhones, since the App Store has become such a success for the company. "And the incremental revenue off Rhapsody subscribers who are interested in buying a song off of iTunes, that's icing on the cake."
As for Rhapsody and Real Networks, it's the mobile platform that counts -- and more deals are on the way.
"We believe that connecting subscription music with the devices consumers care about most -- their phones -- is critical to driving mainstream adoption of the subscription music model," Smith said. "We're excited to debut this on the iPhone and plan to bring the same unlimited access to additional mobile platforms like Android."
Key Differences and Regulatory Scrutiny
Why would you want access to Rhapsody if you're getting your music via iTunes on your iPhone or iPod touch? "Rhapsody provides instant gratification," Smith said. "The song you want to listen to, right then, without having to worry about paying 99 cents to scratch that itch. Combine this with the ability to do everything on the go, from listening to radio stations to creating playlists, and you've created a great music listening experience for consumers."
Apple also might be creating some breathing room between itself and federal and European regulators who might be curious about the App Store approval process. "It decreases the chances of getting chastised by regulators," Krishna said. "Allowing those that seem like competitors to also have apps on the iPhone -- there's not a lot there that people can complain about."

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