Rhapsody launches digital download store to compete with iTunes

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Rhapsody America, the Web’s top subscription-based music service, opened a digital download store today, becoming the latest company to challenge the dominance of Apple’s iTunes.

Like other recent challengers -- and unlike iTunes -- the Rhapsody MP3 store will feature songs that aren’t constrained by anti-copying measures. The four major record labels will provide Rhapsody such songs, which work on any digital music player and can be copied an unlimited number of times. Apple has such music from only one major label.

The store from Rhapsody America, a joint venture of RealNetworks and Viacom’s MTV Networks, offers another indication that the music industry, in its struggle with Apple over the pricing of music, is cultivating a new breed of Apple competitor.

Rhapsody is charging 99 cents for a single and $9.99 for an album, the same pricing as on iTunes.

One of Rhapsody’s selling points, however, is that customers can listen to an entire song before purchasing it. ITunes gives customers a 30-second sample.

Amazon.com and Napster both opened digital download stores in the last year, selling music without copyright protections. In the past, the music industry has required digital locks on songs to make it harder for music to be copied and passed around on the Internet.

But consumers have been frustrated with ...

... the limitations of those protections, which restrict the number and kinds of computers and devices upon which music can be played.

In May 2007, Apple broke new ground when it began selling music without copyright restrictions from EMI Group. But it hasn’t been able to strike similar agreements with the other three major labels, which are in a struggle with Apple over its resistance to offering variable pricing on music.

With its new store, Rhapsody is now ‘better positioned to compete with the other stores and with iTunes,’ said Susan Kevorkian, program director of consumer markets for research firm IDC.

To promote the launch, Rhapsody is offering a free album to each of the first 100,000 people to create accounts before Friday.

Rhapsody also plans to announce today that it will supply streaming music services and download stores on other Internet sites and services, such as Yahoo, MTV and popular social networking service iLike.

James McQuivey, a media technology analyst with Forrester Research, said Rhapsody offered something different in the digital music marketplace: a chance for users to both stream and buy music.

‘ITunes is so big. How do you beat them at their game?’ McQuivey said. ‘From Rhapsody’s perspective, you don’t.’

Rhapsody is trying to create a unique position by fueling music rather than just being a one-stop destination, he said.

In a deal announced last year, Rhapsody will allow Verizon Communications’ customers who use their phones to listen to musicto manage tunes on their computer and load them onto their phones -- something that hasn’t been easy up to this point.

Launched in December 2001, Rhapsody has built a music subscription service, as well as a free Internet radio service that’s available through services such as Comcast’s Internet access.

Rhapsody offers several services, which the company says together have just less than 3 million subscribers.

The most comprehensive service, Rhapsody to Go, costs $14.99 a month and gives customers unlimited access to a library of 5 million songs that they can listen to on portable devices. But the number of subscribers has been flat, said Anu Kirk, Rhapsody’s general manager of product management.

The service has been hampered for a variety of reasons. It doesn’t work with Apple’s iPod, the most popular digital music player. Critics have debated whether enough people are interested in a subscription service and whether Rhapsody’s subscription price is too high.

Now, Rhapsody subscribers will be able to preview as much music as they want before buying directly from the Rhapsody store. Music shoppers who aren’t subscribers can listen to 25 full songs a month.

‘ITunes is like a vending machine,’ Kirk said. ‘I look at Rhapsody as a complete breakfast.’

-- Michelle Quinn