If Best Buy walks, Real's Rhapsody will hurt

Best Buy's acquisition of Napster is likely to mean RealNetwork's Rhapsody music service will wave goodbye to more than just one of its biggest partners.

Rhapsody of course powered Best Buy's digital music store. Two music insiders told me on Thursday, while I was reporting a story about whether Apple is wise to get into music subscriptions, that the Napster acquisition will almost certainly mean Best Buy will sever it's relationship with Rhapsody. This means that RealNetwork's CEO Rob Glaser would no longer have the muscle behind him to demand electronics companies make their players compatible with his service.

RealNetwork's CEO Rob Glaser would no longer have the muscle behind him to demand electronics companies make their players compatible with the service.

As the largest electronics retailer, Best Buy could lean on electronics makers (all except Apple) to make sure their devices worked well with its music service, Best Buy Digital Music Store, powered by Rhapsody. There's a story behind this tortured name and I'll get to in a sec.

"The acquisition news was just announced so we are still in discussions with Best Buy about our longer-term relationship," a Rhapsody spokesman said in an e-mail.

The situation illustrates a major headache for music subscription services. Napster and Rhapsody have had to cater to the host of digital music players on the market. When those devices made changes to their software, it could cause serious glitches in how the music service performed on them.

Considerable expense and effort went into looking for problems each time a device was upgraded.

One of the questions raised by the Best Buy-Napster deal is whether the retailer intends to battle Apple. That seems unlikely. According to one source close to RealNetworks, what Best Buy has complained about for a long time is not having enough control over its music service. Best Buy began offering the Rhapsody service in 2003. Two years later, Best Buy cut a deal with Napster and also bought a 10-percent stake in that service.

In 2006, Best Buy execs went back to Rhapsody and said that it wanted to offer a branded music service. That's how the Best Buy Digital Music Store powered by Rhapsody was born.

Losing Best Buy won't mean the end of the world to Rhapsody, said the source. Yahoo Music has encouraged former customers to join Rhapsody. Best Buy was a healthy driver of subscribers and of course, there was the strategic value. But overall, the outlook for stand-alone subscription services doesn't look good.

[john55440]

People interested in subscription music services can always buy a Zune.

[wyly295]

Rhapsody should use some of its cash hoard to outbid Best Buy. Napster is in play and Best Buy negotiated a steal of a deal. Rhapsody would be foolish not to step in and take Napster for itself.

[gsmiller88]

It's annoying to see Rhapsody have so many endorsers (Best Buy, Yahoo, MTV) and still have so little market share compared to iTunes.

[SixVodkas]

What? You find it annoying that a well educated, intelligent purchasing public chose iTunes over these crap subscription services?

Get off your high horse, drop your holier than thou mentality and face the truth... People CHOOSE iTUNES, NEARLY 10-1 over subscription based services, and NO MATTER how much smarter you THINK you are than everyone around you, people LOOKED at every option and CHOSE iTunes.

Get over yourself, get over it and get used to it.

[David Dudley]

It's because they also have very little marketshare themselves. And with no device sales to promote user subscriptions, it's a tough sell regardless of endorsement.

[kineticarl]

SixVodkas, you really think that people looked at every option? I'm pretty sure most people went out to the store, bought an iPod because it was nice, and then fell into iTunes by default/design. They found that itunes was pretty much the only option (for a few years at least, prior to drm-free mp3 stores like Amazon) they had to purchase music online for their device. And it was crazy easy. I'd argue that many people don't even know that other music stores or non-ipod devices even exist.

So gsmiller88 looked at his options and made a choice and likes his service, and sees the benefits of the subscription model, even if you don't. Why wouldn't he hope for other people to enjoy that service too? Why does that warrant a "high horse, holier than thou" attack of your own? Because you're threatened that he doesn't line up with the iTunes herd? waaaahhhh!

[Waam]

Rhapsody is already in danger of being squeezed out. Buying Napster looks like a natural response at first, but Best Buy is already determined to move in another direction than what Rhapsody had to offer. There would have been no sense in it. The truth of the matter is, Best Buy wants to sell digital players OTHER than iPods too, and without a driving hub to make it all possible, iPods with it's iTunes will continue to dominate. Best Buy likes that too, but I'm sure we all know, the more you can sell, the better.

As somebody who owns Microsoft stock, I hate that the Zune exist. It seems the only reason why the Zune exists is to give Microsoft bad press. Even after updates to it's line which actually look nice, all you hear now is how sales are so low. They desperately need to spin off this division, or at least take your name off the device.

[SixVodkas]

Best Buy and the rest of the Mega Corps are looking for one thing ONLY, and that's to find a way to make you pay and pay and pay and pay (it's called a subscription based service) for the rest of your life.

Even if you only download one, single solitary song, you'll pay and pay and pay and pay, and even though the buying public has utterly SHUNNED this idea, over and over and over again, they see everyone out there as an inexhaustible source of revenue, and they're going to repackage this scheme until either someone falls for it, or the cows come home and they've bankrupted their investors.

Yo! Investors? You're being played for fools.
Back out now, while you still have funds enough to buy a Big Mac.

[David Dudley]

Subscription services have done pretty well actually, just not in the world of music yet. For example, Comcast, all the phone carriers (Sprint, AT&T, Verizon, TMobile) and Netflix have shown that a subscription service can be extremely financially successful.

[sythara]

as a stock owner in best buy I say they are doing a good deal.

[kineticarl]

I used Yahoo subscription service for a couple years and loved it. I listened to far more music than $10/month would get you elsewhere. At that price, it was a fine value, whether or not I the music is "mine". And if I knew I couldn't live without an album for the rest of my life (versus an album that's okay that I could listen to off and on for a few months and then eschew for newer stuff) I could buy it for cheap, no problem.

My second point here is this: Rhapsody and Napster both use Microsoft's PlaysForSure, do they not? It's a standard they both use to administer their subscription drm, and aside from zune and ipod, almost every other player out there supports it also. A quick look shows that iriver, cowon, creative, sandisk, and archos all support playsForSure / protected WMAs. So what's the worry here? If it works with Napster, it'll work with Rhapsody, as far as I can tell.

[kineticarl]

I used Yahoo subscription service for a couple years and loved it. I listened to far more music than $10/month would get you elsewhere. At that price, it was a fine value, whether or not I the music is "mine". And if I knew I couldn't live without an album for the rest of my life (versus an album that's okay that I could listen to off and on for a few months and then eschew for newer stuff) I could buy it for cheap, no problem.

My second point here is this: Rhapsody and Napster both use Microsoft's PlaysForSure, do they not? It's a standard they both use to administer their subscription drm, and aside from zune and ipod, almost every other player out there supports it also. A quick look shows that iriver, cowon, creative, sandisk, and archos all support playsForSure / protected WMAs. So what's the worry here? If it works with Napster, it'll work with Rhapsody, as far as I can tell.