August 21, 2007 12:28 PM PDT

MTV and RealNetworks: A sound decision?

MTV and RealNetworks: A sound decision?
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It makes sense that RealNetworks and MTV are partnering with one another--they have a lot in common.

Both companies linked up with Microsoft and had high hopes for the marriage. But both found their partner to be less than faithful. Jilted by Redmond, they hope to find in each other a more stable companion.

Of course, the RealNetworks-MTV alliance, called Rhapsody America, is not about the one they have loved and lost, but the one who has rebuffed them altogether--Apple.

For years, companies big and small, alone and with various partners, have sought to rival the iPod-iTunes combination. Yet, they have had little success. Having sold 3 billion songs, Apple is not only the largest digital music store, but one of the biggest music stores in the U.S., surpassing Amazon.com and Target.

Indeed, it was Microsoft's desire to dethrone iTunes that led it to RealNetworks in the first place, and later to MTV.

RealNetworks' relationship with Microsoft on the music front began in acrimony. Its partnership with MSN Music was part of a broad antitrust settlement between the two Puget Sound rivals. As part of that pact, announced in October 2005, Microsoft agreed that no music service would be promoted more heavily on MSN than RealNetworks' Rhapsody.

That narrow wording left Microsoft with plenty of room for dalliance, and the software maker quickly started making the rounds in search of other companions.

At the Consumer Electronics Show in January 2006, Microsoft announced it was working with MTV to co-develop a music service called Urge that would be built into the next version of Windows Media Player, though Rhapsody continued to be touted some on MSN.

Almost as soon as it was announced, though, Microsoft's eye wandered again, this time turning inward. In June 2006, the company confirmed it was planning the Zune, which would have its own service to rival Urge.

With painful Microsoft memories fresh in their mind, MTV and RealNetworks are taking no chances this time around, signing a prenuptial agreement of sorts. As part of their joint venture deal, the two companies agreed that the service "shall be the exclusive offering of its type with respect to digital audio music by each of (MTV) and Real for a multiyear period for online, Web-based service offerings and mobile-based service offerings."

The terms of the deal, filed with the Securities and Exchange Commission on Tuesday, also stipulate what each is bringing to the marriage. RealNetworks is contributing, among other things, its existing Rhapsody service and subscribers, the Rhapsody brand and Web address as well as its distribution agreements and some cash. MTV is also throwing in cash, as well as a five-year, $230 million note and its Urge subscriber base and content.

The two companies are also trying to head into an area where Apple has been less prominent--putting music on mobile phones. That's where their third partner--Verizon Wireless--comes in. As part of the deal, Verizon plans to start sending a duplicate copy of songs bought over the air to a customer's Rhapsody account. Rhapsody users will also be able to transfer subscription content onto Verizon phones.

Still, calling the iTunes store a force to be reckoned with would be a dramatic understatement. According to the NPD Group research firm, the online music retailer first made its way into the top 10 leading music retailers in the third quarter of 2005, joining the likes of Target, Tower Records and Borders.

As of July, Apple was citing NPD statistics stating that only Wal-Mart Stores and Best Buy still sell more albums than iTunes. When it comes to online music stores, NPD found that iTunes captured 70 percent of the market share for single-track downloads to PCs in 2006; eMusic, which sells only songs without digital rights management software from independent labels, came in second with 10 percent, and Napster came in third with 4 percent. Rhapsody and MSN Music tied for fourth place with only 3 percent of the online music market share.

That's not to say that others don't still have iTunes in their sights. Wal-Mart announced Tuesday that it will start selling MP3 music tracks without digital rights management software, meaning that such songs can play on a wide range of music players including Apple's iPod. Apple also sells some DRM-free tracks from EMI, but charges $1.29, versus the 94 cents that Wal-Mart is touting. Wal-Mart is offering tracks from Universal Music Group, which is selling its library in MP3 format from several online stores, though notably not through iTunes.

Wal-Mart also sells music in Microsoft's WMA format for 88 cents a track, while Apple charges 99 cents for tracks encoded in its FairPlay digital rights management technology.

CNET News.com's Caroline McCarthy contributed to this report.

See more CNET content tagged:
RealNetworks Inc., MTV, RealNetworks Rhapsody, NPD Group Inc., music retailer

15 comments

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Why Compete?
Everyone is trying to compete with the iTunes-iPod ecosystem. At this point you're asking to die a certain death if you ignore the iPod.

The iPod works with other music formats, why not offer iPod compatible music that is ...now get this...wait for it...it's coming...

CHEAPER THEN ITUNES!!!

I own a few iPods and I would gladly go to another store that offers the same music but cheaper.
Posted by Olu070 (49 comments )
Reply Link Flag
There is.
Rhapsody offers a 10% discount on song tracks if you are a subscriber...that's $0.89 / track vs $0.99 on iTunes. I transfer whatever songs I choose to my mp3 player and take it with me. If I want to buy the tracks and burn it to CD (maybe for a gift), I can do that to....at 89 cents per track.

Are you going to go to Rhapsody now? You can also...wait for it...it's coming...USE YOUR IPOD WITH RHAPSODY.

All the worlds problems are solved. Happy days!
Posted by WileySkier (61 comments )
Link Flag
Interesting Move
I'm a Rhapsody To-Go subscriber. I've been a subscriber for a little less than a year and I have actually enjoyed the idea of putting whatever I want from their library onto the players I own.

I've owned a Creative Zen Microphoto (the HD bit the dust on it) and I currently own a SanDisk Sansa 4GB and Insignia (Best Buy) MP3/Video player, both of which work great with Rhapsody's subscription model.

About the only thing that I dislike about Rhapsody is...ummm...not really much of anything other than they use DRM-WMA, but then again, that's a given even though I think their RAX would have been a better choice.

Ultimately, I think Real wins in this scenario because it casts light on them thanks to MTV.

Choice is a good thing. I choose Rhapsody. I think it works well FOR ME; and to me, that's all that matters, isn't it?
Posted by `WarpKat (275 comments )
Reply Link Flag
What happened to the...
MS - MTV Deal? Apple will still sell iPods.
Walmart? I bet that will be a great user experience.
Posted by scweezil (171 comments )
Reply Link Flag
Taken long enough for people to compete
The real story is how little the big businesses pay attention to
the customers. They are always following apple, first with
getting labels to agree on selling the music, then on DRM free
music.

Subscriptions are what the corporations want, always have been
and they were around long before apple.

The sad thing is that the labels only way to break apples
dominance is to remove their songs wholesale from apple and
make them exclusive to someone else. No one is trying to do
things faster, cheaper and better, but they are focused still on
controlling the behavior of consumers. Marketing 101 is
listening to the customers and giving them what they want.

Its hard to compete with apple, but i really hope someone comes
up with some real innovation and gives them a run for their
money. This is what the consumer wants. Its really sad that its
taking this long for the music industry to change and that they
allowed Apple to take over this much. There are a lot of
companies better suited to competing with apple in this arena
that seem to not even be in the ball game yet.
Posted by scratchss (16 comments )
Reply Link Flag
Why is it Sad?!
Someone/entity comes along and does things right. Now we have
people actually complaining about it?!

I am confused. Yeah you're right about one thing. Listen to the
consumers, however the only company willing, and desiring to
actually do that is Apple. The rest keep coming up with the same
old re-hashed turd droppings.
Posted by Thomas, David (1947 comments )
Link Flag
MTV, Real, Verizon: The 3 Stooges
I mean these three taking on iTunes, the iPhone, and AT&T. Hmm. Well, I have a Verizon phone, but I won't be buying music from them cause I also have an iPod.
Posted by R. U. Sirius (745 comments )
Reply Link Flag
WMA = no play
Why would any store that wants to compete with iTunes sell
music in WMA format when it won't play in the vast majority of
portable music players (iPods)?


BTW, does Verizon still disable bluetooth, etc. in their phones so
you have to pay to transfer songs, photos, etc..?
Posted by rcrusoe (1305 comments )
Reply Link Flag
Verizon Bluetooth
> BTW, does Verizon still disable bluetooth, etc. in
> their phones so you have to pay to transfer songs,
> photos, etc..?


Yep, that's exactly what I have to do to move media files between MY phone and MY computer. I have to pay Verizon a fee each time for the privilege.
Posted by R. U. Sirius (745 comments )
Link Flag
Sound decision?
It's only a "sound decision" when I get lossless .wav files with no DRM. Hey for my $18 bucks a cd I am paying here in New York, I can make .wav files and still have the backup disk to reflect on the artwork. I'll gladly pay the same $18 for .wav files conveniently downloaded instead of having to rip. It's about the quality of the music files. This is why I still buy compact disks.

I've even gotten into vinyl recently, the sound quality is fantastic. If I didn't spend $3000 on a DAC I would buy even more records. Amazon.com is currently my friend when it comes to buying and getting music recommendations. Also Independent foreign labels are gaining traction thanks to the internet.

I would say, the major labels should get back to the basics. Sound quality #1, Musician quality #2,. Also it doesn't hurt to release entire libraries of the great Jazz and Classical in .wav for a start. I know hundreds of audiophiles who would love to hear great ADD or AAD mastered recordings. Think .wav.
Posted by stevevarga (5 comments )
Reply Link Flag
Get Real MTV & Vcast!
Isn't this REALLY a slap in the face of Microsoft?
MS + MTV = URGE, but NOW MTV says URGE has got to go & REAL is the real solution for them?

MS Zune & their ZunieTunes Store left MTV holding the bag, but Zunes have bombed big time...

This is definately a last ditch effort to attack Apple's iPod, iTunes, iTunes Music Store & iPhone in one fell swoop...good luck with that.

Verizon had their chance with the iPhone & turned it down...

Is it just me or did you think that REAL was out of business?

MTV? Do they even play MUSIC on MTV anymore? OR is it just bad reality shows, commercials & even worse RAP videos? MTV : All Music, All the time...? remember? NOT TODAY! It's all MONEY & no content all the time.

Get Real MTV & Vcast!

LOL!
Posted by Llib Setag (951 comments )
Reply Link Flag
MTV, Real - the Sears & Kmart Merger of 2007
Yea, 40 years ago if SEARS & KMART had merged, look out America department store shoppers but by 2000 or so when they merged, who cared? Who cares.

Same situation now. You have MTV which is about as relevant to music today as Kmart as a music selling retailer and Real, the technology rejected by 3 generation of computer users.

The competition sees his and thinks - bwahaha.
Posted by jbelkin (167 comments )
Reply Link Flag
Yeh, I'll just wait...
Subscriber...meaning monthly payments...meaning not realy 89
cents at all. Yeh, I'll just stay with iTunes.
Posted by drocha184 (10 comments )
Reply Link Flag
Best of luck to em
While I enjoy iTunes (simple and it works for both Cds and downloads), if I wanted a subscription model, I would not mind going to Real.

But the problem that I see is that all these guys (MTV, Real, etc) want to be THE ONE and the only one. Then they ignore iPods. Not really the senseble thing to do. :-(

If you have subscription, you have to have DRM, just to make it work. OK. Fine.

But most of us are happy with buying the music and putting our CDs and downloads into a music jutebox (hmmm, think iTunes) and just going from there.

I don't think this Real - MTV combo will last or even make much of a splash. For all the reasons the others have stated. They just want our money, not to make us happy. :-( how sad.

en
Posted by eldernorm (220 comments )
Reply Link Flag
 

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