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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

April 6, 2010 at 6:00 AM

Rhapsody spinoff done, price falls and Android embraced

RealNetworks completed the spinoff of its Rhapsody subscription music service, which is marking the occassion today with a big price cut and the release of a new streaming music application for Android phones.

Rhapsody also is rolling out new branding with a guitar-pick-like logo, which graces a mural in its new standalone headquarters office in the U.S. Bank Centre tower in downtown Seattle.

You could say Rhapsody is now one of the largest and best capitalized startups in Seattle. The spinoff left the company with 156 employees, including 110 in Seattle, plus $18 million in cash from Real and $33 million in advertising credits with its other former owner, Viacom.

The Rhapsody business has been grossing $130 million a year and will be profitable by the end of the year, according to Jon Irwin, the company’s president. (pictured here in the new offices, next to the new Rhapsody logo in blue).

RhapsodyJon.JPG

As of the fourth quarter of 2009, Rhapsody had 675,000 subscribers who paid $12.99 a month for unlimited access to a library of 9.5 million songs. It’s going to now charge $10 a month for the service, which will be called “Rhapsody Premium.”

A mobile version that works on up to three mobile MP3 players will continue to be offered for $15.

Rhapsody is counting on phones to boost its growth. Subscribers can stream the Rhapsody catalog to the iPhone using an application that’s been downloaded 1.5 million times. Today it’s releasing a similar application for streaming music to Android phones, and the company plans to release a version for BlackBerry devices by the summer.

“It breathes new life into the subscription market for music going forward,” Irwin said. “We think it’s a ripe opportunity right now.”

Rhapsody grew out of Listen.com, a company RealNetworks acquired in 2003. In early February, Real announced that it was spinning off Rhapsody as part of a restructuring that will eventually spin off the company’s games business as well.

Real continues to maintain its technology services and RealPlayer business.

Comments | Topics: RealNetworks, rhapsody

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