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Comcast lends might to Rhapsody

John Borland CNET News

Published: 10 Nov 2003 11:30 GMT

In one of the largest promotions of digital music subscription plans to date, cable Internet giant Comcast has agreed to distribute and market RealNetworks' Rhapsody music service.

The deal, which is expected to be announced in New York on Monday, puts the weight of the largest US broadband Internet provider behind a digital music service for the first time. The cable company said it has agreed to market Rhapsody to subscribers, but also plans to run national, heavy-rotation television advertisements in the United States for the promotion.

Also on Monday, RealNetworks' rival MusicNow is slated to launch a new music downloads store -- similar to Apple Computer's iTunes store -- that will be cobranded with retail giant Best Buy. The MusicNow store, which will sell 99-cent (59 pence) songs or offer unlimited listening to subscribers who pay $9.95 a month, will initially be available only through Best Buy, but soon will be available directly through Microsoft's Windows Media Player software, MusicNow said.

The deals highlight growing momentum for digital music services, which are taking the Net by storm, after years of delays.

The Comcast promotion is crucial for Rhapsody, which has been marketed alongside broadband services before, but has never previously been the beneficiary of television advertisements.

The promotion could also help draw attention to other digital music companies as well, according to analysts. Because the market is young, any mainstream promotion is likely to educate consumers that digital music is available at all, whether or not they sign up for Rhapsody itself.

"The momentum and energy that you see with a TV campaign will help all of them, not just Rhapsody," said Michael McGuire, an analyst with GartnerG2, a division of the Gartner research firm. "Everyone's going to benefit."

Rhapsody is a rarity in the emerging world of online music services, which for now consist primarily of programmed Internet radio stations and 99-cent download retailers modelled on iTunes. In a major break with both of these models, Rhapsody offers consumers streaming access to hundreds of thousands of songs on demand for $9.95 a month.

Making a killing
Subscription services were once considered a potential "killer app" for music distributed over the Internet. But they have lost much of their lustre since the launch of the iTunes store, which has sold millions of downloads and spawned numerous copycats.

RealNetworks acquired Rhapsody through its purchase of Listen.com, after its own effort to develop a subscription service with the record labels -- dubbed MusicNet -- faltered.

For its part, Rhapsody has shown signs of success, and RealNetworks recently announced that it has signed up some 250,000 paying music-service subscribers, including customers of its paid radio service.

The Rhapsody deal will give Comcast's cable modem subscribers a one-month free trial of the service. It will also give anybody who signs up as a paying subscriber 10 free CD burns, which usually cost 79 cents per song.

"We've been talking to Comcast for a long time about how we could work together," said Sean Ryan, a RealNetworks vice president. "Comcast wanted to wait to see if the market was going mainstream, and they feel it is now."

The Comcast announcement is the latest sign that digital music is digging more deeply into the mainstream.

The new Napster music download service, which was launched last month and is also available through the Microsoft software, announced last week that it had struck a deal with Penn State University to provide discounted access to music to students there, paid for with student fees.

Apple itself announced last week that its iTunes store had sold 1.5 million songs in its previous week of operation, indicating that opening up its downloads to Microsoft Windows users had substantially stepped up sales. The Mac maker had launched its own digital store with a heavy TV marketing campaign focused on online song sales and on its iPod music player, in the first digital music campaign to reach television screens.

The Intel connection
RealNetworks said it also plans to announce that it is working with Intel to help home stereos and other non-PC devices access the Rhapsody service through a home network. The streaming media company has used Intel's Universal Plug and Play technology to build networking support into the subscription service software, it said. The first device that supports this, Rockford's Omnifi, is already for sale, and others will be available by Christmas, company executives said.

Comcast and RealNetworks have partnered before, having launched a co-branded game service earlier this year.

Comcast executive vice president Dave Watson said the company, which has been sprucing up its Web portal, hopes the marketing deal will help highlight the value of broadband for consumers.

Watson said the Comcast has identified several promising applications for broadband beyond music, including voice over Internet Protocol (VoIP), video, instant messaging, home networking, games and sports. He said it will continue to explore content partnerships, but downplayed the possibility that it would seek to lock in exclusive deals for its subscribers any time soon.

"One of the ways we wanted to demonstrate the power of 100 percent broadband network was by bringing in a leader in music space, which is Rhapsody," he said.

CNET News.com's Evan Hansen contributed to this report.