Rhapsody's New DRM-Free Tracks are Music to iPod Users' Ears

Keep your friends close and your enemies closer, goes the old saying. If the adage is true, then Real's Rhapsody subscription music service must really be feeling the pinch from its rival in Cupertino.

"We're no longer competing with the iPod," said Neil Smith, vice president of Rhapsody. "We're embracing it."

By embracing it, Smith means that Rhapsody is shifting its business model in several ways.

Until now the service has primarily focused on a music subscription service that allowed users to play an unlimited number of songs during the time they were subscribed to the service, but then used its digital right management system to prevent subscribers from playing content—even content downloaded to their hard drives—after their subscription expired.

"They offer a convenient 'jukebox in the sky,' as RealNetworks CEO Rob Glaser calls it," noted U.S. News & World Report senior writer David LaGesse a few months back, when Yahoo announced it was killing its $9 per month subscription service and shifting those users to the more expensive Rhapsody subscription service. "You can access the music from web-connected PCs and a sprinkling of other devices, such as TiVo. But quit paying, and the music dies."

The other big part of Rhapsody's model that's shifting is the ability to play the downloaded music on any device, unrestricted by DRM. For instance, with the Rhapsody-to-Go program that began a few years ago and allowed specific devices that supported Rhapsody's DRM, many users requested the ability to play Rhapsody downloaded content on their iPods.

"Rhapsody doesn't support the iPod via Rhapsody-To-Go," noted one of Rhapsody's support personnel on a Rhapsody forum several months ago. "RealNetworks cannot support this feature, as the iPod's digital rights management system doesn't support time-limited based content. Rhapsody-To-Go requires a portable audio device to include Janus. This tells the device how long a license should maintain active until it needs to be connected with the server for another license to up the amount of time content playback is allowed. The iPod does not include such a count-down type DRM system. RealNetworks can do nothing about this. Apple, however, may see such an interest in the subscription download based market and tweak FairPlay (iPod's DRM system) to do a count-down DRM system."Apparently Apple didn't feel the need to do a count-down DRM system, so Rhapsody's shift to purchasing music without DRM restrictions is a major change in strategy and positioning, as it puts Rhapsody in the position of having the largest catalog of unrestricted MP3s available for purchase.

Real has said it will put on a $50 million marketing blitz over the next few months, along with partners MTV and Verizon, to spread the word about the new purchase options. To that end, a promotion that runs through July 4 allows the first 100,000 users to receive a credit for the purchase of their first album. I tried the service this morning, while writing this article, and found using the new service is very straightforward and that all files in the album are placed in to a zip file for easier downloading. Opening the zip file, conveniently named "RhapsodyMP3Purchases-2008_07_01-0524" so that I know the date of my purchase, reveals all the album's songs in iPod ready MP3 files including album artwork.

Speaking of Verizon, another shift in the Rhapsody strategy, now that it's selling songs that are unrestricted by DRM, is to allow over-the-air purchase and download of music directly to a Verizon phone, with no restrictions on keeping that content only on the mobile phone.

The price will increase for purchases, from the standard 99 cents per song or $9.99 per album, to $2 per song downloaded directly to a Verizon phone as well as to the user's computer. While that sounds expensive, initial reaction also sounds positive.

"Many of us will pay more for the privilege of impulse buying," wrote LaGesse about the most recent announcement, "particularly now that the partnership with Rhapsody means the music will play anywhere. Make it easy for me to download tunes across the wireless network, and maybe I no longer need my iPod."

Maybe this ease of downloading across the cellular network may eventually lead Apple to consider charging an additional price for on-the-fly downloads of its DRM-protected and unrestricted (EMI only) music files. But it could also lead Verizon and Real in a different direction, too, as the iPod continues to dominate: finding a better and more compact audio format that can play on a growing number of audio players and phones and requires less bandwidth to download.

Oh wait, that format's already out there in the form of AAC, which Rhapsody already has the potential to support.