RealNetworks and Viacom have mutually agreed to spin off the online Rhapsody music platform into its own independent brand.
MTV, which is a subsidy of Viacom, is looking for ways to help the struggling music service better compete with Apple iTunes, Napster and other online services.
The $12.99 per month service offers millions of music tracks, but music listeners have been unwilling to pay such a high price for streaming music. After the spinoff is complete, I believe RealNetworks will have to find a better price point for consumers who could easily choose a different service.
Since the start of 2009, Rhapsody reportedly has lost more than 100,000 users, and now has 700,000 active subscribers.
"Separating Rhapsody into its own independent company is a significant first step in making RealNetworks a more focused and profitable company," said Robert Kimball, RealNetworks CEO, in a statement. "Rhapsody will be the largest pure play digital music service in the market. We have provided Rhapsody with the right team, and financial and intellectual property assets to succeed in the competitive market for digital music."
RealNetworks hopes to be able to better focus on RealPlayer, its other software and the company's line of casual games. An internal shakeup isn't a complete surprise, as former CEO Rob Glaser resigned last month.
As someone who has tested multiple different online music services over the past few years, Rhapsody will have to find a way to convince me to use the service again. There simply are too many similar offerings that clutter the market, and Rhapsody hasn't done anything stellar to move itself to the top of the pack.
Rhapsody has previously tried partnerships with Verizon, Best Buy, Dell and others.
