Taking the Wraps off the New Rhapsody

Will RealNetworks' removal of DRM from Rhapsody tracks, new social-network push, and Verizon Wireless tieup make a mark on Apple?

by Arik Hesseldahl

Digital media concern RealNetworks (RNWK) will announce on June 30 a sweeping expansion of its music store, including the launch of its long-awaited partnership with Verizon Wireless that will bring its Rhapsody music subscription service to millions of Verizon Wireless customers.

Additionally, RealNetworks will join the ranks of online music sellers like Amazon (AMZN) in selling MP3 music files without copyright-protection lock technology known as digital rights management, or DRM. Amazon has been selling DRM-free MP3 songs since last year. RealNetworks will begin aggressively marketing its new offerings under the phrase "Music Without Limits." News Corp.'s (NWS) MySpace indicated earlier this year that it will sell MP3 songs to its users (BusinessWeek, 4/3/08).

RealNetworks will also begin offering unprotected MP3 songs from the four major labels, including Sony BMG Music Entertainment, Warner Music Group (WMG), EMI, and Universal Music Group. Apple (AAPL) has been offering DRM-free songs via its iTunes store for some time, but as yet has only EMI in its corner. Rhapsody's songs, as MP3 files, will be compatible with practically every digital player on the market, including Apple's iPod and iPhone product families. Its catalog of DRM-free music will rival that of Apple's.

Sharing Through Social Networks

On top of all that, RealNetworks will also announce a series of partnerships with companies like iLike, the popular music-oriented social network. That will allow iLike users to purchase songs directly from Rhapsody via iLike. Among the benefits to iLike users will be the ability to share full-length songs with friends from social networks, and Rhapsody will be added to the options of iLike's "buy" button. Up to now, iLike users have generally been able to share only 30-second samples.

Its applications work on social networking sites like Facebook, MySpace, Google's (GOOG) Orkut and Bebo.

Analyst Michael Gartenberg of Jupiter Research called the series of deals another example of the industry banding together in order to compete with Apple. "It also marks a major milestone in the evolution of DRM-free content," he says. "It's interesting to see yet another music store being permitted to sell DRM-free music that Apple is not yet permitted to sell in a DRM-free manner. This begs the question 'Why?'"

The moves comes only days after Apple disclosed that it had sold its 5 billionth song since the 2003 launch of its iTunes store, and mere days before Apple is due to release the second iteration of its iPhone.