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Will Carriers Save The Subscription Music Business?

May 22, 2009
by Eric Savitz
Blogger and Columnist, Barron's, Tech Trader Daily

Eric Savitz

The news this week that Napster is relaunching with a $5-a-month subscription plan that includes 5 free MP3 downloads would appear to be a troubling development for RealNetworks’ (RNWK) rival Rhapsody service, which will set you back $13 a month for a streaming service that lacks the free MP3s. It is also no doubt irritating to Real that it comes from a company that is now a unit of Best Buy (BBY): in the past, the Best Buy digital music store was a re-branded version of Rhapsody, which came pre-loaded on non-Zune, non-iPod music players sold by the retailer.

Earlier this week, I chatted about the situation with Neil Smith, VP of business management for Rhapsody America. His spin on the Napster story is that what they’re really doing is going head-to-head with Apple’s (AAPL) iTunes store–that Napster is “all about the downloads.” He says Napster basically wants to use the new approach to get into the pre-paid music gift card market, using the free downloads as a driver to steal share from Apple. He thinks selling tracks is more their goal than “turning the tide toward subscription from purchase,” which is where Real is focused.

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