updated 10:05 am EDT, Tue April 6, 2010
Rhapsody cuts price to stay relevant
Rhapsody today slashed the price of a subscription from $15 per month to $10. The immediate cut still provides the same features, which includes unlimited music downloads as well as streaming and in some cases local caching. Permanent MP3 downloads are still an option and usually cost $10 per album with songs ranging between 79 cents and $1.29.
The price drop is the first clear action since Real spun off Rhapsody as a separate company and should potentially help stem losses to other unlimited music services. Most of the US-based equivalents, like Microsoft's Zune Pass, still charge $15 per month, albeit in some cases with perks such as 10 free MP3 tracks each period. Rhapsody's lack of distinction has led it to lose subscribers to where it now has just 675,000 active users.
The company has also confirmed that Universal Music Group has paid for a small, five percent stake in the business. The move leaves Real and Viacom with equal stakes and should give Rhapsody a needed cash infusion to offset recent losses. With the cut and expected subscriber increases, Rhapsody expects to be profitable again by the end of the year.
Both the new pricing and the Universal deal reflect a race to get Rhapsody back on track before Spotify arrives in summer and provides both a competitive price for streaming as well as a free, ad-supported option. It remains smaller due to its Europe-only limitations but is expected to grow rapidly once it reaches the US. Unlike Rhapsody, Spotify has investment from all four major music labels and should get much stronger promotion as a result.