As Rhapsody streams, Apple’s cash flows

Rhapsody iPhone App: PlaylistThere was much rejoicing as Apple approved two applications that enable on-demand song streaming to the iPod. Following the approval of the Spotify app, a companion to the European music service that provides free on-demand listening on PCs but requires a subscription on the iPhone, Apple approved the Rhapsody app, which also requires a subscription to deliver tracks on demand.

The latter approval was especially meaningful since subscription services in general have historically berated the a la carte model (even as they warm to it) and there was that unpleasantness a while back regarding Real’s now moot attempts to get its rights-managed tracks onto the iPod. It’s a good thing Real learned its lesson about not trying to circumvent DRM.

But that’s all old news, and now some are heralding Rhapsody’s arrival on the iPhone as a fresh beginning tor subscription services. I disagree. Like Michael Gartenberg, I believe in the potential  of streaming music to connected devices, but see services such as Rhapsody stuck between the rock of well-crafted Internet radio offerings such as Slacker and Pandora, and the hard place of a la carte purchases. Yes, sometimes we all want to hear a specific song, but there are even cloud-based options for that that don’t require a subscription. And if Real Networks is waiting for the carriers to figure it out, good luck.

Having Rhapsody on the iPhone, like having it on Sonos, is a great value-add for Rhapsody subscribers — an even better value-add than having the Sirius XM iPhone app is for those subscribers. I’s a good retention play.  But it doesn’t solve the fundamental problems these services have and I doubt it will signficantly help expand the subscriber base (On the other hand, at least it won’t lock subscribers in to one portable device.)

Meanwhile, the iPhone and iPod touch gain more sway as the most flexible pocketable digital music consumption devices, with their integrated and third-party apps bringing together local music, network music, Internet radio, Slacker, Pandora, Deezer, YouTube music videos, Sirius XM, and now Rhapsody (among others). If you’re a Rhapsody subscriber, you’re going to pay your monthly fee for bits anyway, but now you also get to fork over a couple of hundred to Apple for its atoms whereas before an Apple music player was probably out of your consideration set.

I’m sure Real Networks wishes it hadn’t gone this way as Rhapsody has to adhere to several limitatoins on the iPhone such as lack of background playback and an inability to sell a la carte tunes through Rhapsody, but the popularity of the iPhone probably forced its hand.

And so the rich get richer.

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