The Business Centre

Rhapsody America, the joint online music service of RealNetworks and MTV Networks, on Monday began selling songs from all major labels in the MP3 format and launched its mobile music service with Verizon Wireless.

Rhapsody America will sell songs from all four main music labels and many independents as MP3 files not protected by DRM (digital rights management) technology, Real said on Monday. Buyers will be able to download the songs into Rhapsody, RealPlayer and Apple's iTunes and put them on any MP3 player, including an iPod.

In addition, Rhapsody America set up several new channels for finding and buying music through its service, including Yahoo Music, MTV sites such as MTV.com and CMT.com, and iLike, which is accessible through major social-networking sites. From MTV's sites and Yahoo Music, people will be able to try out songs by listening to the full track and seamlessly go on to buy the MP3 file from Rhapsody, the company said. Most songs will cost US$0.99 and most albums will cost $9.99.

Rhapsody, which was started by Real, made its name with a subscription service that gave customers access to a large library of songs on their PCs via a monthly fee. But it has had a hard time competing against Apple's iTunes, a store where users purchase individual songs and albums. The songs customers get from Rhapsody via subscription are still protected by DRM.

Real and MTV announced their partnership last August in a bid to better compete against Apple. The exclusive deal with Verizon Wireless was announced at that time but took several months to complete because of the complexity of the task, Rhapsody America's shift to MP3 that was happening at the same time, and the desire to get the service right from the start, said John Harrobin, senior vice president of digital media and marketing at Verizon.

The service with Verizon Wireless, called VCast Music with Rhapsody, will let subscribers easily move songs and playlists from the Rhapsody subscription library onto select mobile phones, where they can be enjoyed until the user cancels the subscription, said Ed Ruth, director of digital music at Verizon. If the service is cancelled, the phone's music player will no longer play them. The songs can be shared on as many as three Rhapsody-compatible phones or players. There will also be options for users of the compatible phones to buy songs or simply use the software to manage songs from their own CDs that they put on their phones.

The first phone fully optimized for VCast Music with Rhapsody will be the Chocolate 3 from LG Electronics, which will go on sale by the end of July, Ruth said. But there will be firmware upgrades for several existing handsets that will give them most of the same capability, he added. Most of the difference is in how quickly users can synchronize large amounts of content between the phone and PC, he said. VCast Music with Rhapsody will cost $14.99 per month. Over-the-air song purchases through the phone, which won't require a subscription, will cost $1.99 and include one copy of the song for the phone and one for the buyer's PC.

The number of people listening to music on their phones is growing rapidly, up 30 percent just from December 2007 to April of this year, according to research firm M:Metrics. Most still "sideload" music purchased elsewhere, said M:Metrics analyst Mark Donovan. Only 1.3 percent of U.S. mobile subscribers — 2.8 percent, for Verizon users — download music over the air, he said, but over-the-air sales are growing.

Lower prices and ease of use will be keys to further expanding the mobile music business in the U.S., according to In-Stat analyst Stephanie Ethier. U.S. consumers are still more comfortable with a la carte music purchasing than with subscriptions, she said.

VCast Music with Rhapsody may change that, M:Metrics' Donovan said. Music subscription services are like TiVo, where people don't really understand the benefits until they've experienced them, according to Donovan. A prime example would be a family with children, because the new Verizon service would allow them all to pick out music from the Rhapsody library and download it to as many as three mobile devices, as well as three PCs, he said.

"I don't think that any carrier worldwide has made a bunch of money from an over-the-air music store," Donovan said. "I do think that Rhapsody has the potential to mix that up."

Even as it stands, although AT&T's iPhone is the best-known music handset, it's just one device. Verizon has rolled out both its music service and its high-speed network more quickly, Donovan said.

"There are more people listening to music on Verizon phones than are listening to music on iPhones," Donovan said.