RealNetworks' service to lower fees for song downloads

Wednesday, May 28th 2003, 12:00 am
By: News On 6

SEATTLE (AP) _ The online music price war has begun., which offers Internet radio broadcasts and other programming for $9.95 a month, is lowering the price for burning digital music onto compact discs from 99 cents to 79 cents per song.

The move comes just one month after Apple Computer Inc. launched an online music store, in which Macintosh users can download a song for 99 cents with few restrictions _ and no monthly subscription fee.

The announcement also reflects how companies are casting about for effective strategies to lure customers in the nascent business of selling songs online.

``We're starting to see the business model experiments,'' said Michael McGuire, an analyst with Gartner G2.

Seattle-based RealNetworks, which is acquiring San Francisco-based, was expected to announce Wednesday that it is also offering the subscription feature under its own RealOne brand in a product called RealOne Rhapsody.

The acquisition, valued at about $36 million in cash and stock, is expected to close later this year.

Companies are trying to allow consumers to copy music from the Internet onto personal computers and CDs legally, cheaply and with few restrictions _ while still satisfying major record labels wary of piracy.

Apple's iTunes Music Store approach _ in which customers spend 99 cents per song _ has been popular in its initial month, with more than 2 million downloaded songs in the first 16 days of its launch. offers a different strategy. It already charges customers a $9.95 monthly fee for access to online radio stations, custom playlists and other programming. It claims ``tens of thousands'' of subscribers, but is hoping for more by lowering the fee to burn songs.

The company decided on the 79-cent price after a six-week experiment, in which charged 49 cents per song, chief executive Sean Ryan said. The move attracted more subscribers and boosted song downloading, although he declined to reveal figures. may allow customers to burn songs for a fee without buying a monthly subscription, Ryan said, calling 2003 ``the year to test business models.''

Apple drew widespread attention _ and customers _ with its new iTunes Music Store. But McGuire said the key is going to be who offers the best and most updated mix of music on a regular basis.

And Apple will need substantial sales to make its store work, as downloads don't generate the recurring revenues enjoys with subscriptions, said Lee Black, an analyst with Jupiter Research.