Rhapsody Gunning for iTunes with DRM-free Music

Rhapsody, an online subscription music company-turned MP3-download service, is spending $50 million in marketing to take on #1 retailer iTunes, offering DRM-free songs online and working with such partners as Yahoo Inc and Verizon Wireless. Since Rhapsody will sell its songs in the MP3 format, iPod users will now have a choice of where to purchase music. Rhapsody is hoping iPod users will opt for a DRM-free choice.

Rhapsody is jointly owned by Real Networks and MTV Networks (Viacom) and is attempting to shift some users from their $13 to $15 a month subscription plans to a habit of purchasing music via their new downloads store. The key for Rhapsody is convincing Apple devotee's to use the new store over iTunes - a task that seems difficult, however the fact that they offer DRM-free music at the same prices as iTunes offers some compelling added incentive.

To drive users and traffic, Rhapsody has positioned itself to be the music store back-end to MTV's music Web sites and iLike, one of the more widely used music applications on Facebook. Rhapsody is also available on Verizon Wireless' VCAST Music service and follows the same dual download model where users can grab copies on their phone and PC.

Rhapsody is following Wal-Mart and Amazon.com, and more recently, Napster, as the latest player to take on the Apple iTunes juggernaut which possesses over 70 percent of the U.S. marketshare of digital music sales (selling over 5 billion songs since its 2003 debut). With DRM-free choices, it will be curious to see how long Apple can last (as leader) with its Fairplay-laden tracks - or if they have a leg to stand on with negotiating with the labels to remove it.

The flurry of new MP3 download stores have only been made possible by the capitulation of the four major record labels to allow DRM-free music - the only way any downloadable file will work on an iPod device. This is a huge move for the typically reticent and slow-moving industry, but one that truly offers consumer choice and a much greater potential for electronics manufacturers to come up with alternatives to the iPod. Of course, that's a tough nut to crack successfully - just look at Microsoft's Zune.