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Verizon Wireless, Rhapsody aim to increase digital music revenue

Verizon Wireless has partnered with RealNetworks' Rhapsody to launch a mobile application aimed at boosting the revenues of the digital music market.

Rhapsody will integrate its desktop digital music application with Verizon Wireless' over-the-air mobile music service, creating V Cast Music with Rhapsody. Verizon Wireless customers will get unlimited monthly access to streaming music online and on Rhapsody-compatible mobile phones and players.

"We've long held the belief that getting music off the PC and onto the mobile phone is attractive to consumers, and the partnership with Verizon Wireless represents an evolution of that strategy," Bill Hankes, vice president of communications for Rhapsody/RealNetworks, Seattle.

"Verizon is strong as a network and has 67 million wireless subscribers, so that's a very large addressable audience both for them and for us," Mr. Hankes said. "We want to introduce Rhapsody to people in a way that makes sense, and this partnership with Verizon means that millions of people will be able to check out Rhapsody on their handsets."

Verizon customers can buy music over-the-air even if they are not V Cast subscribers. They can also download the master copy of songs or albums to their PCs free of digital rights management software that restricts how and where music can be played.

This move is a push by both companies to increase the revenue generated by digital music sales, a segment that has not fully capitalized on declining sales of compact discs and other physical media, Mr. Hankes said.

"This platform will accelerate the adoption of digital music today, which is only growing at a modest pace," he said.

Physical music purchases dropped more than 21 percent last year in terms of dollar sales and digital sales grew 10 percent last year.

In addition, digital sales still only account for about 20 percent of all music sold today, per Mr. Hankes.

Verizon Wireless customers will now have access to the entire Rhapsody catalog, which includes more than 5 million songs.

Getting rid of the DRM software means that consumers who buy MP3s through V Cast Music with Rhapsody will be able to upload the songs to their PC, MP3 player and mobile device, as well as burn them to CDs.

Songs are 99 cents each if users only want to access them on one medium. Customers interested in a subscription may sign up for $14.99 per month.

"RealNetworks was one of the early and loud proponents to drop the software that limits how and where people can enjoy their music," Mr. Hankes said.

"Before, when you bought a track from Apple or Rhapsody, you could only listen to it on your computer," he said. "That created a lousy consumer experience because they couldn't move the tracks. For example, if they bought it and put it on their iPod, that's the only place they could play it. They couldn't play it on their PC."

Both Verizon Wireless and Rhapsody will launch aggressive ad campaigns to promote the integrated music subscription service via television, online and print media in conjunction with the commercial release of LG's Chocolate 3 mobile phone later this month.

This partnership helps each company expand into a mass market.

"The typical Rhapsody subscriber tends to skew a little older and little more male," Mr. Hankes said. "The partnership with Verizon will help us attract a broader demographic and a younger demographic, in addition to our traditional subscribers.

"This is going to be a big boost for the digital music industry," he said. "With Verizon Wireless putting the access in the hands of millions of customers today, it gives them the means to connect with music in a more meaningful way. This partnership with Verizon will help get the [Rhapsody] brand name known by more people."