A leading supplier of online music is cutting the price of individual songs by 20%, the latest gambit by the recording industry and its allies to lure the masses away from unauthorized sources of free tunes.
The price cut by Listen.com Inc. comes as RealNetworks Inc. of Seattle -- which is in the process of buying Listen -- phases out the MusicNet service that it co-owns with three major record companies and replaces it with Listen’s Rhapsody service.
San Francisco-based Listen isn’t changing the subscription fee for its basic service, which lets people play an unlimited number of songs from an online jukebox for $9.95 a month. It’s cutting the price it charges them to make permanent copies of songs on CDs from 99 cents a track to 79 cents.
The point isn’t to sell more singles but to sign up more subscribers. That’s key for all the online subscription services, which compete not only with free sources of music such as Kazaa but also with online stores that don’t charge monthly subscription fees.
The most successful of the latter has been Apple Computer Inc.'s new iTunes Music Store, which sold nearly 2 million tracks in its first two weeks.
Other subscription services, meanwhile, are finding new owners, rolling out redesigned services and switching technologies as they struggle to build an audience. All of the services put together, estimated analyst Lee Black of Jupiter Research, have fewer than 400,000 subscribers, a paltry number in comparison with the tens of millions using online file-sharing networks such as Kazaa.
Real’s decision to substitute Rhapsody for the much-maligned service from MusicNet had been expected since Real’s announcement last month that it was buying Listen in a cash-and-stock deal valued at $36 million. Real co-founded MusicNet two years ago with Bertelsmann, EMI Recorded Music Holdings Inc. and AOL Time Warner Inc.'s Warner Music Group Inc.
MusicNet, which has just raised an additional $10 million from Real and its other founders, declined to comment on the shift at Real.
The company built its original service around Real’s technology but is expected to offer a new version soon based on software from Real’s archrival Microsoft Corp. in a bid to pick up more distributors.
Real plans to promote Rhapsody to the roughly 300 million people who have installed Real’s music players on their computers. That kind of marketing power has eluded Listen despite numerous deals with large Web sites and Internet providers.
Most but not all of the companies distributing Rhapsody have agreed to lower the per-track price to 79 cents, said Dave Williams, Listen’s vice president of product management.
Though some analysts predicted that Listen’s price cut would be mimicked by rivals, several of those services said they would stay put -- at least for now. That’s because marketing and programming are more important to consumers, they said, than a small shift in the price of a burnable song.
Said Greg Rudin, vice president of marketing for FullAudio Corp., “We’ll wait; we’ll see; we will react to what the consumer wants.”
Williams said the company saw a dramatic increase in subscriptions earlier this year when it temporarily cut the price of burnable singles to 49 cents. That price was well below the wholesale price Listen paid the record companies; sources said the new price is just above it.
Listen would like to sell songs to nonsubscribers too, but it would need new licenses from the labels to match Apple’s flexibility to copy and move files, Williams said.
The stumbling block there, according to executives at several record companies, is that the anti-piracy software for computers running Microsoft Windows software can’t match the security that Apple offered the labels.