RealNetworks Launches Partnership Barrage at CES

RealNetworks Monday unveiled a slew of partnerships aimed at competing with the likes of Apple and Microsoft to deliver digital content to multiple devices. The announcements came amid a frenzy of product releases from technology giants as the annual International Consumer Electronics Show (CES) got under way in Las Vegas.

Real announced a deal to integrate its music service — known as Rhapsody — into the digital video recorder service from TiVo; said it would partner with the maker of the iRiver portable music player and with hand-set and smartphone maker Nokia to build Rhapsody into hardware; and said it would integrate its service with products from Logitech, which makes home speaker equipment.

While most of the partnerships are focused on RealNetworks’ Rhapsody music download service, potential exists for the deals to be expanded to include video and other media over time.

“Our vision for Rhapsody is to deliver seamless and personalized access to millions of songs, on demand and from any device,” said RealNetworks Senior Vice President Dan Sheeran.

A number of the partnerships evolved out of RealNetworks’ decision to let consumer products makers work with the source code of the Rhapsody service, or the “Rhapsody DNA,” according to Sheeran.

“With industry leaders like Nokia, SanDisk, iRiver, and Sonos embracing Rhapsody DNA, we look forward to a steady stream of Rhapsody-enabled consumer electronics products in 2007,” he added.

Uphill Battle

Not surprisingly, Real is one of dozens of companies all taking aim at the same sweet spot at this year’s CES, where devices that can translate Web-based media to home networks are in the spotlight, along with portable media players and technology.

For RealNetworks, the goal is to grab a piece of the digital living room market quickly being dominated by other players, most notably Apple’s iPod and iTunes.

Microsoft has long made it known it intended to be a player in the space as well, and CES has featured presentations about how the new Windows Vista will be able to help the personal computer become a home-entertainment hub. Microsoft is also a new player to the portable music scene thanks to the Zune, which launched late in 2006.

While its Rhapsody service has won strong reviews and is gaining traction, Real faces an uphill climb in that market because Apple’s iPod continues to be the dominant digital music player. Only non-iPod devices can be used to access Rhapsody, which offers subscription-based as well as pay-per-song plans in addition to streaming digital music.

The partnership with ReignCom, the Korea-based maker of the popular iRiver portable multimedia devices, is aimed at helping change that. The companies will roll out a line of flash-based devices that include a WiFi enabled MP3 player that will allow consumers to download their favorite music over the air directly to the device. The device will also be capable of making VoIP phone calls through the WiFi connection and will feature a small video screen.

Reigncom will also make a version of its Clix 2 device that will be built to maximize the Rhapsody service. Both devices are expected to be available in the United States by summer.

Sheeran said with the WiFi functionality, the devices will give users more freedom.

Back in the living room, the TiVo partnership will offer TiVo subscribers the ability to access the Rhapsody catalog and download songs on demand. The service is expected to go live later this year.

The service would provide consumers “the ultimate method of finding and enjoying digital music from the comfort of their living rooms,” Jim Denney, vice president of product marketing at TiVo.

For its part, Nokia said it would build support for Rhapsody into the new version of its N800 Tablet PC, which runs on the Linux operating system.

Logitech’s Rhapsody-ready products will be the first to market, hitting shelves later this month. Those include software downloads to enable the Squeezebox and Transporter product lines to log into Rhapsody and download music without the use of a PC.

Battle Tested

The RealNetworks push is a reminder of the importance of digital music, which has sometimes found itself overshadowed by the rush to build video solutions capable of handling traditional TV as well as Internet-based video feeds.

Subscription services such as Rhapsody increased 14 percent in 2006, accounting for about US$185 million in annual revenue, JupiterResearch analyst David Card said. By contrast, digital downloads grew 30 percent to $800 million.

The subscription services still appeal to niche audiences primarily, according to Card, though he thinks they will become more important over time. In fact, JupiterResearch predicts subscription revenue will grow by 32 percent per year in the next five years.

“Subscription services will continue to appeal primarily to music aficionados in the near term,” he concluded.

Despite Apple’s massive early lead, and the firepower that Microsoft brings to the game, it’s still early in the game for digital music, with plenty of consumers still yet to take the portable music player plunge, noted Roger Kay, president of Endpoint Technologies.

“There are still opportunities for other companies, but Apple has built a significant early lead that won’t be easy to overcome,” Kay told the E-Commerce Times. A partnership approach can be effective by offering alternative means to reach consumers.

For instance, he said, TiVo users may become aware of Rhapsody through the DVR service and decide to purchase an iRiver. “If there’s one thing that’s clear it’s that Apple has won the consumer awareness and marketing battle so far.” Strong iPod sales and relatively weak Zune numbers during the holiday 2006 season served as a reminder of that reality, he added.