RealNetworks disclosed in a regulatory filing that it is negotiating a reorganization of the Rhapsody America joint venture with MTV Networks.

According to the filing, the intent is to let Rhapsody operate "more independently" of either parent company by allowing the two parties to adjust their respective stakes in the venture. Currently, RealNetworks holds 51% and MTV the remainder. The filing says discussions are underway to change that to either a 50/50 split or even less. Reading between the lines, possibilities include adding another investor to the joint venture, spinning off the JV into a standalone company, or possibly selling it outright.

The joint venture was formed after MTV shuttered its URGE subscription music service, merging staff and subscribers with that of Rhapsody. Since then, the service has struggled, along with all monthly subscription music services. Despite taking over the music subscription services of such former rivals as Yahoo, subscribers numbers have consistently fallen. Its third-quarter subscriber total was 700,000, representing a decrease of 50,000 from the second quarter of the year and 100,00 since the beginning of the year.

Rhapsody tried to position the service as the "music engine of the Internet," providing on-demand streaming to other services like MOG and iLike, but the limitation to only 25 free songs a month for non-subscribers proved too limiting and both deals eventually expired.
There are some bright spots. The Rhapsody iPhone app, which lets subscribers stream full songs on demand from the popular phone, was downloaded more than 500,000 times. But it's not clear how many converted into paying monthly subscribers after the free trial period.

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