RealNetworks says it had developed an iPhone app for its Rhapsody subscription music service, and is submitting it for Apple's approval this week.

An overview of the app, including a video demo, was posted over the weekend to the Rhapsody blog. Basically, Rhapsody users will be able to sign in and access their complete virtual library, playlists, radio stations, etc., from the iPhone device. Users can also search and play for new songs as well.

If Apple will accept music applications that compete with iTunes to the App Store is a looming question. Apple's been under fire recently for its unpredictable approval process. Just last week it was forced to respond to an FCC inquiry about the biggest flap yet-it's rejection of Google Voice. With Apple under pressure to make its app approval process less restrictive and more open to potential competitors, Rhapsody is timing this one perfectly.

In addition to Rhapsody, other services such as Spotify are either developing, or have developed, on-demand streaming apps as well. To be sure, other music services have created successful iPhone apps, including Pandora, Slacker and Last.fm. But those are Internet radio services that don't offer on demand streaming. They also include buy links to the iTunes store.

On-demand services like Rhapsody and Spotify, which let users save playlists of favorite songs, could persuade users to skip buying songs on iTunes in favor of pure streaming: the "access vs. ownership" model. Rhapsody touts that benefit in the blog posting announcing the app.

But since the iPhone is a connected device, on-demand streaming services may not always be available. Most have a caching function that will save previously streamed songs for a certain period of time (usually a month) so users can play them even when the device is not in either cellular or WiFi coverage. But otherwise the experience of the stream is dependent on the quality of the coverage. That could drive users to download the songs they want to make sure they can access at any time.

RealNetworks says it is also working on an Android version of the app as well. It has not detailed any pricing or availability details for either.

The fact that Rhapsody has developed a mobile, on-demand streaming music subscription application for the iPhone and Android raises questions about whether that functionality will ever make its way to the services' exclusive mobile partner-Verizon Wireless. Mobile operators have been reluctant to adopt such unlimited streaming services due to the bandwidth pressure they put on their networks. The Rhapsody-Verizon relationship as such has been limited to date to individual song downloads. A Rhapsody subscription service running on the iPhone-a device exclusive to rival AT&T-could push Verizon to making a similar on-demand option available to its subscriber base.

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