Power Of Mobile Rings Rhapsody Back To Growth (Analysis)

What do you do when you have the most unfashionable brands in the fast growing, cutting edge music streaming business? The answer seems to be that you team up with mobile carriers and bundle your service.

That at least seems to have worked for Rhapsody International, which owns the Rhapsody and Napster brands in the U.S. and around the world.

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The Seattle-based company said it has racked up an impressive 63% year-over-year-growth in paying subscribers globally to top out at 1.7 million by the end of the first quarter. During the quarter, Rhapsody said it added 8,000 new subscribers a day.

“We may not be the shiny new penny but we are definitely building significant subscriber base,” said Paul Springer, Rhapsody International’s SVP Americas and Chief Product Officer.

Even though Rhapsody is a 12-year-old pioneer of music-streaming it has lost out both in perception and subscribers as newer services like Spotify and Deezer have racked-up younger users in the last two years.

Most of Rhapsody’s growth came internationally after it signed a lucrative pact last October with one of the world’s largest telecoms companies Telefonica, which is particularly strong in Latin America with brands like Vivo in Brazil (100 million customers) and Movistar around the Spanish-speaking countries. 

Rhapsody, which uses the Napster brand in Europe, also saw rapid growth in Germany and France where it bundles with E-plus and SFR, respectively. Overall the service has grown from being in just three countries 18 months ago to 32 countries today. And that figure is growing.

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Billboard has in the last year frequently identified mobile bundling as the Holy Grail for really juicing music subscriber take-up. And Rhapsody, which rightly or wrongly isn’t the flavor of the month, shows that ease of access to customers who see the mobile phone as an essential life tool, pay no mind to adding an extra $5 to $10 to their bill for a music service.

Of course, it doesn’t end there—and this is why Rhapsody earns some credit:. Just because your biz dev team has done a stellar job of reeling in one of the big mobile partnerships you still have to deliver and give customers what the partnership promised. This was a challenge Beats Music faced at launch when its much sought after AT&T partnership got off to a shaky start which likely discouraged users who were new to the vagaries of the still fledgling music subscription business.

Unsurprisingly, Rhapsody is keen to tell the mobile story – it’s one that’s favored by both public and private investors who believe that the future of all media is dependent on mobile ubiquity. The 11-year-old music company says today 80% of all its users access the service through their mobile devices and up 60% use mobile exclusively.

Springer would not break out individual countries but said the U.S. was "still growing but not at the same clip as some of the international markets where smartphone penetration is just really starting to take off." Springer added, “Also there’s a lot of competition with free services in the U.S. like Pandora, Spotify and iHeartRadio.”

Rhapsody’s news comes as first quarter SoundScan data show downloadsales dropping by some 13% in the first quarter even as streaming music rose by 35%. Springer, and other executives say that the attitude of labels toward streaming music services has shifted significantly to be more positive. “All of our conversations with the labels are about streaming taking over,” said Springer.