Business Matters: How Rhapsody Got to 1 Million Subscribers
Business Matters: How Rhapsody Got to 1 Million Subscribers

If subscription music services are going to have any impact on the digital music future, they'll need to be bundled into other more popular services.

That's the strategy championed by Rhapsody CEO Jon Irwin -- and it's at the center of a new deal that combines the Rhapsody service into the data plans of MetroPCS Communications, a smaller mobile phone operator based in Texas.

Under the deal, MetroPCS will include a Rhapsody service subscription to any user signing up for its $60 per month unlimited data plan using an Android-powered handset. MetroPCS offers a $40 and $50 data plans as well, but the $60 plan is the premier plan. The latter also includes unlimited talk, text, and Web access, along with other features like MetroNavigator, Pocket Express and Visual Voice Mail Plus.

Customers choosing that option essentially become Rhapsody subscribers, and can use the music service on their computer, Sonos and any other device that supports Rhapsody.

The deal gives Rhapsody the ability to market directly to MetroPCS' nine million nationwide customers, including promotion in its various retail locations. As of September, the Rhapsody app will also come preloaded into all MetroPCS Android phones.

"It's gonna be right in your face," Irwin says. "They're making a very aggressive push in providing Android phones with both 3G and now 4G networks. That Android device is a very powerful music delivery platform, and it's tapping right into a segment of the population that may not have been participating in the [music] industry to date."

Rhapsody has existing deals with Verizon Wireless and AT&T that let users sign up and pay for their service via their mobile phone bill. But it's not yet bundled into those carriers' data plans the way the MetroPCS deal is.

"I'm a huge believer that the partnership strategy is going to win this game," the CEO says. "Bringing music to people in association with services that are essential and that they already purchased is the sweet spot. This takes it to the next level."

Early evidence suggests that bundling a music service into a mobile phone data plan is a promising strategy. Cricket Wireless signed 100,000 registrations in less than six months with its bundled Muve Music service. While this deal has similarities, there are also differences.

For starters, the Muve service was built from the ground up as a mobile service, and is the centerpiece of the Muve phone's OS. MetroPCS customers also can choose other data plans, while Muve phone users have only the Muve music plan as an option. That said, the Rhapsody/MetroPCS combo does allow users to enjoy their music plan on other devices; the Muve plan does not.

Tier one operators like Verizon and AT&T are not yet on board with the bundling plan, however. Part of it has to do with the revenue split. Part of it has to do with priorities. But Irwin hopes deals like this with MetroPCS will prove out the benefits of such a partnership and eventually bring the larger carriers on board.

"As the larger carriers see the success that MetroPCS will have, they'll start looking at putting deals together," he says.