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

Streaming music service Rhapsody, which on Friday will be celebrating a full year of independence from former parent company Real Networks, is taking steps to augment its Internet radio features -- to the chagrin of some in the music industry.

The American Association of Independent Music (A2IM) today issued the following note to members: "From what we're hearing, Rhapsody is seeking the webcaster 'pureplay' royalty rates rather than using the standard Copyright Royalty Board ('CRB') rates (set by a government tribunal). These pureplay rates are approximately a 40% discount off of the CRB set rates and they are offered to pureplay webcasters because of certain important concessions that these webcasters agree to that are important to independent labels and artists.

"Rhapsody, it appears, is seeking the discounted rates without making the same concessions. For instance, we've heard that Rhapsody is looking to increase the number of times they can play music from the same artist in a three hour period to six times (which is double the amount allowed webcasters)."

Update: Rhapsody responds to these allegations as such:

"Rhapsody has been a strong supporter of independent labels and artists since its inception, and we have a long history of working closely with independent labels to promote their artists in all aspects of our service, from our television ads to our live events. As always, Rhapsody welcomes inquiries from our content partners who want to discuss current and futur

"We are constantly exploring new deals with our partners as we build our service and add new product innovations," she said. "Radio is an area of focus for us, so we are exploring a multitude of methods to bring radio to our subscribers. Radio is an excellent music discovery vehicle and we believe that it leads listeners to listen to more, new music, which is great for artists, labels and the entire business."

A2IM, however, feels Rhapsody's efforts may prove counterproductive.

"This extra airplay could cannibalize recorded-music sales as consumers will be able to 'pick' the artists they want to hear -- not like a radio webcast but more nearly like an on-demand offering," the association wrote in its note. "Further, Rhapsody's request appears to require the music label to represent that they control all rights and will pay any amounts due any other parties, including artists and publishers. This places an accounting burden on our members that true webcasters who comply with the compulsory licenses and pay via SoundExchange and the PROs don't."

Rhapsody has several Internet radio options for subscribers, but to date the Internet radio elements of the service have been rather understated. In the meantime, other Internet radio services -- Pandora in particular -- have emerged to own the space with authority. The service recently unveiled a redesign of its Web-based product, and is gearing up for increased competition from the impending launch of Spotify, so it will be interesting to see what it does to address its weakness in Internet radio.