It isn't exactly free music downloads. But it's getting closer.

On Wednesday -- a month after Apple Computer ( AAPL) made a big splash by selling tunes for 99 cents apiece -- the Rhapsody online music service cut its price for subscriber downloads to 79 cents.

In addition, RealNetworks ( RNWK), the online media company that is acquiring Rhapsody parent Listen.com, launched Rhapsody as a replacement for the MusicNet online music service it owns in conjunction with three major record labels.

The announcements indicate how online music services are bowing to the desires of music buyers, and how the major record labels may be ceding control of the legal online music business as it grows in popularity.

Shares in RealNetworks surged nearly 10%, or 80 cents, to trade at $9 Wednesday. Shares in Apple fell 68 cents to $18.20, while Roxio ( ROXI), which last week said it was buying Rhapsody and MusicNet rival Pressplay , fell 26 cents to $6.14.

Members Only?

While Rhapsody wins the headline war as far as the price of a download, the 79-cent fee for a CD-burnable download, unlike the Apple offering, comes as part of a package deal. The Rhapsody service, which also includes streamed music on demand and Internet radio stations, costs $9.95 a month before any downloads. The Apple iTunes music store charges no monthly subscription.

"Clearly consumers want to be able to take their music away from the computer," says Lee Black, a senior analyst at Jupiter Research. Record labels, he says, have realized "if you're going to sell any kind of music to consumers over the Internet, you have to give them some sort of ownership and ability to copy that to other devices."

The different approaches that Apple and Rhapsody are taking with online music reflect their different goals, suggests Black. For Rhapsody, a subscription model means more regular revenue than a download-only model. "With the 79 cents," he says, "they're saying there's a privilege to being a member."

But with Apple's iTunes, maximizing music revenue isn't necessarily the goal. What's more important, he says, is making Apple hardware -- including iPod portable music devices -- more valuable.

Online Musical Chairs

Meanwhile, RealNetworks' formal decision to favor Rhapsody over MusicNet once again puts in flux the role of major labels in the online music business.

Last week, Sony ( SNE) and Vivendi Universal ( V) sold Pressplay to digital software company Roxio.

RealNetworks is sending mixed signals at best about MusicNet, which it co-owns with AOL Time Warner ( AOL), Bertelsmann and EMI. Earlier this month, MusicNet said its owners had invested an additional $10 million in the service, which launched, like Rhapsody and Pressplay, in late 2001. RealNetworks continues to be a major shareholder of MusicNet, which uses RealNetworks' underlying technology.

But on Wednesday, a RealNetworks spokeswoman called Rhapsody "the best consumer experience out there" for legal digital music, citing its combination of Internet radio, streamed music on demand and downloading options.

A MusicNet spokeswoman declined to comment on RealNetworks and Rhapsody.

With RealNetworks phasing out MusicNet, the only distributor of the service remains co-owner America Online. The MusicNet spokeswoman said the company will be adding more distributors this year.

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