RealNetworks Grabbing for Music Traffic

A deal with Comcast will put its digital music service before millions of subscribers.
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So much for eliminating the middleman.

One of the upshots of getting music online was supposed to be eliminating the distance between musicians making the music and their listeners.

But, as indicated by Monday's reports of new online music deals, some of the current players in the music business may simply be replaced in the migration online. Or they might not go away at all.

The latest announcements in the online music business, involving

Comcast

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,

Best Buy

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and

RealNetworks

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, serve as a reminder that although technology may change how business is conducted, technology is rarely able to disrupt one crucial step in the sales chain: getting consumers' attention.

More often than they would like, companies with an efficient distribution system and a frictionless business model -- such as online music sellers -- must first get past established gatekeepers if they want to make it into the home.

That's the state of affairs behind Monday's deals.

RealNetworks, the online content company that operates the Rhapsody music service, said it reached an agreement with Comcast, the nation's largest cable operator, to offer a co-branded version of Rhapsody to Comcast's high-speed Internet customers.

As a result of the deal, RealNetworks -- which said its music subscription services had 250,000 subscribers at the end of September -- has a chance to get the attention of the 4.9 million households that subscribe to Comcast's broadband Internet service.

The Comcast/Rhapsody service will be accessible through Comcast's homepage for its Internet customers. To promote the service over the next two months, the companies will allow Comcast users to have seven days of free access to the music service, with no credit card required. Comcast customers who sign up for the $9.95-a-month service will also get the opportunity to burn 10 free songs onto a CD -- a service usually priced for subscribers at 79 cents per track.

The companies will advertise the promotion online and on TV this year, and they plan further joint marketing in 2004. They didn't disclose additional terms, but it seems reasonable that Comcast will be gaining some monetary advantage from the privilege of allowing RealNetworks to market to its current customers.

Separately, the privately held MusicNow on Monday announced the launch of the MusicNow Download Store, available initially only through Best Buy. Through the store, consumers will be able to download more than 400,000 major-label tracks directly to any of more than 40 portable digital music players. Pricing is for individual tracks at 99 cents apiece, and full albums for $9.95.

The Best Buy download store is the latest distribution mechanism for MusicNow, formerly known as FullAudio. The company's subscription music service is already marketed via several consumer-facing companies including cable operator

Charter

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, radio broadcaster

Clear Channel

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and the Internet service provider

EarthLink

(ELNK)

.

Certainly the gatekeepers benefit from these deals: With Rhapsody, for example, Comcast gives its subscribers another reason to have a high-speed Internet connection. With MusicNow's store, Best Buy gives its customers an excuse to by portable digital music players. But both deals enable an online music company to do what it might otherwise have difficulty doing: getting in front of millions of potential customers. On the Internet, just as in the three-dimensional world, foot traffic doesn't appear magically.