Rhapsody fights for relevance in streaming world it helped create

By

After 14 years, what's next in Rhapsody's queue as it attempts to take on the biggest competition yet?
After 14 years, what's next in Rhapsody's queue as it attempts to take on the biggest competition yet?
Photo: Jim Merithew/Cult of Mac

Apple Music cranked up the volume on music streaming, turning an insider topic into water-cooler fodder as musicians, industry bigwigs and tech analysts weighed in with questions about the future of the music industry.

Seemingly everybody is suddenly talking about Apple Music subscription numbers and the chances of competitors like Spotify and Pandora. But in all the media buzz about who’s winning and who’s losing, almost everyone is disregarding another major player — Rhapsody, the streaming music service that just happened to spark the streaming revolution.

Rhapsody arrives in 2001

rhapsody-old
Rhapsody was just a website with a dream to stream.
Photo: The Pageman/Flickr CC (Derivative)

On December 3, 2001, Rhapsody was born. The streaming music service brought the world a completely new way of consuming music. Rhapsody cost $9.99 per month and provided unlimited on-demand access to its entire music library. You could listen to almost any song in the world if you had an Internet connection.

The catch was you couldn’t download this music and, in fact, you didn’t own it. Users paid merely for the right to listen to the music. It was the first service of its kind.

“We’ve always been ahead of our time,” Rhapsody CFO Ethan Rudin told Cult of Mac. “We envisioned a world where you can enjoy music whenever and wherever you are with a limitless catalog of music in your pocket.”

The music industry was extremely different back then. Music was just making the jump from hi-fis and boomboxes to computers and mobile devices. Most people still purchased CDs, the iPod had just launched and the iTunes Store wouldn’t see the light of day for another two years.

Meanwhile, services like Napster that enabled easy sharing of MP3s and other audio files bloomed across the Internet. Since people got away with illegally downloading copyright-protected files, it grew increasingly hard to convince people to pay for music.

Rhapsody achieved moderate success but never became a household name the way iTunes did. That so-called first-mover advantage that some people tout? It didn’t really pan out for Rhapsody.

A matter of relevance

apple-music-banner
The description for Apple Music is pretty close to competitors’ offerings.
Photo: Apple

Fast-forward to 2015, and it appears we are in the exact place Rhapsody’s founders envisioned 14 years ago. The service has built up its music catalog over the years, released mobile apps and added new features.

It’s had almost a decade and a half to iterate and improve while competitors were just getting into the game. Still, Rhapsody isn’t on top. The service is growing its subscriber base faster than ever before, yet it only just passed a modest 3 million paying users. Rhapsody posted a $12 million loss for the latest quarter, but it’s not exactly uncommon to be losing money in the streaming business — Spotify lost $197 million in 2014.

But Spotify blew past 20 million subscribers in just a few years, and Apple Music quickly hit 11 million subs, so what’s the deal with Rhapsody? Rhapsody has been around far longer than Apple Music and Spotify, offers basically the same features, and yet it’s the least talked about.

“Every now and then when I listen to music on it, the app will crash, or the music will just stop,” Rhapsody user Ruben Carrera complained to Cult of Mac. He signed up during a Rhapsody free trial promotion and stuck with it, but that was before Spotify or Apple Music even existed.

He’s considering switching to one of the new services but has one problem. “I don’t want to have to go through downloading every single song again,” he said.

Not long ago, Carrera wouldn’t have had much of a choice at all if he wanted to stream music. Now, the ice is far thinner, so it only takes one small crack to convince someone they might be better off skating on a different pond.

It seems Rhapsody’s Rudin is aware of this brand power issue.

“There is still an education challenge around subscription music,” said Rudin. “It’s flattering to watch new competitors bring a product virtually identical to the one we’ve had in market for years.”

Looking back, he’s right. Rhapsody was way ahead of its time — and that very well could be a weakness. It’s been 14 years and music streaming has really only taken off in the past few.

Spotify helped popularize streaming with its freemium model, which lets anyone stream music for free on their computers if they can put up with some ads here and there. The free tier eases people into the idea of streaming, and some eventually decide to pony up for the paid version’s extra features.

“I think Spotify cracked the nut by figuring out the right mix of content and advertising to make streaming music a successful business model,” said Daniel Ives, senior analyst at FBR Capital Markets, in an interview with Cult of Mac. “Apple Music taps into its unique holistic ecosystem of 1 billion iOS devices sold to date and has the golden business model given the Apple brand and content.”

Ives acknowledged Rhapsody as a pioneer but said, “Spotify and Apple have become the market and mindshare leaders.”

Apple has never prioritized being a “pioneer” because it doesn’t want to be first — it wants to be best. Apple Music was far from the first in streaming, but it’s a recognizable brand only a few months after launch.

Rhapsody looks ahead

Ethan Rudin_Horizontal
Rhapsody CFO Ethan Rudin calls the new competition “flattering.”
Photo: Rhapsody

It somehow doesn’t seem fair that Rhapsody’s massive head start means it doesn’t get to share the glory as streaming music comes of age.

So where does Rhapsody go from here? How does the original music streaming service take on new competition that’s successfully delivering almost exactly the same thing?

“We joke that we were 13 years early to our own party, but we’re the only ones around long enough — and with passionate enough customers — to talk about what is proven to work,” said Rudin.

Rudin also said to be on the lookout for what Rhapsody believes to be the “future of streaming”: closer, more personal connections between artists and fans. Who knows if that’ll be enough to bring Rhapsody back to relevance, but with Spotify’s free plan apparently on its deathbed and the first of Apple Music’s 11 million free trials about to expire, things are about to change in a big way.

Maybe the new kids on the block will end up needing some advice from the streaming veteran after all.