Verizon Wireless is hoping it can make better music as part of a trio than it did singing solo.
The carrier last week announced a partnership with MTV Networks and RealNetworks Inc. to challenge Apple Inc.’s dominant iTunes service. MTV will shutter its Urge music download service and will integrate components of the offering with RealNetworks’ Rhapsody, a subscription-based online offering.
RealNetworks and MTV will form a joint venture, with the Seattle-based digital entertainment company owning 51% and the Viacom Inc. subsidiary taking the remaining 49%. Verizon Wireless will serve as the exclusive distribution partner for Rhapsody America L.L.C.
“The unique collection of assets that Real, MTV and Verizon bring to this relationship really do complement each other,” said Verizon Wireless Chief Marketing Officer John Stratton during a conference call outlining the effort. “We do believe that a particularly important dimension of this partnership will be the mobile phone.”
The companies declined to offer details such as a pricing structure or launch date, and while Verizon Wireless’ exclusive deal was described as “a long-term relationship,” details of the agreement have not been disclosed. A representative from the carrier said the new service will be “fully integrated” with the carrier’s current Vcast Music service, but how Verizon Wireless will brand-or co-brand-the offering has yet to be determined.
Expanding scope
Regardless of the details, the service likely will mark the wireless industry’s first real step beyond “mobile music” into the broader world of cross-platform digital music. Carrier-branded fulltrack services from Sprint Nextel Corp. and Verizon Wireless have largely failed to capture the imagination of on-the-go music lovers, while iTunes and its rivals have continued to gain momentum online.
“Verizon perhaps stands to gain the most here,” wrote Ovum Senior Analyst Jonathan Arber. “The injection of a key brand should help boost its music service, while the integration with the fixed service greatly increases its value proposition to customers.” Verizon Wireless will not only benefit from a partnership with high-profile partners-RealNetworks’ online offering is thought to be the leading subscription-based music service on the market-it will be supported by some impressive marketing muscle. MTV has committed $230 million over five years to advertise the service, and will back the service with on-air promotions and other marketing campaigns.
“We’re going to open the fire hoses, from a marketing standpoint,” said RealNetworks CEO Rob Glaser. “We know, from our standpoint, that we’re going to do a lot more (marketing) than we’ve ever done before. I can tell you, speaking categorically, that we’re going to be doing things from a marketing standpoint . that go further than anything we’ve ever been associated with.”
Michael Bloom, who managed MTV’s Urge service, will oversee Rhapsody America, and the new service will integrate much of Urge’s staff and technology. Glaser declined to say whether the new offering will employ a subscription model or charge users per song, but it’s likely that Rhapsody will at least incorporate existing business-related elements of RealNetworks’ current service.
Advertising potential
So not only will Rhapsody likely sell music subscriptions, it may offer an ad-subsidized service, like the stripped-down version Real offers online today. And the inclusion of ads could prove a key element for Verizon Wireless, which has struggled to convince users to pay $2 per tune for over-the-air downloads.
Real began working closely with Verizon Wireless last year following its $350 million acquisition of WiderThan Co. Ltd., a Korean outfit that powers the carrier’s mobile music offerings. Glaser said he hoped the new offering bridges what thus far has been a substantial disconnect in digital music-the gap between online music services and the mobile phone.
“For the past year, we’ve been in active dialogue with Verizon about how we can take the work we were doing with them on kind of a white-label basis and integrate it with the Rhapsody service. As it turned out, it all came together concurrently with the discussions we were having with Viacom and MTV Networks,” said Glaser. “I think by bringing in Verizon, we have the opportunity to create scale so that we really stand out in a market that has become somewhat fragmented.”
