Wilson+Stategy+Report

Wilson M Stategy Report To: Proximity Music team From: Matthew Wilson Date: Feb. 27, 2010 Subject: Strategy Report

Here is the strategy report for Rhapsody music that was requested. I will provide a description of the company, what forces are acting upon it, the company’s current business strategy, and implications for Gen. Y. Rhapsody is failing in all of it's endeavors and has virtually no hope of gaining any type of strong foothold in the music downloading industry.

Rhapsody music lets subscribers legally listen to a multitude of songs through their internet connection, with additional monthly fees to allow the songs to be transferred to MP3 devices. Rhapsody, owned by Real Networks (51 %) and Viacom International (49 %), was created in December of 2001 and was initially the top music downloading site. Rhapsody has been overtaken by Itunes and Amazon music in the market for legal music dowloading. (Pham, 2010)
 * Description of Rhapsody **

Real Networks is restructuring Rhapsody into its own company and hopes to complete the process by the end of March 2010. Real Networks says that it is a way for them to concentrate on the other aspects of their business including video, games, and mobile messaging. It is more likely RealNetworks is restructuring Rhapsody because at the end of 2009 Rhapsody had only 675,000 customers. (Bonanos, 2010) Competitive Landscape ** Rhapsody’s biggest threat is from substitute products; other digital music sites. These sites include -illegal downloading ( Limewire) The illegal downloading sites are easy alternatives to paying for music. These substitute competitors offer a much cheaper platform for paying Rhapsody customers. As long as people do not care about the legal aspects of the music downloading game, there will always be market share taken away from Rhapsody.

-legal and free music listening stations (Pandora) For music listeners who just want to listen on their computers, there are plenty of free sites to do so on. Sites such as Pandora and Grooveshark give people the ability to listen to music solely on their computer. These sites are more for the occasional music listener because of the inability to download the actual tracks.

-other legal music downloading companies (Itunes) Rhapsody needs to be able to compete with the other legal downloading music services such as Itunes and Amazon. This is very difficult to do right now because Itunes has gobbled up almost 60% of the legally downloading music services. The purchase of Yahoo music in 2008 has increased Rhapsody’s market share from 7% to about 9%. (Hansell, 2008)

Rhapsody’s business strategy is a feeble attempt to compete with Apples “Itunes” by putting more emphasis on customers mobile music choices. Multiple attempts have been made by Rhapsody to let customers transfer music to their mobile device. -In 2008 Rhapsody teamed up with Verizon to create a music buying experience for Verizon customers. This venture does not even allow music to be downloaded directly from the user’s phone, which is what most people want. -Rhapsody was allowed to create an application for the Iphone in 2008 but that too was a failure. (Bonanos, 2010) The app only allows customers to access their music when connected to wi-fi, due to Rhapsody’s commitment to Verizon. -The exclusion of the app from AT&T’s network has seriously hurt it; getting one star out of five on more than half of its reviews.
 * Rhapsody’s Business Strategy **

Real Networks has teamed up with Sprint to streamline Sprints mobile music service. (Bruno, 2010) This move says that Real Networks still wants in on the music game, but does not want Rhapsody’s name anywhere near their new business partner. This move tells the world that Rhapsody is a sinking ship. Implications for Gen. Y. ** Gen Y needs everything faster and music is no exception. Music on the go is so completely dominated by Apple that it would be hard for Rhapsody to gain more customers. MTV’s parent company Viacom has pledged 33 million dollars in advertising on MTV when the restructuring of Rhapsody is complete. (Bonanos, 2010) Even if Rhapsody can somehow use this advertising properly, they are still spiraling into oblivion.

Bonanos, Paul. (February 11, 2010). Newly Independent Rhapsody’s Subsriber Base Still Shrinking. Retrieved February 28, 2010 from [] Bruno, Antony. (February 11, 2010). RealNetworks, Sprint Forge Mobile Music Deal. Retrieved February 28, 2010 from [] Hansell, Sau. (June 30, 2008). Rhapsody Runs Hard Just To Stay in Place. Retreived February 28, 2010 from [|http://bits.blogs.nytimes.com/2008/06/30/rhapsody-runs-hard-just-to-stay-in-place] Healey, Jon. (June 29, 2008). ilike Rhapsody- Why Don’t More People? Retrieved February 28, 2010 from [] Pham, Alex. (February 9, 2010). RealNetworks Spins off Rhapsody Music Service as Solo Act. Retrieved February 28, 2010 from []
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