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Rhapsody Makes $50M MP3 Bet + Analysis

PARTNERS INCLUDE YAHOO, MTV, iLIKE. VERIZON ADDS MOBILE MP3'S.

Rhapsody_mp3 Rhapsody America opens an all mp3 store today backed by a $50 million marketing campaign aimed straight at iTunes. Rhapsody's reach is extended as the download provider for Yahoo,MTV and iLike whose music application is popular on Facebook. The DRM free tracks are also available over the air via Verizon Wireless.

Rhapsody is the leader in subscription music, but decided it also had to compete with iTunes head on to succeed. "We're no longer competing with the iPod. We're embracing it," said VP Neil Smith. Consumers can listen to full songs before buying vs. 30 second samples on most stores. Tracks are $.99 with albums at $9.99. This matches iTunes and Napster, but is higher than Amazon. (Details and a Verizon press release after the jump.)

ANALYSIS: With $50 million in marketing and partners like MTV and Verizon, Rhapsody may be able...

to put a dent in iTunes where about 50% of the catalog still carries DRM. Full song streams are also a welcome addition. Rhapsody also traditionally offers more music discovery options and content than its rivals.

But the competition still has the advantage. The seamless relationship between iTunes and the iPod is hard to beat. Plus millions have already given their credit cards to iTunes and Amazon and set their computers to be compatible with them. Rhapsody may not yet offer strong enough reasons to switch.

PRESS RELEASE: RHAPSODY & VERIZON

Mobile music enters a new era today as Verizon Wireless and Rhapsody®, the digital music service from RealNetworks® (Nasdaq:RNWK) and MTV Networks, launch V CAST Music with Rhapsody. Combining Verizon Wireless’ world-class, over-the-air mobile music service with Rhapsody’s leading desktop solution, V CAST Music with Rhapsody delivers unlimited monthly access to music on up to three Rhapsody-compatible mobile phones and players and online on multiple PCs and web browsers, for less than the cost of a single CD. In addition, customers who purchase music over-the-air are able to download the master copy of the songs or albums to their PCs free of digital rights management (DRM) software that restricts how and where music can be played.

With V CAST Music with Rhapsody, Verizon Wireless customers are still able to purchase songs over-the-air for $1.99 and get two copies of the song: the first for their phones, the second for their PCs in the DRM-free MP3 format. When customers download the V CAST Music with Rhapsody Software to their PCs and sign up for the monthly subscription, they have the ultimate music management service, including:

o Unlimited subscription syncing with access to more than five million songs

o Creating and accessing playlists, viewing playlists of other users, including celebrities

o Burning, importing and converting CDs to play anywhere

o Managing an existing digital music collection for free and syncing it to their mobile phones

o Buying non-protected MP3s of songs on the PC for 99 cents per song

o Buying songs on the phone, over-the-air – get two copies of the song for just $1.99 (one is over-the-air, the second master copy is the MP3 file customers download onto their PCs)

By subscribing to V CAST Music with Rhapsody, customers can discover new music from millions of songs, without breaking the bank. Whether a hard core music fan or a casual listener, customers of all music appetites will love the flexibility that 5 million songs give them to discover new music, listen to old favorites and find just the right song to suit their mood.

While Verizon Wireless customers continue to have the ability to get their favorite music while on-the-go via full song over-the-air downloads, ringtones and ringback tones, V CAST Music with Rhapsody also provides them with an award-winning desktop music application, allowing them to sync their favorite music quickly and easily, directly to their mobile phones. Now music lovers will be able to manage their collections with the most comprehensive music management tool and take their music with them anywhere.

John Harrobin, senior vice president of digital media and marketing for Verizon, said, “V CAST Music with Rhapsody fulfills Verizon’s promise to deliver the best mobile experience to our customers. Now, music fans can not only get the benefit of immediate access to music over-the-air, but also – in partnership with Rhapsody – customers can seamlessly integrate the leading mobile music service, available on a choice of devices they carry with them everyday, with the ultimate desktop experience.”

Rob Williams, senior vice president of music products for RealNetworks, noted, “Working with Verizon Wireless, we are able to extend the reach of the award-winning Rhapsody service to millions of mobile phones. V CAST Music with Rhapsody gives mobile phone users the best experience of any music service on the market while also giving them access to unlimited music, whether at home or on-the-go.”

Verizon Wireless customers who simply want to manage or buy music can download the V CAST Music with Rhapsody software for free at www.verizonwireless.com/music. Customers interested in a subscription may sign up for $14.99 monthly subscription online or by visiting a Verizon Wireless Communications Store, including those in Circuit City, or by calling Customer Service at 1-800-2-JOIN-IN.

V CAST Music with Rhapsody will be available on the marquee V CAST Music with Rhapsody device, the Chocolate 3 by LG, when the phone becomes available in July; the service is also available today on select phones, including the LG Decoy™ and LG Dare; MOTO™ W755; Samsung SCH-u550, Samsung Glyde™ and Samsung Juke. Customers using the MOTORIZR Z6tv, MOTORAZR² V9m or LG VX8700 may bring their phones into a Verizon Wireless Communications Store to receive a free software upgrade on their phones to access the service.

For more information about Verizon Wireless products and services, visit a Verizon Wireless Communications Store, call 1-800-2 JOIN IN or go to www.verizonwireless.com.

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