RealNetworks And MTV To Spin Off Rhapsody

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Just as cracks are starting to appear in the iTunes armor and streaming music is gaining real steam, Rhapsody is being told to go it alone. RealNetworks and Viacom's MTVN announced late yesterday they are spinning off their Rhapsody America joint venture into a new company that will operate independently. The restructuring is expected to be completed by the end of the first quarter.

According to documents filed with the SEC, Real, MTVN and one or more minority stockholders will hold  shares of less than  50% of the new company. The reamaining stock will presumably be available to make or attract outside investments. Real will contribute $18 million in cash to launch the new venture, and take back control of its international radio business. MTVN will contribute $33 million in advertising, but its previous commitment of $111 million in ads will be canceled.

Does this spin off set up Real to be a nimbler company, make it more attractive to a new investor, or simply cast aside a division that can't find consumer traction to sink or swim on it's own?

It's far too early to be tell. But RealNetowrks, already struggling under a recent CEO ouster and ongoing lawsuits, is determined to put its best face forward.

"Separating Rhapsody into its own independent company is a significant first step in making RealNetworks a more focused and profitable company," said Robert Kimball, president and acting CEO for RealNetworks. "Rhapsody will be the largest pure play digital music service in the market. We have provided Rhapsody with the right team, and financial and intellectual property assets to succeed in the competitive market for digital music."

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1 Comment

  1. I’m a fan of Rhapsody and have always marveled that it hasn’t taken off – it’s inexpensive. Reading Rick Rubin’s vision of the future music industry 3 years ago, it seemed he was describing the Rhapsody model that already exists.

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