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January 30, 2006


The case study on RealNetworks poses an interesting challenge to the traditional idea of buying music by song or album. I believe this case has significant validity, and that RealNetworks has undeniable potential to become a force to contend with in coming years.

My question for either Reid or Glaser would be this: Judging from the data available, when will Rhapsody and RealPlayer become viable, profitable services? Furthermore, how will this happen? Income statements for RealNetworks show steadily decreasing operating losses. My question, then, is when and how will these become positive numbers?

I believe the answer to my question would cover many areas. Let us assume for the sake of simplicity that Glaser is the one to answer. He would probably first remind me that the operating losses have been decreasing, and that this is expected to continue. He would go on to explain that the key to securing more income will be convincing individuals that an unlimited streaming service is much more useful and much cheaper than having to pay for each individual song. Once consumers will be able to stream songs wherever they want and to whatever device they want, such persuasion will be much easier. Also to note is that individual songs and albums are cheaper on Rhapsody - 79 cents and 7.99 respectively, compared to 99 cents and 9.99 on iTunes. With competitive pricing and more access to music, it follows that RealNetworks simply needs to effectively market their products to gain a lot of users. Rhapsody-to-go is another improvement that lets people bring their music with them on compatible MP3 players. If RealNetworks can point out the usefulness of this capability, it could very significantly boost the number of users for Rhapsody.

From my standpoint, I hardly knew anything about music subscription services in the past. I simply used iTunes because I bought an iPod awhile ago. I had a bad experience with a Creative Jukebox Zen, and so I went with Apple. Having read the case study and having researched Rhapsody, I can honestly say I will not buy another iPod when I am in the market for a new media player. Unless Apple makes it affordable for me to legitimately fill up my iPod, a cheaper, comparable player from another company that I can fill up for $15 a month makes infinitely more sense to me than an iPod that would cost thousands to fill, and more if I count my changing music tastes. RealNetworks has an excellent opportunity. As long as they play their cards right, they may be extremely profitable down the road.

January 24, 2006

BKR Paper Response

The BKR paper leaves many avenues of discussion open. Two of these areas particularly interested me.

For one, the idea of an Intellectual Property Rights Body is subject to much debate. It is a very viable idea, as artists and record labels have been subject to great losses in the light of P2P networks that allow users to download large volumes of music for free. My question is about what form this organization would take. Maybe the government will be pressed to set up a particular branch for enforcing copyrights and licensing. Maybe online music distributors will form their own organizations. There is much to be gained, however, if a universal group can be formed that would regulate and fight to keep copyright and licensing under control.

My other question pertains to the use of digital music in the future. Ipods are sold in sizes no smaller than two gigabytes. This Ipod can hold 500 songs, which would legally cost a person almost $500 to fill, depending on whether the person purchases albums or individual songs. This makes a personal music device much less practical than if a person can fill it easily with many songs that he downloads illegally. This creates a conflict, then. More digital music distributors will have to provide more cost effective methods of filling a player, such as a subscription service with which a person can possess as much music as she wants as long as she keeps up her subscription. The only other option is for music players to be made cheaper and with smaller storage capacities. A person that must save to afford a $400 Ipod cannot fill it with music for $10,000. My question is this: what way does the market seem to be moving? The paper discussed changing pricing strategies in terms of services demanding more than 99 cents when they secure a large customer base, but what incentive will consumers have to fill their devices at such costs? Will the devices change to reflect this relationship, or will service change to accomodate music players with high storage capacity?