Real Network’s iTunes Price Cutting Bags 1 Million Sales
Real Network’s recent price cutting of iPod compatible song downloads may not be bringing profit to the company, but it is cutting into the iTunes market as well as carving their own song download market before Microsoft enters the picture. Real has announced that they’ve sold 1 million songs (at 49 cents / song) in the first week of operation. Although Real has been the target of iPod/Apple loyalists, the 50% discounted price is attracting those who cannot see the point in paying almost $1 for a song, and who do not want to fool with pirated music.
Real claims that it’s equivalent to the iTunes music store, Rhapsody, has 500,000 members, and that it’s content can be played on over 100 devices. They claim to have 625,000 songs available for purchase / download in the AAC and (more critically) iPod compatible format. Real managed to reverse engineer Apple’s DRM technology to allow them to sell songs that will be compatible, and usable, on Apple’s popular iPod device. Very good news for Real, very bad news for Apple. Although initially mocked, Real might (excuse the pun) become a real competitor to Apple’s music offering. Apple have, up to this point, faced little to no serious competition in the online music market. There is a real possibility that this might change.
Apple is very dependant on their new music business, and serious activity could prove quite damaging to their bottom line and overal profit margin. They’ve already stated that they don’t make very much money on individual music sales (how much so, we can’t be sure). The effect of a long running and successful competitor to their offering could be very damaging. What they could do to salvage the situation? They might be attempt to license ‘Fairplay’ (their DRM technology), and in doing so make up lost profits from that.
The 49 cent ‘Freedom of Choice’ campaign will uhndoubtedly cost Real dearly. However, there is the very obvious benefit of pinching Apple’s much needed customers. Whether they’ll keep on coming over to Real after they cease the 49 cent campaign, however, is another matter. What will be really interesting to watch is Microsoft’s entrance to the online music market (expected imminently). Microsoft have negotiated individually with major record labels, and will have over 1 million songs to sell when launched – more than the number on sale by iTunes and Real.
Real has also announced two University targeted deals for its Rhapsody Internet jukebox service. Students at the University of California at Berkeley and the University of Minnesota will be offered Rhapsody at “deeply discounted” rates at the start of their upcoming school terms.