Real Pacts with MTV, Verizon, and Universal

Today seems to be the day everyone wants to lash their fortunes to Universal Music and take on Apple’s iTunes music store for the top slot in the digital retail music world: Real Networks has announced it is now offering selected tracks from Universal Music in DRM-free, MP3 format, and, probably more importantly, is merging its Rhapsody music service with MTV’s Urge under a new company, Rhapsody America, with Verizon’s VCAST as its mobile outlet.

First, in what the companies are categorizing as a “test,” RealNetwork’s Rhapsody music service is now offering a selection of DRM-free tracks from Universal Music in 256 Kbps MP3 format. Selections include some of Universal’s top-selling artists, but don’t represent Universal’s entire catalog. DRM-free tracks are available at $0.88 per track to Rhapsody subscribers, and $0.99 per track to non-subscribers.

The partnership represents Universal’s latest move to prove that it can go it alone in the digital marketplace without help from Apple’s iTunes music store: the company recently announced it would not sign a long term distribution agreement with Apple and has so far declined to offer its DRM-free music for sale via iTunes. Universal’s announcement with RealNetworks is the third partnership the company has unveiled just today to put its DRM-free music into the world without iTunes—the other two are deals with Wal-Mart and gBox.

However, for RealNetworks, the more significant move may be a broad partnership with Viacom’s MTV Networks, which will see its Rhapsody music service merged with MTV’s existing Urge music download service, with Verizon’s V CAST music service active as its mobile outlet.

Under the deal, RealNetworks and MTV Networks are launching Rhapsody America, which will act as the exclusive digital music service for both Real Networks and MTV’s “premiere” music brands, including MTV, VH1, and CMT. Moreover, Verizon’s V CAST mobile service will be Rhapsody America’s mobile platform, enabling the company to offer over-the-air downloads and streaming to Verizon mobile phone customers. Former MTV NEtworks General Manager Michael Bloom will head up the new company, which will have offices in Seattle, San Francisco, and New York.

“Today’s announcements represent a sea-change in the digital music market,” said RealNetworks CEO Rob Glaser, in a statement. “By partnering with MTV Networks, home of the most storied brands in music history, and the market’s leading wireless company, Verizon Wireless, we’ll make Rhapsody the premier digital music service that delivers great music to millions of consumers whenever and wherever they want.”

Beginning today, existing URge customers can use their login IDs to access Rhapsody and tap into both services; similarly, Rhapsody customers can alrady see MTV content moving on the Rhapsody service. Rhapsody service will continue to be available to RealNetworks’ partners like SanDisk, TiVo, and Best Buy.

RealNetworks’ moves could give it the momentum and footprint to mount a significant challege to iTunes. As the Urge, Rhapsody, and V CAST services integrate, the combined company will be able to offer a la carte download sales, subscription-based streaming, and over-the-air streaming and song purchases via mobile phones. In comparison, iTunes offers neither subscription-based streaming nor a mobile solution. Furthermore, RealNetworks can also offer DRM-free music from Universal which isn’t available at all via iTunes; although iTunes Plus currently offers the EMI catalog in DRM-free format, that arrangement is not exclusive, and the new Rhapsody America is no doubt already talking with EMI about bringing its DRM-free library on board. Of course, the unfathomable millions of iPods Apple has sold over the last several years give the company a relatively solid customer base: while DRM-free tracks sold through Rhapsody will work with iPods, those tracks currently represent only a small fraction of the service’s total content: the rest of it (DRM protected music and streaming) still doesn’t work with Apple’s iconic music players. But one thing is certain: the battle is heating up.

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