How Rhapsody Became A Top Tier Player Again

Rhapsody today announced reaching 2.5 million total subscribers across their unlimited and UnRadio offerings. While not in the same scale as Spotify’s 15 million, it nonetheless places Rhapsody as the fourth largest subscriber base globally and approximately 10% of the global total.

Rhapsody spent most of the second part of the 2000’s treading water, never really able to break out of a solid niche of between 750,000 and 880,000 subscribers. Rhapsody was doing its best to run a sustainable business but because it wasn’t blowing vast amounts of cash on customer acquisition (either via marketing or having a free tier) it was seeing most of its new user growth cancelled out by churn. But even with this measured approach such is the nature of digital music margins that it still lost money, lots of it.

Enter investment firm Columbus Nova who acquired an undisclosed stake in Rhapsody in September 2013. A reorg and a repositioning process followed paving the way for strong subscriber growth. Rhapsody had 1.5 million subscribers one year ago. If it continues to grow at its present rate it should hit 3 million by July this year. And if it sustains that growth into the start of 2016 it could find itself the second biggest subscription service globally. Current number two Deezer appears to be slowing so 2nd place could be a realistic target for next year. Quite a turn around for a service that looked like it was falling by the wayside 5 years ago.

Rhapsody created the streaming subscription marketplace. I remember back in the early and mid 2000’s when I was a Jupiter analyst, forever trumpeting the subscription model. In fact, along with my fellow Jupiter music analysts David Card and Aram Sinnreich, we took a lot of flak for our forecasts that predicted subscriptions would be the future of digital music. Granted we made our bet the best part of a decade before the market transpired but Rhapsody was there in market doing pretty much what subscription services are doing today. It deserves credit for having created a market and now once again for a newly found relevancy in the contemporary marketplace.

Postscript: Intrigued I decided to look up one of my old Jupiter music forecasts to see how wrong I was and I had a nice surprise. In the 2007 Jupiter European Music Model I had European subscription revenue at €484.2 million by 2012. The actual number was €420.2 million. That sound you can hear is me patting myself on the back.

16 thoughts on “How Rhapsody Became A Top Tier Player Again

  1. Sorry Mark, but I expected more detail from you. Your title alludes to details on how it happened – but you only say that the company got an influx of capital and reorganize…well, duh! Disapointed in this post. Expected more detail from you.

  2. Hi Thelivebeat – sorry you didn’t get as much out of this post as you wanted. I’ve been getting told that my posts are sometimes too long so I was trying to keep this one shorter. Just goes to prove you can’t keep everyone happy! But thanks for your feedback, I do appreciate it. So
    for you and the other readers who prefer more detail, here are some specifics on what Rhapsody did:
    -ousted the incumbent president and much of the old team
    -pivoted focus on the mass market with UnRadio
    -struck a global partnership deal with Telefonica included bringing over hundreds of thousands of Sonora customers
    -Prioritised Latin America
    -put international as the central focus for subscriber growth
    -used the Napster as the global brand
    -aggressively pursued international telco partnerships

  3. Hey Mark,

    Keep your posts long and detailed. If I want byte size info about the music biz, there are plenty of to get that. I look to you for a detailed analysis and context about the issue.

    My two cents…

  4. Pingback: How Rhapsody Re-Entered The Streaming Player Competition - South Carolina Music Guide

  5. One more detail lover:
    Also expected more from the post when reading the headline (actually came from the hypebot site to yours to see if there is more info). The points from your reply are the most interesting.
    To me, the most interesting question in streaming is how do the companies differ? What they offer is more or less all the same, but how do they manage to differentiate? To what extent can they?

    Up-to-date market info -> players (development in the last years and differences) -> what holds the future

    Just my one cent…

  6. Thanks for the feedback JoJa. The consensus is leaning to depth rather than brevity so normal service will resume in future blogs!

    If you are after super detailed service level stats and analysis you should take a look at the global music services benchmark we published in MIDiA Research. It has profiles of 40 music services, including key metrics such as user numbers, pricing, investment, territories available etc.

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  9. Pingback: How Rhapsody Became A Top Tier Player Again | Music Industry Blog | Music Connection- Dayton

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