Music subscription services have been hard sells in the golden age of Pandora Music and other free web-based radio alternatives.
RealNetworks (Nasdaq: RNWK ) and Viacom's (NYSE: VIA ) MTV are spinning off their Rhapsody digital music service. This isn't some glorious offshoot of a fast-growing appendage. It's not even in the same camp as Time Warner (NYSE: TWX ) unloading its problematic AOL (NYSE: AOL ) two months ago.
No, Rhapsody isn't even going to IPO, apparently. The service will simply take on a few additional investors in a restructuring, freeing RealNetworks of operating control.
"Separating Rhapsody into its own independent company is a significant first step in making RealNetworks a more focused and profitable company," CEO Robert Kimball notes in the announcement.
That pretty much says it all, doesn't it? Rhapsody and Napster have struggled to turn a profit by offering music fans monthly smorgasbords of streams. Even the typically successful Microsoft (Nasdaq: MSFT ) hasn't been able to brandish its bullying ways with its meandering Zune Pass.
Is this simply an effect of the recession, or have consumers turned on paying for music streams?
Rhapsody closed out its third quarter with roughly 700,000 subscribers, down from more than 800,000 members when the year began. Best Buy hasn't broken down Napster subscriptions, but it wouldn't be a surprise to see that audience declining, either.
It's tough to move premium audio. Even Sirius XM Radio (Nasdaq: SIRI ) shed net subscribers in 2009. The saving grace for the satellite-radio giant is that its account tallies are tied closely to auto sales. Once the car showrooms began showing signs of life in the latter half of last year, Sirius XM came through with back-to-back sequential gains in subscriptions.
Streaming services are different. Napster and Rhapsody may offer members the ability to preload their portable media players -- allowing them to go where many freebie digital music sites can't -- but that's clearly not a material differentiator for folks cutting back on frivolous expenditures. It also can't help that the explosion of the smartphone market is making Pandora and its digital cronies more portable.
This isn't a spinoff. It's a castoff.
Is there a future for music subscription services? How can this work? Share your thoughts in the comment box below.