RealNetworks' Grand Illusion

You can't blame RealNetworks (NASDAQ:RNWK) for wanting to matter more. Yesterday it announced that it was hoping to popularize its Rhapsody service with its Rhapsody DNA technology platform, which would allow seamless integration of its music subscription service with select MP3 players.

Its first partner is SanDisk (NASDAQ:SNDK), the country's second-most-popular seller of portable music players, after (of course) Apple Computer (NASDAQ:AAPL).

You can't help but laugh a little at this latest move. RealNetworks feels like an empty nightclub, installing a velvet rope in a sad attempt to appear selective and popular. Of course, with Apple commanding better than 75% of the domestic market, competing does tend to feel futile.

However, there is an interesting wrinkle here. Rhapsody is an unlimited music service, giving subscribers a digital streaming buffet as long as they remain active members. Apple only sells music a la carte. RealNetworks will preload the SanDisk e200 product line with nearly 32 hours of music in all genres, creating a compelling attack strategy. Of course listeners have unique tastes and love to craft their own mix tapes. But with Apple charging $0.99 a track, the value proposition is going to shine kindly on the SanDisk players.

The move won't topple Apple. Even Microsoft's (NASDAQ:MSFT) Zune is unlikely to make a colossal dent in the industry leader. It doesn't have to. RealNetworks hasn't been a slouch here; Rhapsody has lined up 1.6 million subscribers. That may seem petty when stacked against Apple's achievements of moving 60 million iPods and selling more than 1.5 billion song downloads, but there is plenty of pie to go around.

Companies like RealNetworks and Napster (NASDAQ:NAPS) are hoping that their digital smorgasbords can differentiate their offerings from what Apple has going on. As long as Apple doesn't come out with a similar concept, there is little reason why RealNetworks can't be a more important player here in a few months, even with Microsoft pitching its own digital music service.

So maybe the playing field is a little jammed at the moment, but what's music without a good jam every now and then?

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Longtime Fool contributor Rick Munarriz isn't a subscriber to any digital music service, even though he does have satellite radio. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.