News

Online music is inching its way toward commercial viability.

With Apple Computer reportedly only a few days away from launching its own subscription music service, Seattle-based RealNetworks has purchased San Francisco's Listen.com for $36 million. The acquisition will give RealNetworks control of subscription service Rhapsody and double the company's stake in Internet music services. RealNetworks already owns 40% of MusicNet, a service begun last year with the backing of major record labels.

The purchase follows an initial investment in Listen.com made in February. The deal announced Monday, April 21 includes a cash payment of $17.3 million and 4.1 million shares of RealNetworks stock, valued at $4.61 on that day. Listen.com was founded in the autumn of 1998 during the dot-com boom. Its Rhapsody service costs subscribers $10 per month, and its playlist has always been licensed from copyright owners.

Almost all of Listen.com's 53 employees are expected to keep their jobs, with CEO Sean Ryan becoming vice president of music services for RealOne, a division of RealNetworks with approximately 900,000 subscribers. RealNetworks is undeterred by Listen.com's projected losses of more than $1 million dollars in 2003. "We really believe in the future of online music services," said RealNetworks' CEO Rob Glaser.

So does Apple Computer founder and CEO Steve Jobs. His company is said to be just a few days away from launching its own subscription music, tailored for users of Macintosh computers. Jobs has apparently learned a great deal about entertainment industry diplomacy in his second role as head of Pixar Animation Studios, which signed a five-picture deal with Walt Disney Company following the unexpected success of Toy Story in 1995. Over the past year, Jobs has quietly negotiated online distribution licenses with most major record labels, even going where no other legitimate music service has gone before—signing rock group the Eagles. Jobs personally discussed Apple's new service with the band's manager, Irving Azoff. He's also landed hot Orange County band No Doubt.

In demonstrations with music industry executives, Jobs reportedly manned the computer himself, emphasizing the service's ease of use and strong but not overly restrictive copy protection. For 98¢ per song or $10 per album, subscribers will be able to download and save their favorite tunes on Mac hard drives, on CD-Rs, and on any number of portable iPods registered to them. They will also be able to play the songs on any three designated Apple computers. In the beginning, the service will be integrated with Apple's iTunes software and will be available only to Apple users, approximately 3% of the computer market. It may be expanded later for Windows users.