Music Business — February 12, 2015 at 10:15 am

Rhapsody Continues Growth And Climbs To Over 2.5 Million Subscribers

by

As more people begin to use music streaming services, the paid subscription service has reported a 60 percent growth in its user numbers.

Rhapsody, the company which helped pioneer the subscriber pays model in the music streaming industry has reported an unprecedented jump in user numbers. In April last year, the service had 1.7 million users but now, despite operating in an incredibly crowded and competitive market environment they have announced an incredible milestone of 2.5 million subscribers. In July they’d announced that it took a decade to grow their user base from 1 million to 2 million, so the rate of growth is staggering.

 

The tightly contested marketplace has traditionally been dominated three companies but this recent announcement shows that Rhapsody are making some inroads into the market. Pandora is the world’s most used streaming service and boasts a user base of 80 million but have reported growth of just 5.2% in the past quarter. Spotify, with 60 million monthly users (as of December 2014) and 15 million paid subscribers is still surging, thanks to its global reach into more than 50 countries.  The other dominant force in the market sis French company Deezer who have been able to capitalize on their first to market advantage across much of Asia and have made aggressive moves into the US with the acquisition of Muve Music from AT&T subsidiary Cricket.

 

In the meantime, Rhapsody has been quietly inking deals with wireless carriers both in the United States and across international markets. The company last year struck a deal with T-Mobile offering its UnRadio subscription service with Ethan Rudin, CFO at Rhapsody International, announcing on Wednesday that UnRadio subscriptions jumped 67 percent during the holidays “and that pace continued into the first quarter.” In overseas markets, Rhapsody have partnered with telecommunications giant Telefonica in markets like Germany, Brazil and Chile and Vodafone across Europe. “Our goal is just to distribute music to more people and have them pay for it,” says Rudin.

 

But with the increase in listeners (the Recording Industry Association of America has reported streamed music made up for 27 percent of music sales in the first half of 2014, up from 15 percent in 2012) there has been increased competition as tech giants like Apple, Google and Amazon have sought to make inroads into the music streaming game which will undoubtedly increase competition in the future as more companies scramble for a piece of the pie.

 

You could be forgiven for thinking that music streaming is a profitable business model but the reality is far from this. With record labels demanding hefty royalties for the privileges of having their catalogue available to streaming sites and a consumer base still reluctant to part with their hard earned to pay for full subscriptions, streaming music companies like Rhapsody are still losing money each year. In fact, according to a report last year based on its financial disclosures written by PrivCo, Spotify has lost a total of $200 million since it was founded. Rhapsody seem to be doing better however and their lean business structure seems to be working – according to RealNetworks’  latest financial statements (the company owns 45 percent of Rhapsody) Rhapsody’s net loss improved to $9.9 million, from $13.9 million in 2013, and was just $131,000 in the fourth quarter.

 

Billboard reports that Rudin understands how a subscription service can lose money right now. He says Rhapsody tries to run “as tight an operation as possible,” but calls 2014 and 2015 “investment years.” “This is definitely not a period to pump the brakes. There’s still a massive portion of the music-listening public that is uneducated about the power of the full music service.”