Rhapsody joins ranks of the DRM-free

Entire database converted to unprotected MP3 format

DENVER -- Add Rhapsody to the ever-growing list of digital music retailers who have stripped DRM from their catalogs.

The joint venture between RealNetworks and MTV Networks on Monday converted its entire database of 5 million songs to the unprotected MP3 format, both for music accessible on its client-based application as well as that on a relaunched Web-based store.

The move is part of a multifaceted initiative that the company hopes will make Rhapsody the default music provider on the Internet by facilitating the act of streaming and buying music from multiple partners -- such as iLike, MTV, Verizon Wireless and Yahoo.

As part of the announcement, Rhapsody finally laid bare the details of its much-heralded partnership with Verizon Wireless. Under the agreement, Rhapsody will operate the online VCast Music store, where users can buy and downloads music online, as well as Verizon's wireless over-the-air music service.

A copy of any song purchased from a Verizon phone will be available DRM-free from the online store, and users will be able to transfer any subscription-based Rhapsody tracks to as many as 10 models of Verizon phones. Tracks downloaded to the phone will remain protected with DRM.

Most significantly, Verizon subscribers can opt to upgrade to the Rhapsody subscription service and place the monthly cost on their mobile phone bill.

Users will not be able to download subscription-based music OTA just yet (just a la carte tracks for now), but that capability is planned for the future. About 99% of the Rhapsody catalog will be available for purchase from mobile phones, and Verizon executives expect to finalize licensing deals with the remaining 1% soon.

But this is only the wireless element of the plan. Going DRM-free, combined with the existing practice of letting nonsubscribers stream 25 songs per month for free, allows Rhapsody to take a wholly Web-based approach to streaming and selling music online.

Without DRM, Rhapsody can now stream and sell music via a new Flash-based player simply, which does not require any software download or customer login. The 25-song limit is tracked by computer rather than individual. The player also offers a "buy this" option to acquire the track (however, users will need to set up an account to buy songs).

The company hopes this combination will allow it to act as a sort of music engine for the Internet, an initiative dubbed "Music Without Limits." Fans browsing partner Web sites will soon be able to stream in full any song listed on those sites (under the 25-song a month limit) and also have the option to purchase the song right there without having to launch a dedicated music store application like iTunes.

Most notable about this capability are the partners already lined up, which include some of the most well-trafficked music brands on the Internet. They include Yahoo, which recently shuttered its Music Unlimited service in favor of outsourcing it to Rhapsody; MTV, which did the same for its now-defunct Urge service; and iLike, which extends Rhapsody's reach to such social networking services as Facebook, MySpace and Bebo.

That's a huge improvement over the old model, which required music fans to both download and launch a separate program every time they wanted to listen to a song they discovered online in full, or otherwise be limited to only 30-second samples.

However, Rhapsody will still limit this activity to 25 songs per month, even for subscribers who could potentially stream an unlimited amount.

"We could absolutely allow you to sign in to your Rhapsody account in those environments, but right now the labels do not want that," Rhapsody vp marketing Neil Smith said. "They want people who are using Rhapsody as subscribers to consume it on the Rhapsody site. ... We've asked. We've had explicit conversations about it and have been unable to convince them that this is a good thing for customers."

The subscription element of the Rhapsody service will remain unchanged. Company executives stress the new DRM-free sales tack is largely an effort to attract new users to the Rhapsody platform in hopes of eventually converting them into monthly paying subscribers. The DRM-free tracks sold will be in higher-quality 256 kbps format.

Rhapsody rival Napster went to a DRM-free format this past May and it also has a wireless extension through a deal with AT&T Mobility. However, Napster's mobile sales are still encoded with DRM -- even those "dual delivery" tracks sent to the computer.

Rhapsody plans to promote its DRM-free makeover with a multiplatform ad campaign, including TV spots, valued at more than $50 million through the rest of the year. Additionally, Rhapsody will give away a free album download for the first 100,000 new users signing up to download new music from the online service by July 4.

Verizon also is supporting the effort with online, print and VOD ads, and a potential TV ad element in the future.