A Strategy for Breaking Into a Competitive Market

competition.jpgWith Apple's integrated iPod/iTunes product dominating the digital-download market, competitors have found it challenging to stake a claim. So what makes MTV, Verizon Wireless, and RealNetworks think they can lure customers to their new Rhapsody America download service (which draws upon two unsuccessful ventures: MTV's URGE music store and Real's Rhapsody subscription service)?

The financial details have yet to be released, but the partnership has big plans for fighting iTunes:

  1. They'll focus on mobile downloading capabilities, which iTunes does not offer.
  2. They'll stay competitive in regards to storage capability. Verizon's executive VP and CMO John Stratton said V CAST-enabled mobile phones' 4GB of storage capacity will increase to 8GB by the end of the year, making it competitive with iPhone's highest capacity product. A 16GB V CAST phone should be available by mid-2008.
  3. Their strategy will capitalize on selling music that can connect with multiple devices (Apple's copy-protection technology limits songs bought on iTunes to its own iPods and iPhones.)
  4. Rhapsody America will improve the older Rhapsody service by expanding upon the subscription model, offering songs for sale per download, just like iTunes does.
  5. The partnership will launch an aggressive marketing campaign, positioning Rhapsody as the music service of choice for MTV Networks' MTV, VH1 and CMT.
Digital Media Wire sees Rhapsody America's major challenge as competing against free music (piracy), noting that Apple makes its money off the hardware, not iTunes downloads. However, in June, PacificQuest broke down the numbers and presented a slightly different picture, showing iTune' profits are in line with the company average, and should increase now that more expensive, DRM-free tracks (not protected by copyright) are being offered. Rhapsody America is also participating in Universal's DRM-free trial, so the playing field's leveled there.

The music industry and digital downloading worlds are evolving. Apple's customer satisfaction has declined, and the market's ready for some competition. It looks like Rhapsody America is well-prepared to provide that.

(Market Image by miss rogue)