Rhapsody Raises Rates,Lala Offers Warner Catalog for Free

I had been a satisfied Rhapsody subcriber since May of last year. Notice I said, “had been.” I didn’t use the service nearly enough, but at just $9.99 a month, it was worth having access to Rhapsody’s catalog of over 3 million full length, CD-quality tracks.

I logged into my bank account today to find that RealNetworks had charged me $12.99. Apparently I missed their email back in April announcing the rate change:

We are increasing the Rhapsody Unlimited monthly price from $9.99 to
$12.99. This change will go into effect during your next billing cycle
after May 3rd, 2007. It is the first time in six years that we’ve
increased the price of Rhapsody.

However, if you switch to yearly billing now you can keep your existing
membership rate of $9.99 per month. Under a yearly subscription, you
will be billed $119.88 once a year – a savings of $36 over the new
monthly rate.

Thanks, but no thanks. A 30 percent price jump is a little too steep for my taste, and like I said, I barely use the service enough as it is.

For someone like myself who owns an iPod, still buys CDs, downloads music from eMusic and iTunes and uses Pandora, a more expensive Rhapsody just seems like a frivolous expense, so I cancelled it today. The customer service rep I spoke to was nice and friendly and did make an effort at keeping me, but eventually gave in.

I’ll still be able to listen to 25 songs a month for free, so at least I’ve got that going for me.

In related news, Ethan Smith reports in the Wall Street Journal (“Listen to Music Free, but Pay to Carry“) that, starting today, Lala.com is giving music away to attract new customers.

Starting today, visitors to Palo Alto-based Lala Media Inc.’s Lala.com Web site will be able to listen for free on their computers to the digital catalog of Warner Music Group Corp. and hundreds of smaller independent music companies. Lala executives say they are working to secure licenses with the other three major music companies.

It’s like a subscription music service, but without the monthly subscription fee. Lala is betting that in return for getting all that free access to music at home, listeners will pay to buy the songs they want to take with them on iPods and other music players. The prices will range from $6.50 to $13.50 for an album. (For now, Lala plans to sell music only by the album rather than song by song.)

Lala, whose owners include Bain Capital LLC and several veteran Silicon Valley investors, is underwriting the free offering by paying major labels $6 to $8 a user each month, about the same wholesale rate paid by online music-subscription services like RealNetworks Inc.’s Rhapsody. But where Rhapsody and its competitors charge users $12 a month for “all you can eat streaming,” Lala.com will charge nothing. And where Rhapsody and its competitors require users to load special — and occasionally glitchy — programs to access their offerings, Lala will work through a normal Web browser. Users of Lala’s Web-based service can create and save playlists, send them to friends and browse the virtual collections of other users — all for free.

More important still, the new service will work with Apple Inc.’s iPods — something no iTunes competitor featuring major-label content has been able to do.

Lala’s pricing model, too, runs counter to the way the music industry has done things. Prices will be “dynamic,” or based on demand for a particular title and other factors, including the existing content of a user’s personal music library. Typically, labels use low prices to drive music discovery, often subsidizing big discounts for brand-new albums on the theory that generating word-of-mouth interest will provide momentum in the future. They also sometimes cut prices on blocks of older titles during special promotions. But for most older albums, they often charge a premium, figuring that people buying older music are less likely to be doing so on a whim after, for example, hearing the song on the radio.

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