Rhapsody is the great-uncle of on-demand music subscription services. Founded in 2001 with a tiny classical music catalog, it has grown into a behemoth operating in over 30 countries with a music catalog over 30-million tracks. At the end of 2015, Rhapsody had 3.5-million monthly subscribers across the flagship brand and its Napster-branded service which operates in non-U.S. markets.
Two months ago Mike Davis took over as CEO, quickly tightening the ship with a round of layoffs. Last week came the announcement that Rhapsody would become Napster across all territories, consolidating its brand. RAIN News dialed up a conversation with Mike Davis to discuss that decision, and talk about steering a music service through a complex competitive landscape.
On the Napster naming decision, which has puzzled some observers, Mike Davis emphasized clarity and brand reputation. “We’re Napster in 30-plus countries. The only country running Rhapsody is North America. Any initiative we do — any brand recognition, any PR, anything that happened for Rhapsody was limiting the exposure to the rest of the world. Now, anything we do will have a halo effect across the whole portfolio.”
He also revealed research on brand reputation. “Research showed that brand equity for Napster was stronger than Rhapsody, even in places it hadn’t been used in a long time. So there’s also some brand power in moving over to Napster.” Davis also noted operational inefficiency in running two brands for essentially the same service: “There’s a lot of redundancy in running two brands — two platforms to run, two SEOs, and so on. This simplifies marketing, logistics, everything gets simplified by moving under one brand.”
Product and Partnerships
Rhapsody/Napster has persevered in a tough industry that has seen innumerable competitors come unplugged over 15 year — most recently as Rdio entered bankruptcy last November, its assets acquired by Pandora.
“I’ve been here six weeks, so I don’t know all the magic the team is done,” Mike Davis told us. But he emphasized that distribution partnerships, in number and quality are key. “Our partnership deals are best in class. We have many carrier deals, hardware deals, auto deals. We probably have one of the most diverse portfolios of all the streaming companies.”
Another ingredient of success is the quality of a first-mover product which has been under continuous development for 15 years. “It’s also the quality of the product. It’s an A+, music lover’s service. Fantastic quality. So the D2C [direct to consumer] has grown steadily, plus the significant growth over the past two and a half years with non direct-to-consumer partnerships.”
What About Big Tech?
We brought up Google, Apple, and Amazon as representing giant technology companies that offer music products within sprawling, multi-dimensional ecosystems. Do they blow a stiff headwind against independents like Rhapsody/Napster?
“Yes. That’s how we segregate the industry. Spotify at the top of the pureplay industry. Then the next bucket is the utilities — Amazon, Apple, Google — which have some deep interest in music but it’s more a commodity to sell other items like ads and hardware. The headwind is definitely stiff, but I think because of their parent companies, their flexibility is limited. Many industry executives believe that the next big wave of paid subscribers will come from non-traditional partnerships, bringing in a lot of people who aren’t paying for music yet. We are in a unique spot to win the next round of paying subscribers, whereas some of the big companies have conflicts of interest in certain partnerships, or they have other motives and interests that make them uninterested in some of the strategic areas we’re going into. They [the big tech companies] are legitimate players for sure, but are fishing in a different pond from us.”
Being “The One Spot”
Rhapsody, mainly a music service, branched out recently with a VR (virtual reality) app that provides a 36-degree experience of concert videos. We asked Mike Davis whether podcasts and video might be a future expansion.
“For sure,” he said. “Ultimately, the consumer will increasingly want to go to one entertainment spot, and not be so fragmented as they are today. You’ll see consolidation, and yes, we believe more diverse content should probably be on our platform. We’ve done audiobooks overseas, especially in Germany, where we’ve had tremendous success. Podcasts and video will have more presence in the future. News is also an area we’re interested in.”