RealNetworks and Viacom to spin off struggling Rhapsody

RealNetworks, Inc. and MTV Networks, a division of Viacom International, Inc., today announced plans to restructure their digital music service joint venture, Rhapsody America LLC, into a newly formed corporation that will operate independently from its parent companies. RealNetworks, currently the majority owner and operator of Rhapsody, and Viacom will restructure their ownership and rights in the joint venture to provide the necessary intellectual property rights to launch the new company as an independent entity. RealNetworks will also contribute operating capital as part of the transaction. Under the terms of the restructuring, which is expected to close at the end of the first quarter, RealNetworks will no longer have operating control over the venture, and Rhapsody will have no single majority owner.

“Separating Rhapsody into its own independent company is a significant first step in making RealNetworks a more focused and profitable company,” said Robert Kimball, president and acting CEO for RealNetworks, in the press release.

Kathy Shwiff reports for The Wall Street Journal, “Rhapsody, a monthly subscription service, has struggled to compete with other music services, among them Apple Inc.’s iTunes. It had about 700,000 subscribers at the end of the third quarter, down about 100,000 since the start of 2009.”

“The move comes less than a month after RealNetworks’s longtime CEO, Rob Glaser, stepped down,” Shwiff reports. “RealNetworks will no longer have operating control and Rhapsody will have no single majority owner. Both RealNetworks and Viacom will hold equal stakes of slightly less than 50%, with other shareholders owning the rest.”

Full article here.

MacDailyNews Take: “It’s not a gadget, but [RealNetworks’ Rhapsody] may spell the fate of all gadgets, or at least the ones that play music.” – Wilson Rothman, TIME Magazine’s “Gadget of the Week,” April 27, 2005. To which we responded: “RealNetworks’ Rhapsody will ‘spell the fate of all music playing gadgets’ the same way the Edsel spelled the fate of all gasoline-powered vehicles.”