Possible Apple-Beats deal cheered by Rhapsody

“This could be a big year for Seattle streaming music pioneer Rhapsody, now that Apple’s drawing attention to the category with a possible $3.2 billion acquisition of a rival service,” Brier Dudley writes for The Seattle Times. “The category was already heating up before the Financial Times last week broke news of Apple’s interest in Beats, which started out building high-end headphones and now has a relatively small streaming music service.”

“Apple’s entry would further popularize the category and perhaps lead to more acquisitions, if other big companies decide to add streaming services of their own,” Dudley writes. “‘I’m clapping from the sidelines — I think it’s fabulous,’ said Ethan Rudin, a former Wall Street and Starbucks dealmaker who became Rhapsody’s chief financial officer last fall.”

“Beats had only 110,000 subscribers as of March 31, according to a document leaked on May 10,” Dudley writes. “Rhapsody has about 1.7 million subscribers, up 62 percent over the previous year, but it continues to lose money, including $1.6 million lost on sales of $42 million in the first quarter. Its earnings are reported by RealNetworks, which was the majority owner of Rhapsody from 2007 through 2010 and continues to hold a 47 percent stake.”

“A turning point came last year after Rhapsody severed operations from RealNetworks and took a big investment from Columbus Nova Technology Partners,” Dudley writes. “The company simultaneously cut 15 percent of its employees and let go its president, Jon Irwin. He wasn’t replaced; the company is now led by a committee of senior managers.”

Read more in the full article here.


  1. Communications 101 – First Day:

    You, the President/CEO of a small company in a new market, get news that a major corporation will leverage its assets and resources to make a big entry into your market.

    You send out a press release/statement applauding the entry as it “validates the market”.

    TL;DR: “Welcome Apple. Seriously”

      1. Best Buy bought Napster for $122 million in 2008. Napster was losing money and had about 1-2 years left in cash when it was acquired.

        Best Buy then didn’t really do anything with it until they pretty much gave it to Rhapsody in 2011, taking a minority position in Rhapsody (behind RealNetworks).

        All of these belong in the same bucket of dead companies walking that refuse to die.

    1. It does not matter according to the article they are now being run by “a committee of senior managers” – I’ve never seen a company run by committee survive.

      They are toast.

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