“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.”
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