Rhapsody says it has surpassed 1 million paying subscribers — leveraging its MetroPCS partnership, its recent acquisition of Napster and the rise of mobile devices to solidify its position as the largest premium music subscription service in the United States even as new rivals enter the market.
The milestone represents substantial growth for Rhapsody, which had about 650,000 paying subscribers when it spun off from RealNetworks last year as an independent company based in downtown Seattle.
Jon Irwin, the Rhapsody president, had vowed to employees that he would shave his head if Rhapsody rose to more than 1 million subscribers.
“People have busted their tails since we separated from RealNetworks. This is a huge milestone for us to blow through the million mark,” Irwin said, laughing as he added, “Who cares if I have hair or not?”
Spotify, by comparison, was recently reported to have 250,000 paying subscribers in the United States. Spotify entered the U.S. market earlier this year, building on its success in Europe.
Rhapsody, which recently marked its 10th anniversary, made a couple of key moves immediately upon spinning off from RealNetworks in April 2010, dropping its monthly subscription price to $9.99 and releasing a version of its mobile app for Android, joining its iPhone app.
Irwin gave significant credit to that mobile strategy for helping to fuel the company’s growth.
“We embraced the post-PC era. We timed it right, and we’re bearing the fruit from that choice,” he said.
Spotify differs from Rhapsody in that it offers an ad-supported free trial, lasting six months before users are limited to 10 hours of streaming per month. Users need to upgrade to a $9.99/month Spotify premium account to be able to play tracks on a mobile device.
Rhapsody offers a 14-day trial with full access to the service. Irwin said he prefers to have all users receive full mobile access. He noted that the end goals of Spotify and Rhapsody are the same: to sign up paying subscribers. But he said he Spotify is taking a financial risk by subsidizing the extended periods of free music playback, calling it “an extremely expensive way to do it.”
“They need to count on a certain percentage of those people converting to paid subscribers, or they’re going to go broke,” he said. “That’s just math.”
Irwin said he believes Rhapsody is growing its business in a more sustainable way, and the large base of paying subscribers puts the company in a better position to invest in product development and partnerships. “We’ve moved past a million, and we’re on our way to 2 million,” he said.
Post updated at 11:20 to correct a reference to Rhapsody in relation to Spotify.