rhapsodyRhapsody is focusing more intently on its core music subscription service, dropping third-party ads from its Rhapsody.com website and discontinuing sales of MP3 downloads. And in the short term, at least, the move is putting a damper on the company’s revenue growth.

Revenue at the Seattle-based company dropped 8 percent to $34.7 million in the second quarter, from $37.8 million in the same quarter a year ago, according to a regulatory filing by RealNetworks, the former Rhapsody parent company, which owns 45 percent of the privately held music venture following its spinoff three years ago.

The company was still able to narrow its quarterly loss slightly to $4.38 million, an improvement from its loss of $4.54 million in the same quarter a year ago.

A Rhapsody spokeswoman cited the strategic shift away from MP3 downloads and web ads as the reason for the revenue decline. A lesser factor was a new pricing tier of $5/month for MetroPCS customers. At the same time, looking ahead, the company says it remains optimistic about its opportunities for continued growth.

Rhapsody’s annual revenue hit a new peak of $143.7 million in 2012, an increase of more than 13 percent, despite new competition from Spotify and other rivals.

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  • Dude

    This is a strange thing to do if you are posting a loss of less than $5 million. Lets drop advertising and stop selling MP3s. Hmmm. CEO are you smoking something? Who is stepping up to by this diminishing company that continues loosing subscribers, and has no re-vamp in sight.

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