rhapsodyrealRhapsody, the digital music subscription service based in downtown Seattle, saw its revenue rise nearly 13 percent in 2012, to $143.7 million, while the company reduced its annual loss to $12.3 million, an improvement over its $13.6 million loss the previous year.

Although Rhapsody is a privately held company, the numbers were revealed this week in a regulatory filing by RealNetworks, which has retained a large stake in the music service since spinning it off as an independent company in 2010.

Why no annual profits for Rhapsody yet?

“While we are acutely focused on building a sustainable business, we have made the deliberate decision to invest in the short term,” a company spokesperson tells GeekWire via email. “You’ve seen the returns of that in innovation: our new Android app with Replay, the time and day-based recommendation engine, SongMatch app, iPad app, Xbox app, apps on all the major SmartTV platforms, for starters, with much more on the horizon, including further international expansion.”

The larger revenue comes despite tough competition from Spotify,  and other rivals in the digital music business. It follows deals including Rhapsody’s MetroPCS partnership and its acquisition of the Napster music service from Best Buy in late 2011.

PreviouslyRhapsody app arrives for Windows Phone 8

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