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rhapsodySubscription music service Rhapsody, which recently cut 15 percent of its workforce and shook up its top management, posted a $5.6 million net loss for the third quarter — falling further from its long-term goal of reaching profitability.

It’s the latest sign of stiff competition in the online music business, as Rhapsody faces off against Spotify and other music startups.

The financials were disclosed in a regulatory filing this afternoon by RealNetworks, which continues to hold a stake in Rhapsody following the spinoff of the music service in 2010. The filing says Rhapsody’s revenue declined to $35.2 million in the quarter, from $36.4 million in the same quarter a year ago. The $5.6 million loss compared with a loss of $3.4 million in the same quarter a year ago.

We’ve asked a Rhapsody representative for more information about the reasons for the decline in profits and revenue. The company blamed a previous revenue decline on it strategic decision to shift away from MP3 downloads and web ads, to focus on its core subscription business and international expansion.

Rhapsody said in September that its president, Jon Irwin, was stepping down with the arrival of a new investor, Columbus Nova Technology Partners, which made a “significant investment” in the music service. Columbus Nova is known in part for its earlier acquisition of Rock Band creator Harmonix from Viacom, which has been a longtime Rhapsody investor.

Update: A Rhapsody spokesperson says severance packages played a role in the losses for the quarter. The company is also making moves to build its streaming music service globally, entering markets around the world with a deep library of music. By the end of the year, Rhapsody expects to have gone from three countries to more than 25 across Europe and Latin America over the course of 18 months, in part through partnerships with companies like Telefonica.

“You’ll also see a lot of innovation coming out of a product road map in the next six months that is not just about the listening experience, but about improving the overall fan experience,” the spokesperson says.

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