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rhapsodynapsterlargeThe combined subscriber base of the Rhapsody and Napster music services has grown to more than 1.7 million globally, achieving a 63 percent year-over-year increase and sending a message about parent company Rhapsody International’s status in an increasingly competitive market for digital music services.

“It’s really us and Spotify and everyone else,” said Paul Springer, Rhapsody International chief product officer senior vice president for the Americas, in an interview with GeekWire. He explained, “We believe strongly we’re clearly No. 2 and everyone else is fighting for No. 3 and we think the next year is going to be when the shakeout happens.”

Paul Springer
Paul Springer

He said the growth in subscribers is a sign that Rhapsody’s paid subscription model is effective and working, when contrasted with Spotify’s freemium approach, offering paid and free versions of its service.

But Rhapsody International has so far struggled to turn its growth into profits — posting a net loss of $14.6 million on revenue of $140.6 million in 2013.

Rhapsody International, based in downtown Seattle, is privately held. But RealNetworks, which spun off Rhapsody as an independent company in 2010, still owns about 45 percent of the music service, a stake that requires RealNetworks to report the results of its Rhapsody investment publicly.

Rhapsody faces tough competition from Spotify, Pandora and other established and emerging brands in digital music, but the company, originally founded in 2001, has displayed unusual staying power by adapting to the world of smartphones and streaming music devices.

Springer said the growth in Rhapsody and Napster subscribers over the past year has come largely in mobile listeners, as Rhapsody has struck a series of deals with mobile operators to offer the Napster service to their subscribers. Rhapsody has further expanded the Napster brand internationally after acquiring the digital music service from Best Buy in 2011.

Among industry insiders, rumors have persisted that Rhapsody might ultimately shift to the Napster brand in the United States. Springer acknowledged that it’s something the company thinks about and considers, given the resonance of the Napster brand among key segments of the population, and the growth that Napster has experienced internationally.

No decisions have been made, Springer said. However, he added, “It is something we think about, and if we were to do, it we would do it as part of a major product refresh that we’re planning for later in the year.”

Spotify is reported to be prepping for an IPO and roiled the industry recently by acquiring The Echo Nest, a music discovery company whose technology was used by Rhapsody and other Spotify competitors.

Rhapsody’s growth has come at a time of major internal changes. The company cut 15 percent of its workforce last September, and its longtime president, Jon Irwin, stepped down with the arrival of a new investor, Columbus Nova Technology Partners, which made a “significant investment” in the music service.

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