RealNetworks, SanDisk to take on iPod

RealNetworks Inc. is teaming up with SanDisk Corp. to release a portable music player that more closely links with RealNetworks' Rhapsody online music service, in the latest attempt to take on Apple's iPod and iTunes stronghold.
Analysts see the deal, to be announced Monday, as a way for SanDisk and RealNetworks to join forces against a new common foe: Microsoft Corp., which recently announced plans to release its own Zune portable music player and service.

Redmond-based Microsoft has been providing the technology that allowed services such as Rhapsody to transfer songs to portable music players without compromising the digital rights of that content. But many say they think Microsoft's plans to release the Zune service and a player made by Toshiba Corp. could make the software giant a significant competitor.

"This is kind of a way for both Rhapsody and SanDisk to say, 'Well, if you're gong to compete with (us), guess what, we're gong to compete with you,'" said analyst Phil Leigh with Inside Digital Media.

Katy Gentes, a product manager for Microsoft's Zune effort, said Friday that the company remains committed to the Windows Media platform it provides to partners and will continue to invest in it.

Under the deal, RealNetworks and SanDisk plan to release the Sansa Rhapsody, a portable music player based on SanDisk's e200. The companies said they expected the gadget to be available in time for the holidays, but they would not say exactly how much it will cost.

The player will come pre-loaded with hundreds of songs from musicians such as the Dixie Chicks and Jessica Simpson, as part of a free trial of RealNetworks' Rhapsody To Go subscription service. Anyone who buys or already has the music service will then be able to use the gadget to listen to nearly all of the songs available through the core Rhapsody service.

The Rhapsody Unlimited online service charges users a flat fee of $9.99 to essentially rent an unlimited number of songs as long as they subscribe to the service. Users who purchased the Rhapsody To Go service, at $14.99 per month, had previously been able to transfer their Rhapsody songs from their computers onto a portable music player. But the process required using Microsoft's technology for managing digital rights, a process RealNetworks said was clunky and had glitches.

"The fact that one company was making the player, one company was making the software and a third company was making the service meant it was not seamless," said Dan Sheeran, senior vice president of music for Seattle-based RealNetworks.

The Sansa Rhapsody will use RealNetworks' own technology for managing digital rights, which RealNetworks says will work more smoothly and allow the company to offer more bells and whistles. The gadget's release also will coincide with an update of the Rhapsody service.

Eric Bone, SanDisk's director of product marketing for audio/video products, said the goal of the partnership was to help smooth out the bumps that came up for users trying to grapple with the Rhapsody service and Microsoft technology. But he said the device would still include Microsoft's digital rights technology, so people could still use it to run other music services besides Rhapsody.

Sheeran said the company hoped to release more products with Milpitas, Calif.-based SanDisk, and he also wouldn't rule out working with other device manufacturers.

Analyst Michael Gartenberg with Jupiter Research said he thinks Microsoft's move to offer its Zune player and service has left some device makers and music services looking for new partnerships. But he said RealNetworks still has an uphill battle in persuading lots of users to go with this offering.

For one thing, people who use Apple Computer Inc.'s popular iPod and iTunes music service are used to owning their music, whereas Rhapsody works as a rental service. While Rhapsody has been around for a while, Gartenberg said most consumers still aren't familiar with it, and especially with using it on a portable player.

"The notion of renting music is a very strange concept to consumers, and no one has ever really explained it to them," Gartenberg said. "So one of the things that Real's going to need to do is evangelize."

RealNetworks Chief Executive Rob Glaser said in an interview Friday he believes the access to unlimited songs on a portable device will be a major selling point to people who want to take music on the go.

"It extends the value to a whole set of users who previously said, 'Well, I like the idea of a jukebox in the sky but I don't live with my PC," he said.

Leigh said both companies might be able to do a bit better by working together, but he still doubts the partnership stands a chance of making a dent in Apple's market dominance.