MTV, RealNetworks to Form Online Music Venture
In a bid to create a stronger competitor to Apple Inc.'s marketing-dominating iTunes Store, Viacom Inc.'s MTV Networks is set to announce Tuesday that it is merging its online digital music offerings into a joint venture with RealNetworks Inc. …
Context & Ripple Effects
Both sides arrive at this joint venture with pieces already in place. RealNetworks spent 2006–2007 building distribution for Rhapsody, including a deal to make it the default music software on US consumer HP PCs (January 2006), while CEO Rob Glaser previewed a Rip/Save/Burn 'All' product at the D conference in May 2007. MTV, meanwhile, has operated a download-to-portable-player subscription service since mid-2006 alongside Virgin and Yahoo.
The stated, confirmed aim is scale: a stronger competitor to Apple's market-dominating iTunes Store rather than another niche storefront. The story travelled narrowly — Silicon Alley Insider ran Fred Wilson's commentary on what MTV should do with Rhapsody — framing the deal publicly as an open strategy question rather than a settled turnaround.
First-order effects
- MTV Networks folds its standalone online music offerings into RealNetworks' operation, handing Rhapsody Viacom's promotional muscle and MTV's youth audience in a single move.
- Apple's iTunes Store gains its most explicitly scale-focused challenger yet — a venture combining an established subscription catalog with a major cable-media brand.
Second-order effects
- Virgin's and Yahoo's music subscription services, MTV's peers in the 2006 download-to-device model, now compete against a rival that bundles catalog with broadcast promotion — pressuring them toward partnerships of their own.
- RealNetworks extends its shelf-space playbook beyond the 2006 HP default-placement deal, negotiating from a position backed by Viacom rather than as a solo software vendor.
Third-order effects
- If the pattern holds, media brands stop building proprietary music stores and instead license their audiences to platform operators, concentrating the subscription-versus-download contest into fewer, larger fronts aimed at Apple.
- The structure points toward carrier- and hardware-partnered subscription services as the industry's main counterweight to à-la-carte downloads — with label cooperation becoming the scarce input such ventures compete over.
The trend: Online music retailing in 2007 is consolidating around platform partnerships — media brands renting established infrastructure like Rhapsody instead of operating their own stores — as the industry searches for a credible counterweight to iTunes.