Real slashes song prices in online music battle

In a move likely to step up the digital music dispute between RealNetworks Inc. and Apple Computer Inc., Real slashed prices at its online music store on Tuesday, offering songs and albums for a limited time at nearly half of what Apple charges at its iTunes store.

The digital media software maker is charging US$0.49 per song and $4.99 for most albums as part of a short-term sale, compared to the $0.99 a song and $9.99 per album normally charged by iTunes and other music sites.

Real said it cut prices as part of its new "Freedom of Choice" campaign, which will be marked by online, print and radio ads promoting its RealPlayer 10.5 software. The new software features a technology, called Harmony, that allows consumers to download songs they can play on more than 100 portable devices, including Apple's popular iPod and iPod mini devices.

Seattle, Washington, Real introduced Harmony in beta last month, sparking a showdown with Apple over whether it could offer songs at the RealNetworks' music store that can be played on the iPod.

Apple has not licensed to other companies the technology that makes music play on the iPod. Shortly after Harmony was unveiled, the vendor distributed a statement labelling Real as a "hacker."

While the dispute continues to simmer, Real's music sale is aimed at drumming up demand for its software and music site, at least for a short while.

The company will not be able to maintain the sale for long since selling music downloads is a low-margin business even at normal prices, said Mark Mulligan, a senior analyst with Jupiter Research in London.

"This is an incredibly difficult strategy that has to be finely balanced to benefit alternative revenue streams," Mulligan said. Real is clearly trying to expand the installed base of its media software, but risks attracting only bargain hunters with no brand loyalty, he said.

Real is fighting both the popularity of Apple's iTunes -- which has sold around 100 million songs -- and the market dominance of Microsoft Corp.'s Windows Media Player, as well as a handful of other music download providers, Mulligan said.

"Real is fighting against everyone and you can't wage a war on all fronts," Mulligan said. "You have to do something different, like Apple has with the iPod."

Real has defined its difference as choice, saying that its software allows consumers to play music on a range of devices without being locked into a particular format.

It remains to be seen whether this, and short-term cut rate prices, will differentiate Real in the long term.

Representatives for Real and Apple in London were unavailable for comment Tuesday.

IDG News Service

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