Is Rhapsody Next? Annual Losses Balloon to $35.5 Million…

Last year, the once-promising Rdio slipped into bankruptcy, with annual losses approaching $25 million annually.  Is Rhapsody next?

According to financial details now disclosed, the struggling Rhapsody suffered losses of $35.5 million last year, a figure that increased 66.7 percent from 2014.  The streaming music company counts 3.5 million paying subscribers, though many of those are bundled into pre-existing mobile plans.  That suggests lower revenue contributions, unlike higher-paying clientele for rivals like Apple Music and Tidal.

Rhapsody’s mounting losses are coming against bullish revenue gains.  Over the year, Rhapsody enjoyed a 16 percent revenue surge to $201.9 million, but that cost was very pricey.  Breaking $200 million is a record feat for the company, though almost every streaming music rival is displaying a similar pattern of big revenues, but even bigger cash burn.

Pre-bundled subscribers have proven a mixed asset for streaming services, particularly Rhapsody rival Deezer.  Indeed, Deezer was forced to cancel its IPO, with serious subscriber questions among the suspected reasons.  As prospective investors did their due diligence on Deezer, serious flaws emerged around mobile-bundled subscribers, including the discovery that a large percentage of bundled users that had never once accessed Deezer or were even aware it was on their phones.

And regardless of engagement, the revenue contributions of pre-bundled subscribers are far lower than directly-subscribed users, simply because there isn’t a giant wireless company taking a cut.

Then again, Deezer has a fresh stash of nearly $110 million in funding to burn, with billionaire Len Blavatnik a deep-pocketed supporter.  That could prove extremely difficult for Rhapsody, especially with rivals like Spotify about to secure $500 million in fresh loans, and Apple funding its streaming foray with billions in savings.

Rhapsody dates back to the early 2000s, and is recognized as a streaming music pioneer.  Fittingly, Rhapsody also includes the revitalized Napster brand, though all that history isn’t paying the bills.

The financial disclosures were posted by RealNetworks, a 43 percent owner.

16 Responses

  1. Jeff Robinson

    They do pay songwriting royalties, but our artists have yet to receive a dime from them for publishing. That means $0 paid in mechanicals. Are they doing what Spotify is doing?

  2. Muxxix

    The problem is Rhapsody is not even a factor anymore. No one in this younger generation even knows they exist. They are doing absolutely no branding. Ask kids about streaming media and they’ll tell you about Spotify, Tidal and Apple Music.

    • Paul Resnikoff

      The streaming music space is based on the assumption that massive (and i mean massive) upfront expenditures will eventually lead to dominance and profitability once a winner (or small group of winners) is declared. Against that prevailing sentiment and investor approach, Rhapsody is competing against companies that are burning hundreds of millions of dollars annually for future dominance.

      This has already ruined Rdio. And this doesn’t look good for Rhapsody. This is a king’s game.

    • Name2

      Young people will sit there and stream a Max Martin song 100 times. They’ve got the brains wired for it. Don’t really feel like subsidizing that with my $9.99 or $19.99

      Refer me instead to a service with a bunch of old people who stream for maybe an hour a week and/or pay for the privilege of lossless streaming. The service stays in the black, the numbers have some shielding from web-fed frenzies, and percentage-of-traffic formulas don’t reward those already at the top of the demand chain.

      Hope Rhapsody makes it through the year. I’ve paid up through January.

      • Anonymous

        They keep pushing me to buy an annual subscription. I like the idea of saving money but I am not convinced they will exist in a year.

        I’d recommend backing up your music library.

      • Name2

        What’s funny is that I GOT no solicitation to switch to annual. I saw a blurb in a forum about a $7.99/mo price point, and after looking into it, discovered that it required the faith to pre-pay for a year. That’s the 2nd time that Rhap has restructured their pricing, but was pretty happy to NOT inform me that I could cut my monthly expenditure. (Why should they, right?)

        It’s been a long slow, sometimes painful process attempting to duplicate my Rhapsody library on Spotify and Tidal, with an eye to retiring Rhap, but
        I missed the end-of-2015 deadline, and with recent stories and developments, I’m thinking that any time I’ve put into re-building my library in Tidal might also go up in smoke this year.

        OTOH, only Rhapsody carries Bowie’s 2003 cover of “Love Missile F1-11”, and being able to loop that sucker on Rhapsody while waiting for my DVD to arrive was a great thing.

  3. Do The Math (Literally...)

    Given this undeniable observation: That no one can actually make money providing these services, and the only ones capable of doing it are multi-faceted conglomerates that see providing a music service as an acceptable loss leader in order to get and retain customers (and customer data) – I think we should just keep suggesting, in virtually every other post on this site, that these services “don’t pay enough.”

    I think we should completely ignore these cold, hard, economic truths: That consumers simply will not pay more than $10.00 for on-demand music, that businesses that charge that much and pay 70%+ of total revenues in royalties can’t turn a profit, that attempts to charge more than that – even for “increased fidelity” – get zero market traction.

    We should completely ignore those facts and instead just keep posting about how they just don’t pay “enough.”

  4. Paul young

    And what will that help solve the problem of low payouts to artists

  5. Paul young

    At least ITunes was operating above break-even point and were offering artists and still offers artists a better royalty payouts to artists.
    Streaming is good mainly because its allows funs to access music anywhere anytime on any device .we need to just evolve ITunes with streaming capabilities while keeping its business model intact

    • Remi Swierczek

      Just convert 100,000 Radio stations and all confused streamers to primitive discovery based music stores.
      All should play the best playlists but addition to your personal playlist should have a toll.

    • Name2

      You mean pay $1.29 to add a single song to my streaming library?

      Um, no.

  6. Gaetano

    Hey Paul, awesome post. Agree that this is a king’s game. Rhapsody had early momentum in the streaming wars as they were one of the first major players, but new emergence of hot brands like Tidal & Apple Music are investing now for the future, something that Rhapsody hasn’t done. Only a matter of time before they, along with SoundCloud, are out the door.

  7. Nicky Knight

    It’s still cheaper to buy your music from iTunes store than have a monthly membership to paid streaming calculated over a 12 month period. Most people listen to the same songs over and over.. buying the music from iTunes works out cheaper than streaming for a 12 month period. 12 months of streaming of around $10 per month would be $120 and that’s music you don’t even own… whereas $120 buys a lot of music you get to own on iTunes. I was considering subscribing to a streaming service but realized I can buy and own a lot of albums and singles for a lot less money.. Also, when I was in the free trial on a streaming service I found myself listening to the same music over and over.. so it makes a lot of sense to just buy it and save a ton of money..

    • Anonymous

      Yeah. I’ve found I mostly listen to catalog songs. If Rhapsody goes under I’ll be forced to switch gears and rebuild my music library from downloads and CD’s. No more subscription services for me.

      • Name2

        Ripping CDs and managing local files is a PITA. Half of what I stream I’ve already bought, but have no clue as to where that friggin’ CD is physically stored.

        I go subscription for the time it saves me looking for discs, and the ability to nab a song on impulse on my Samsung Android device ten minutes before leaving work.