Rhapsody now has 2.5m subscribers, but may have lost $15m in 2014

Streaming service Rhapsody lost somewhere in the region of $15m during 2014, according to MBW estimates – but saw its subscriber base grow 60%.

The Spotify rival hasn’t confirmed its exact latest subscriber count, but we can have a good guess: Rhapsody topped 2m subscribers in the summer of 2014, so at the quoted full-year 60% growth rate, its user base will now be somewhere around 2.5m.

Thanks to the latest full-year results of major shareholder RealNetworks, what we can be certain of is that Rhapsody, which operates as Napster in Europe, is currently active in 32 countries around the world.

The news was revealed yesterday by Robert Glaser, CEO of RealNetworks and Co-Chairman of Rhapsody.

“Rhapsody achieved very significant progress in 2014, achieving year-over-year subscriber grow of over 60%,” he told investors. “A key part of [that was] globalising Rhapsody to carrier partnerships. Rhapsody is now available in 32 countries…

“We believe [its] is deeply aligned with trends in media consumption as digital music moves away from individual track sales and towards streaming and subscription services.”

There is no up-to-date record of RealNetworks’ ownership share of Rhapsody, but in September, RealNetworks pinned its stake-holding at 45%.

The latest solid results we have for Rhapsody are that in the first nine months of 2014, it posted a net loss of $14.3m.

RealNetworks doesn’t report in-depth full year figures for Rhapsody until March, but its year-to-date equity in Rhapsody’s net losses increased slightly from Q3 to the end of Q4 – up from $4.17 to $4.45m.

That means Rhapsody’s total annual net loss also looks likely to rise, probably to somewhere around $15m.

In 2013, Rhapsody lost $14.6m. In 2012, it lost $12.2m and in 2011, it lost $13.6m.

We’ll find out Rhapsody’s net losses for sure in March, when RealNetworks releases full fiscal figures.

Rhapsody received positive coverage late last year after Taylor Swift’s 1989 remained on the service, despite being removed by the artist on Spotify. The reason? Rhapsody doesn’t operate a free tier: users can get a no-purchase month trial, but after that they’re required to pay $9.99 a month.

“We offer a much better consumer product than pandora… and Our model is more conservative with regard to capital than Spotify”

Robert Glaser, Rhapsody

Glaser said this week that both Spotify and Rhapsody offered “a much better consumer product” than US digital radio company Pandora “because [although like Pandora] we support radio playback, we also support a much richer experience where you can listen to whatever songs you want, whenever you want them”.

He indicated that Rhapsody feels it is more careful with its expenditure than Spotify, commenting that Daniel Ek’s attempts to convert his free users into paying subscribers was a “very capital consumptive model”.

Glaser said: “You probably read that [Spotify is] trying to raise several hundred million dollars more… obviously [these are] attractive valuations from the standpoint of their current shareholders and if they can keep doing that,  more power to them. Our model is more conservative with regard to capital.”

He has a point: Spotify’s net losses hit €58m in FY 2013 – but it now boasts six times as many paying subscribers as Rhapsody, with 15m, and 60m users overall.

Despite Rhapsody’s own costs far outweighing its income, Glaser suggests that the future is bright. All Rhapsody needs, he says – just like Spotify and pretty much every other audio streaming company  before him – is global scale.

He reassured shareholders. “We think we’re in the process of building a valuable asset.”

As well as Rhapsody, RealNetworks invests in games and mobile entertainment. Its FY 2014 revenues stood at $35.5m, with a $71.8m GAAP net loss for the year.Music Business Worldwide

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