Real halves music prices, widens loss

But the labels are the real winners

By Tony Smith • Get more from this author

Posted in Music and Media, 17th August 2004 10:28 GMT

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Real Networks is getting desperate, it seems. In addition to offering free access to its service during the Olympics, the company today slashed the cost of tracks to just 49c (27p) and albums to $4.99 (£2.71).

But the deal will see it take a big up-front hit and widen losses.

Like the Olympics offer, the price cut announced today will apply "for a limited time only", though Real neglects to mention when the prices will go back up.

In essence, the offer is a bid to get buyers using Real's Rhapsody subscription and a la carte download service, and is particularly aimed at iTunes Music Store customers, thanks to Real's Harmony DRM translation code.

That the company is risking its bottom line and the wrath of investors is clear from a small paragraph tucked away toward the end of the press release.

Real has already said it will lose between three and four cents a share during its current, third fiscal quarter, and today it widened that loss to between three and five cents a share. Some two cents a share of that is down to "antitrust expenses" - no doubt Real's legal action against Microsoft - and possibly the opening of a war chest, in case Apple decides to sue over Harmony.

Still, Real "remains committed to achieving quarterly profitability, excluding antitrust litigation expenses, by the end of 2004", the company added, cheerfully.

As for the price cut, industry insiders note that Real has been here before, knocking prices from 99c to 49c and tripling sales in the process. Alas, royalties remain constant, so the real winners of the sale are the music labels, not necessarily Real itself.

Indeed, UK-based music service Wippit is trying the same trick by offering a range of WMA-protected songs for 29p (54c) a pop.

Meanwhile, Harmony, or a technology very much like it, is the future. DRM is bad enough, without it limiting consumers' choice of both playback device and point of purchase. Real's motivation is no less selfish in this than is Apple's refusal to license FairPlay, iTunes DRM technology. It knows that without the 'freedom of choice' it's touting, fewer music buyers will pay Real for their songs - the motivation is purely financial.

And Real has, in the past, been just as keen to retain its technology as Apple is now. One who is without sin should cast the first stone, not Real. ®