Real seems to be trying everything it can to lure in customers into using its music download service. First they hacked Apple's FairPlay DRM system in order to add iPod support to its Harmony DRM system. Now they have taken a fairly big gamble by slashing its track pricing to 49c (27p UK), album pricing to $ 4.99 (UK£2.71) and offering free access to its premium service for the duration of the Olympics.
These reduced prices are for a limited duration although Real has not announced any closing date before tune pricing returns back to normal. However while Real Networks aims to lure in customers during this period, these lower cut prices means a serious loss making service since as real must still fork out the same original royalty cost to the record labels. In the end, Real may end up doing the record
labels a big favour instead without realising it. GristyMcFisty, RTV71 and Quakester2000 submitted the following news via our news submit :
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But the deal will see the company take a big up-front hit on its financial performance, further widening its loss. Like the Olympics offer, the price cut announced this morning will apply "for a limited time only", though Real neglects to mention in when the prices will go back up. Essentially, 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' 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 itself, industry insiders note that Real has been there before, knocking prices from 99c to 49c and tripling its sales in the process. Alas, royalties remain constant so the real winners of the sale are the music labels, not necessarily Real itself. |
At least Real is one music download service that knows how to compete through the use of offering reduced price sales as well as widening their player support as much as possible. Apple on the other hand is commited to keeping its 99c pricing and limiting playback support to its iPod only.
However, while Real may think lower pricing may lure in consumers, one still needs to use their infamous media player in order to even purchase any music. Its pesky message centre that insists on starting with Windows has stopped me from reinstalling the Player since my last complete system reinstall. The player is also fairly restricted in functionality with many features such as the graphic equaliser limited to its premium 'Real Player Plus' version.
Feel free to discuss and find out more about online music download services on our Music Downloads, P2P & Legal Issues Forum.
Source: The Register - Internet & Law
