MTVN to Fold Urge, Launch New Music Service with RealNetworks, Verizon

Rhapsody America Venture Targets iTunes
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MTV Networks is shuttering online-music effort Urge as it bands together with RealNetworks in a move to fight Apple's iTunes.

Urge, launched with Microsoft last year, will merge with RealNetworks' subscription digital-music service, Rhapsody, to form Rhapsody America, and the venture's new music-download product, which will retain the Rhapsody name, will be carried on PCs and on mobile phones under an exclusive deal with Verizon Wireless’ V CAST service.

While executives said elements of pay-to-download service Urge, such as its music-curating features, will live on in the new service, the brand will die. Urge's current chief, Michael Bloom, will head the new venture.

"We believe it will be the best of both services," said Van Toffler, president of MTVN Music/Logo/Films Group, on a conference call announcing the partnership. "The collaboration of these three companies is like a perfect storm," he added, calling the product the "purest digital-music play" available.

Both Urge and Rhapsody have struggled to fight iTunes for limited market share. According to research firm NPD, iTunes accounted for 68% of music files legally downloaded to PCs from November 2006-January, 2007. Napster took only 4.4%.

Toffler, along with RealNetworks chairman and CEO Rob Glaser, said that by pairing with each other and offering the service on Verizon mobile phones, they could better fight the competition. Apple's popular new iPhone is only compatible with AT&T.

"Really, we saw a really great op -- a one plus one plus one equals way more than three opportunity," said Glaser, pointing specifically to MTVN's significant marketing muscle as incentive for the partnership.

Executives familiar with the matter, however, cited MTVN's lack of marketing behind Urge as the engine of its demise.

MTVN launched Urge with Microsoft in May 2006, banking on its brand cachet, longstanding relationships with artists and labels and unique design and subscription model to set it apart. But the service was incompatible with Apple's portable players, meaning that MTVN had to work to persuade its viewers to get rid of their iPods.

On-air marketing for Rhapsody will begin across the MTVN channels during MTV's 2007 Video Music Awards, scheduled for Sept. 9.

MTVN executives maintained that Urge wasn't intended to be an iTunes rival; at the time of its launch, only 3%-5% of the some 70 million Internet households bought music from legal, a-la-carte download systems in any given month anyway, according to NPD.

But despite its sleek presentation and MTVN's wealth of exclusive footage, celebrity playlists and hundreds of bloggers, Urge never gained traction. A major snag came when Jason Hirschhorn, MTVN's inaugural chief digital officer and Urge's main architect, left the company soon after the venture launched.

"This relationship with RealNetworks, Verizon and MTVN is really undeniable," Toffler said. "With these two folks at our side, we feel really confident that it will be an unparalleled service."

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