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Rhapsody president Jon Irwin weighs in on the state of business in the digital music industry.
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Old digital music -- for the lap for the first time last year revenue from digital music sales surpassed sales of CDs.
It's about time -- as their new hope for the music business joining me now John Arlen president of music subscription service.
Rhapsody John you're brave man you know -- -- found in 2001.
You've been CEO for three years yourself.
And at a time when music seems kind of free and ad supported everywhere you guys have stuck to the paid model how's it going.
It's -- really well actually we've five grown since we spun out from -- now work side.
Three years ago.
I would more than doubled our subscriber base to right now this is first hear from two to 2012 was first -- the digital music sales and surpass physical music sales.
And this is the time when.
Technology in the business -- rhapsody is built -- ready to expand and explode right still comma.
2001 founding he got only a million paying sounds that's just not enough it seems like he failed and your model has been proven wrong what do you say absolutely not a lot of this was waiting for the model to shift and I have until 2008.
The way people took music portable into the with them was on the -- -- -- you had -- iPod to take music with you.
20082009.
With the advent of the somewhat ironically of the iPhone the android devices the capability of these devices now.
Allow people to take our model that we pioneered with them anywhere any time on the devices that they now law.
Yet -- this is just the beginning of a rapid expansion in this market.
What is the most often occurring case among your one million subs who what where they mainly listen to rhapsody in their car or on their iPhone or where it's on the mobile device mauled by its very powerful that he actually is the initial an entree into the car in the middle admirable more than seventy per cent of our listening.
Is on the mobile device on the mobile device rather than inside a car.
Now if you are such a good business model why did RealNetworks is like gold view but why -- -- separate seems like to be perfectly ball quite nice actually RealNetworks still owns.
A share in the company major -- in the company and continues to provide that that leadership and guidance.
However we were able spent out at a time when industry was gonna move quickly to pursue our own roadmap.
Focus on -- created and they.
Greatest music experience for the fans.
So that we can grow the customer base and keep up with the rapid changes in technology -- -- -- ten dollars a month a million subs this is like a 120 million a year roughly.
And revenue privately held -- right privately held that you seem like there's a -- on someone else's charm bracelet and we shouldn't be bought by some other bigger company and who can look every up some.
Right now our focus is and continuing to build the best service for the music fans.
In addition what we do as we focus on working with partners wireless carriers and cable companies both -- the United States and in Europe right now.
So that we can bring music and in bad rap city -- that listening experience.
For those those partners.
And their subscribers.
-- I see now you know what your answers are sound really well rehearsed an awfully articulate got try to Freddie office something here John.
Performance fees it was surprise -- that while radio stations which have been around for however many decades.
Pay no performance fee whenever they play hit song.
Online services actually the paying pretty big -- and pandora has been -- congress trying to get him to lower those fees.
What does -- have to pay and term and how does it differ from radio which is free.
Well again radio which is free -- in the broadcast -- which is free pandora actually pays royalty rates as well.
And that's to do -- there their version up radio still short of on demand.
The fees we do pay we do pay the majority of the revenue -- yet.
To the suppliers to the labels into the artists -- eventually the rights holders.
But there's still margin -- there for us to focus on investing our profits in creating a great experience.
For music fans to listen to it just seems like an artificial -- difference between what you guys who won't -- but radio does mean music is music -- understand why the old tech guys.
Get get away without -- pay any fees in the new tech guys -- -- and they and they get kind of hit Florida because it's better yet -- fundamentally better yet here that's on our radio.
And you wanna hear again yes you can with rhapsody you can look at it over North Korea got to go thanks ability to -- -- nice job.
I.
