Inside Move: Apple plants music seeds

Online tune biz listens to lessons of iTunes

With 3 million songs sold in its first month, Apple Computer’s iTunes Music Store continues to rock the digital music business it just entered — even if it’s currently available only to the 5% of computer owners with Apple machines.

The latest reaction: pricecutting by Listen.com’s Rhapsody service, which dropped the cost of its music downloads by 20¢, to 79¢ apiece.

Execs at Listen’s new parent company, RealNetworks, hope the cuts will help Rhapsody compete when Apple debuts a Windows-compatible service later this year.

Real marketing VP Dan Sheeran acknowledges that Apple’s sudden success and distinctive ad campaign are pushing competitors to improve fast or get out of the business.

With Rhapsody, Real is very much trying to improve fast. But it’s a different story for Real’s other music service, MusicNet, which it founded with three major labels. Real announced it no longer would distribute the service through its RealOne player, leaving AOL as MusicNet’s only outlet.

This came days after Sony and Universal sold off their music service, Pressplay, to Roxio, which plans to combine it with assets from the defunct Napster to create a legal peer-to-peer distribution network.

Another company, Altnet, already has begun using Kazaa, one of the most controversial file-swapping systems, to legally distribute music, videos, adult content and games. Expect a series of announcements this week about Altnet’s expanding operations.

“I think Apple did us a huge favor,” Sheeran says. “They’ve spent a lot of money to explain online music even though 97% of the customers out there can’t use their service.”