RealNetworks’ digital music wager

Company buys rest of Listen.com shares

Media-software giant RealNetworks has snapped up the shares it doesn’t already own of Listen.com — home of digital-music subscription service Rhapsody — in a cash/stock deal that values Listen at $36 million.

Deal dramatically expands Real’s commitment to — and wager on — the budding legitimate market for digital music, a market that has, up to now, been eclipsed by free file-sharing on services like Kazaa and Morpheus.

Richard Wolpert, strategic adviser to RealNetworks, thinks that will change in the near future.

“Several things have happened over the past six months — and will happen in the next six months — to bring digital music to a tipping point,” he said in an interview. “One is the amount of content — we went from 100,000 tracks available a year ago to more than 300,000 now. The experience is starting to get better than the pirate services.”

Real will pay $17.3 million in cash and issue 4.1 million shares of stock to acquire the remainder of Listen. Real took a small minority stake in the Netco earlier this year for an undisclosed sum of cash.

RealNetworks already holds a substantial minority investment — slightly less than 40% — in MusicNet, the online subscription service co-owned by EMI, Bertelsmann and AOL Time Warner.

Wolpert declined to disclose whether Listen’s technologies would be shared with — or folded into — the MusicNet service, but Listen founder Robert Reid maintained “there will still be a Listen.com and there will still be a Rhapsody service.”

Reid added that Listen hopes to take advantage of Real’s distribution muscle and its experience in building subscription services online (the company already has 900,000 subscribers to its various services) to expand Rhapsody’s reach.

He also hopes to take the service to the next technological level — expanding it to function on home audio and wireless portable devices — through Real’s existing partnerships with tech and consumer electronics firms like Sony and Nokia.

RealNetworks’ Nasdaq-listed shares moved 1.3% higher in Monday’s trading to end the day at $4.64.

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