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Rhapsody to offer music downloads that work on iPod

Apple just got some new competition from online music provider Rhapsody, which is now making its music library available in MP3 format through a brand-new music download store, meaning songs can be transferred to an Apple iPod.

“We’re no longer competing with the iPod,” Rhapsody Vice President Neil Smith said. “We’re embracing it.”

The move takes direct line at Apple’s immensely popular and profitable iTunes online store. The new Rhapsody site matches Apple’s 99-cent a song download charge, or $9.99 album pricing. But it allows users to listen to an entire song before purchasing, compared to Apple’s 30-second preview.

The new Rhapsody site, open only to U.S. users, offers downloads in the MP3 format, free from the DRM (Digital Rights Management) technology that limits the transfer of downloaded music between portable devices and computers. That means, song bought from the new Rhapsody store can be directly transferred to iPods.

The new Rhapsody MP3 Store, at www.rhapsody.com/mp3, boasts 5 million unprotected tunes for download.

Owned by RealNetworks and MTV, Rhapsody had been a subscription-only service. The new move follows a recently opened music store from Amazon that also included non-DRM tunes, as now does Napster. To boost attention, Rhapsody is giving away free albums to the first 100,000 people to create accounts this week.

And it has also announced new plans to supply streaming and download music through several new partners, like the VCast Music service of Verizon Wireless, which will charge $1.99 a month to have the song sent to their phone over the air, as well as a high-quality copy to their computer. Verizon’s $1.99 tracks also can be MP3s, so they can be moved not just from the computer to the cell phone, but to other portable devices as well. Verizon also will have a $15 a month all-you-can-download service for some of its phones that are DRM-encoded, meaning they can’t be transferred to iPods.

Other new Rhapsody partners include Yahoo Inc., MTV, for downloads, and the music streaming iLike application on Facebook and other social-networking sites.

Is this a big deal? For Rhapsody, probably long-term. For iPod users, maybe not so much. They’re already locked in to their music libraries. The iPod has an installed base of about 150 million iPod users, about 75% of the multimedia download market. And those iPods are already fat and loaded with music downloaded from Apple’s iTunes store. I don’t see any of them moving to Rhapsody at all.

Then there are the millions of iPhone users. Apple expects 10 million to 12 million iPhone to be sold by year’s end, with a big surge coming July 11 when the iPhone 2.0 is released. Those phones have integrated links to iTunes. Their users are surely not going to Rhapsody.

But for those who don’t use the iPod or iPhone, the Rhapsody expansion will help. Verizon customers who have the latest phones like the Dare, the Decoy, the Glyde and Juke, will have no practical need for an iPod, if they can stand those extra music fees. And rival iPod devices like Microsoft’s Zune may get some much-needed bounce.

So the Rhapsody move is perhaps the first real competition Apple and iTunes has really had. Whether Apple’s overwhelming dominance can be dimmed, though, is doubtful.

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