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Music Service to Be Launched by Best Buy, RealNetworks

October 06, 2006|From Bloomberg News

Best Buy Co. and RealNetworks Inc. said Thursday that they would start a digital music service to compete with Apple Computer Inc.'s market-leading iTunes and Microsoft Corp.'s Zune.

The service, based on a new version of RealNetworks' Rhapsody software, will be available Oct. 15 and run on a SanDisk Corp. device.

The Sansa e200R will cost $139.99 for a 2-gigabyte device and $249.99 for 8 gigabytes, the companies said.

Best Buy, based in Richfield, Minn., and Seattle-based RealNetworks are seeking to lift sales by challenging the iTunes service. Milpitas, Calif.-based SanDisk wants to increase its 10% share of the $4-billion U.S. market for digital music players. Apple dominates the market with its iPod player and iTunes service.

"We're trying to give people a choice so that they don't have to use the iPod," said Rob Glaser, chairman and chief operating officer of RealNetworks.

The Best Buy service will mirror the existing Rhapsody prices of $14.99 a month for unlimited access to the site and $9.99 a month for a more narrow access. Individual song purchases will cost 89 cents for subscribers and 99 cents for others, RealNetworks said.

Microsoft last month unveiled its Zune player and music subscription service, the company's first foray into music-player hardware design. Microsoft is charging about $15 a month for the music service and 99 cents for permanent song downloads.

Best Buy previously has experimented with partnerships with RealNetworks and Napster Inc., another music download service, said Vivian Ma, an analyst at Toronto-based CIBC World Markets.

"The online service will help people discover new music and that increases sales on other platforms as well," said Jennifer Schaidler, vice president of music for Best Buy.

The retailer plans to add exclusive songs to the online music store and promote it through in-store kiosks and newspaper inserts.

Shares of SanDisk fell 80 cents Thursday to $55.58, Best Buy gained 25 cents to $56.85 and RealNetworks 49 cents to $11.40.

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