Real Asks, "Rent or Buy... How About Both"?

Rob Glaser, founder and CEO of Real Networks, took out more than a few full page ads to tout his new semi-free, music rental service, Rhapsody25 -- a revamped version of Real's Rhapsody online music service that allows users to download and listen to 25 songs a month free of charge. They also announced Rhapsody To Go, a service that adds portability to the download service.

Ahh. a new twist on the age-old question: Is it cheaper to rent or to buy?

If the Napster numbers can be believed, they increased their anemic subscriber base by 143,000, or 54 percent to 410,000 in one quarter by offering an "all you can eat" rental plan. Real, which says it has over 1 million subs, really had no choice but to answer the challenge.

Short-term subscriber gains are interesting, but only sustained growth will translate to profits. And, more importantly, the early adopters of this service are unquestionably core users of the products - the value proposition is too complicated to attract much new blood.



But, back to our question: What will consumers choose - rent or own?

Ownership is the American way. We own cars, homes, bicycles, toys, knick-knacks, you know, stuff! Sure people rent these things, but ownership is the ultimate goal of every red, white, and blue-blooded American. However, music downloads are still free for the most part and the legal "for-pay" download business makes up less than 2 percent of spending. Is renting a bridge from stealing to buying?

And to continue the thought experiment: Is collecting your favorite songs by your favorite artists something in your DNA or have you been trained by the old form factor and old sales model to do it?

At the end of the day, Real's announcement is probably too little, too late. There is nothing happening here that you can't already get somewhere else. However, competition being the mother of invention, the Real offering is certainly no worse than Napster's, and if they can enjoy an increase similar to Napster's, they will become a much more formidable player.

Let's give this rent or buy thing a few months for the mid-adopters to get into the game. I think there is a real (no pun intended) benefit to the rental model - of course, there is another name for it .

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