Digital Tunes Make a Mainstream Play

Forget decoder rings or troll dolls. Marketers are reaching today’s kids with digital goods — and top of the list is music. Real Networks’ deal with Comcast, announced this week, will offer free unlimited use of the Rhapsody streaming music service to the cable company’s broadband subscribers who use the RealOne player for desktop computers. If users subscribe to Rhapsody, which offers an all-you-can-eat streaming service for a monthly subscription fee, they also get ten free songs they can burn to CD and own permanently.

Offering free, limited-time access to Rhapsody “is a way for broadband service providers to differentiate themselves and become more valuable,” said Dan Sheeran, senior vice president of marketing, Real Networks. “They’d like to be seen as the media center, so they’re providing incentives for people to think of them as music providers, not just access providers.”

Real has similar co-promotion deals with most of the major broadband providers, Sheeran said, but none is laying on the marketing like Comcast. The ad campaign, created by Publicis, shows myriad concert posters being tacked to a wall. But the concert hall is not a place, it’s Rhapsody. The metaphor is designed to appeal to Rhapsody’s target audience, broadband users with higher than average income, mostly in their 30s and 40s.

Meanwhile, Apple, which in the past has cultivated an elite image by tying the brand to hip cultural icons like Bob Dylan and the Dalai Lama, teamed up with Pepsi North America to give away 100 million free songs from Apple’s iTunes Music Store. The promotion will kick off on February 1, 2004, with a Super Bowl ad. Pepsi will randomly seed winning codes inside bottle caps of 20-ounce and one-liter bottles of Pepsi, Diet Pepsi and Sierra Mist.

Apple also is working on a similar cross-promotion with McDonalds, which is aimed at cultivating a hipper image for the fast food giant, said Yankee Group analyst Mike Goodman, “and what’s hipper than an iPod? At same time, if you’re iTunes, that ‘billion served’ sign is awfully enticing.”

The music is a nice perk for consumers and to the brands that are paying the bills, but the added exposure could be most beneficial for the music services, which are in a land rush to grab mindshare as digital music providers. Those 100 million iTunes will only be playable with Apple’s iPod, while Real Networks will benefit from a multi-million dollar television and Internet ad campaign.

While Apple’s deals with Pepsi and McDonalds are about brand awareness, Goodman said, the Real/Comcast deal is all about distribution. “Real is, at least at the moment, the sole streaming premium subscription audio service for Comcast, a very powerful position,” he said. Rhapsody’s position will look even stronger soon, Goodman said, because Comcast plans to roll out several more unique content services over the next several weeks.

Down the line, though, Rhapsody and iTunes will compete head-to-head, according to Goodman, because Real plans to launch an individual track download service that will allow users to load songs onto portable devices, just like iTunes does. If Real offers a better deal on that than iTunes’ $.99 a song, Apple may have to sing a different tune.