Is Rhapsody Next? Annual Losses Balloon to $35.5 Million

Is Rhapsody Next? Annual Losses Balloon to $35.5 Million

by Paul Resnikoff

Last year, the once-promising Rdio slipped into bankruptcy, with annual losses approaching $25 million annually.  Is Rhapsody next?

According to financial details now disclosed, the struggling Rhapsody suffered losses of $35.5 million last year, a figure that increased 66.7 percent from 2014.  The streaming music company counts 3.5 million paying subscribers, though many of those are bundled into pre-existing mobile plans.  That suggests lower revenue contributions, unlike higher-paying clientele for rivals like Apple Music and Tidal.

Rhapsody’s mounting losses are coming against bullish revenue gains.  Over the year, Rhapsody enjoyed a 16 percent revenue surge to $201.9 million, but that cost was very pricey.  Breaking $200 million is a record feat for the company, though almost every streaming music rival is displaying a similar pattern of big revenues, but even bigger cash burn.

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Pre-bundled subscribers have proven a mixed asset for streaming services, particularly Rhapsody rival Deezer.  Indeed, Deezer was forced to cancel its IPO, with serious subscriber questions among the suspected reasons.  As prospective investors did their due diligence on Deezer, serious flaws emerged around mobile-bundled subscribers, including the discovery that a large percentage of bundled users that had never once accessed Deezer or were even aware it was on their phones.

And regardless of engagement, the revenue contributions of pre-bundled subscribers are far lower than directly-subscribed users, simply because there isn’t a giant wireless company taking a cut.

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Then again, Deezer has a fresh stash of nearly $110 million in funding to burn, with billionaire Len Blavatnik a deep-pocketed supporter.  That could prove extremely difficult for Rhapsody, especially with rivals like Spotify about to secure $500 million in fresh loans, and Apple funding its streaming foray with billions in savings.

Rhapsody dates back to the early 2000s, and is recognized as a streaming music pioneer.  Fittingly, Rhapsody also includes the revitalized Napster brand, though all that history isn’t paying the bills.

The financial disclosures were posted by RealNetworks, a 43 percent owner.

Yoel Molina Law

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