SAN FRANCISCO (Dow Jones) - In an effort to expand the reach of its flagship subscription music service Rhapsody, RealNetworks Inc. is rolling out a new Web- based version and introducing compatibility with Macs and Linux-based devices.

The move is Real's first major announcement related to its music initiatives since settling its lawsuit with Microsoft in October.

On Monday, Real will start offering a Web-based service called Rhapsody.com, which allows existing Rhapsody subscribers and new users access to streaming music via browsers like Internet Explorer, Firefox and Safari. Previously, Rhapsody subscribers had to access the service by launching software on Windows- based PCs.

"The approach has a lot of merit," said Jupitemedia analyst Joe Wilcox . "Real is taking Rhapsody beyond the [PC software] and opening it with respect to other platforms, plus it brings the first real subscription music service to Mac and Linux-based products."

Real, the Seattle-based digital entertainment company (RNWK) is the market leader for subscription music products, ahead of Napster Inc. (NAPS) and newcomer Yahoo Inc. (YHOO). As of the company's last quarterly report, Real claims 1.3 million paying subscribers; Napster reported 448,000 subscribers in November. Yahoo does not break out its music subscription numbers.

Napster chief executive Chris Gorog said in the company's most recent earnings conference call that the company is planning its own Web-based subscription music product.

The larger chunk of revenue from digital music, however, still comes from paid downloads of individual tracks. Apple Computer Inc. (AAPL), which sells individual music tracks to PC and Mac users for 99 cents via its iTunes music store, is far-and-away market leader. Before Real's announcement, Mac users could not access any subscription music services.

Wilcox says that the "sweet spot" for subscription music service consumers is an 18 to 24 year-old. Folks within this demographic, says Wilcox, are the among the same people who grew up acquiring music content for free through the former file-trading service, Napster, as well as peer-to-peer Internet services.

Dan Sheeran, Real's senior vice president consumer services, says the Linux compatibility also gives Rhapsody a new reach into devices such as mobile phones, televisions and connected digital media devices. Sheeran also mentions that Rhapsody can now tap Mac users - many of whom are music aficionados or influential within the music industry.

In the coming weeks, Rhapsody.com will be also available within Microsoft's Windows Media Player 10. Afterwards, as a part of the Microsoft settlement, the MSN Network will be using Rhapsody Web Services to integrate Rhapsody into its MSN Search, MSN Messenger and MSN Music services.

In its earnings report in October, RealNetworks' quarterly music revenue grew 39% to $25 million for the quarter and now represents more than 30% of the company's sales.

Real shares have gained more than 50% since settling the lawsuit with Microsoft in an agreement that would pay the company cash equivalents of $761 million and help promote its online music and gaming services. Real shares also got a boost after Yahoo Inc. announced later that it would double the price of its own subscription music service for portable devices.

Real will also be offering a downloadable upgrade to its existing Rhapsody software. For Rhapsody To Go subscribers, the new version will feature improved functions for transferring tracks to portable music players, including those from SanDisk Corp. (SNDK). There are now over 70 Rhapsody To Go compatible devices on the market.

(END) Dow Jones Newswires

12-05-05 0511ET Copyright (c) 2005 Dow Jones & Company, Inc. Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.