Rhapsody: Apple has gone too far

By Julianne Pepitone, staff reporter


NEW YORK (CNNMoney) -- Apple has made content publishers mad as hell, and at least one isn't going to take it anymore.

Online music provider Rhapsody said Wednesday that it will pull its streaming service from iPhones and iPads unless Apple amends the new subscription model it announced Tuesday.

Rhapsody's issue: Apple wants 30% of all sales generated through its platform. And now, publishers can no longer provide links in their apps to let customers buy content outside of the app.

"It's pretty simple math: they're asking us to sell a product for less than it costs to deliver it. Rhapsody is not going to choose to do that," says company president Jon Irwin.

"Before the official announcement we weren't entirely clear about the terms. Well, it's certainly clear now," he added.

For $10 a month, Rhapsody users can download as many songs as they like and listen to them on multiple devices. Apps are available for the Android and BlackBerry platforms in addition to Apple's.

"The whole point has been to let our customers listen to whatever, wherever," Irwin says. "But Apple has created a situation that is economically untenable."

Rhapsody already shells out money to copyright holders, music publishers and artists, Irwin says. The company can't afford to lose a third of its subscription revenue to Apple -- and its competitors can't either.

"Our peers operate under the same cost structure, so we are all in the same boat," Irwin says. "Apple needs to create a model that makes sense, that balances the costs."

Irwin is hoping to pressure Apple by banding together with "market peers" to figure out "legal and business responses" to the subscription announcement.

And if Apple isn't willing to ease up, Rhapsody will pull out of the App Store.

"There are other platforms out there," Irwin says. "That structure would definitely be manageable."

Google (GOOG, Fortune 500) is banking on that attitude. A company blog post Wednesday announced Google One Pass, a service that "lets publishers set their own prices and terms for their digital content." A Google spokeswoman told Fortune the company will take only 10% of the revenue.  To top of page

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