Rhapsody Expands Carrier Billing to AT&T and Verizon to Compete with Spotify
A Veteran Streaming Service Adapts to Stay Competitive
Rhapsody, one of the pioneers in music streaming, has been a resilient player in an increasingly crowded market. While newer services like Spotify and Rdio have surged in popularity, Rhapsody was the first to offer unlimited on-demand music for a flat monthly fee—a model that paved the way for today’s streaming giants.
However, the service has lagged in some areas, such as tablet optimization. Its native iPad app only launched recently, months after compe*****s like Rdio, MOG, and Spotify debuted theirs. To compensate, Rhapsody is focusing on alternative growth strategies, including expanding its carrier billing partnerships.
Why Carrier Billing Matters
Convenience for Users, Higher Retention for Services
Rhapsody recently announced a billing agreement with AT&T, allowing subscribers to charge their monthly fees directly to their wireless bills. This follows a similar deal with Verizon, meaning Rhapsody now supports carrier billing for over half of U.S. mobile users.
Carrier billing simplifies payments by eliminating the need for credit cards or third-party processors. For streaming services, this reduces subscription churn and improves user retention. As Rhapsody President Jon Irwin noted, it also benefits carriers by increasing average revenue per user (ARPU) and customer loyalty.
A Growing Trend in Mobile Payments
Carrier billing is gaining traction beyond music streaming. Major players like Google Play, Facebook, and Amazon have integrated it for digital purchases. Research from mopay highlights its effectiveness:
- Mobile billing traffic quadrupled between 2008 and 2011.
- Social gaming companies saw 40% higher ARPU after enabling carrier billing.
- Users typically spend 80% of their carrier credit limits, with 55% making five or more transactions in six months.
Can Rhapsody Close the Gap with Spotify?
Competitive Advantages
While Rhapsody trails Spotify in user base (1 million vs. 5 million paid subscribers), its multi-carrier support gives it an edge. Unlike compe*****s—most of which partner with only one carrier—Rhapsody works with AT&T, Verizon, and MetroPCS. Slacker is the only other service with comparable carrier coverage.
Additionally, Rhapsody is one of the few music apps available on Xbox Live, broadening its reach beyond mobile devices.
Challenges Ahead
Despite these advantages, carrier billing alone is unlikely to dethrone Spotify. The feature remains underutilized by many consumers, and Rhapsody’s late entry into tablet streaming may hinder growth. However, as mobile payments become mainstream—especially if Apple adopts carrier billing—Rhapsody’s early investments could pay off.
The Bottom Line
Rhapsody’s expansion into AT&T and Verizon billing reflects a strategic push to enhance accessibility and reduce friction for subscribers. While it may not immediately challenge Spotify’s dominance, the move aligns with broader industry trends favoring seamless mobile payments. For Rhapsody, even incremental gains in this space could solidify its position as a resilient contender in the streaming wars.
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