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MTV merges Urge with RealNetworks' Rhapsody

Music giant to invest $230m in Rhapsody TV ads

MTV Networks will invest $230m in advertising on its cable television networks as part of its investment in the Rhapsody America venture it launched on Tuesday with RealNetworks.

RealNetworks executives, including Chairman and CEO Rob Glaser, outlined financial details of the company's joint venture with MTV to merge MTV's Urge online music service with RealNetworks' Rhapsody online music service on a conference call on Tuesday. MTV will begin its advertising and marketing campaign for Rhapsody America during its popular annual MTV Music Awards show, which is scheduled to air on September 9.

Glaser said the goal of the marketing and advertising push behind the new venture is to raise awareness of the Rhapsody brand so it "becomes the Kleenex of this kind of experience", comparing it with the US company brand name that has become synonymous with facial tissues.

The deal to create Rhapsody America, a new venture aimed squarely at competing with Apple's enormously popular iTunes online music service, was announced earlier in the day. The new venture, which will offer both music on a subscription basis as well as sales of music through downloads of individual songs, also includes an exclusive partnership with Verizon Wireless's V Cast music service.

RealNetworks will have a 51 percent ownership of Rhapsody America, while MTV Networks, which is owned by Viacom, will own 49 percent. The Rhapsody brand and related properties are being exclusively licensed to the new venture, and the network and back-end infrastructure and operations for the service will continue to run as part of RealNetworks, Glaser said.

RealNetworks will continue to report the revenue from its Rhapsody music service in its quarterly financial earnings statements, said Michael Eggers, RealNetworks CFO. The company expects that in financial statements going forward, the Rhapsody America joint venture will show up on financial reports as additional revenue and increased operating expenses, including increased marketing and advertising expenses that will be offset by MTV's 49 percent share in the venture.

The venture also will affect revenue for the remainder of the year, and RealNetworks has adjusted its third and fourth quarter revenue expectations accordingly, Eggers said.

The company expects incremental revenue of $500,000 for the third quarter and $2m to $3m for the fourth quarter of 2007 as a result of Rhapsody America. RealNetworks now expects third quarter revenue to be in the range of $141.5m to $145.5m and revenue for the full year to be in the range of $563m to $576m, he said.


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