Rhapsody Adds AT&T And Verizon Carrier Billing To Get A Beat On Spotify And MOG

Veteran music streaming service Rhapsody has been around for over a decade. It’s managed to survive in a turbulent (and oftentimes) crowded market, even as it has been eclipsed in popularity by services like Rdio and Spotify. In fact, Rhapsody was the first on-demand service to offer unlimited access to a substantial catalog of music for a flat monthly subscription fee, paving the way for startups like Spotify.

On the other hand, Rhapsody is far from first-mover status on the tablet front, as it finally debuted its native iPad on Monday — long after its competitors. (Rdio hit the iPad in August of last year, MOG in March and Spotify in May, for example.) However, while lagging behind on the iPad, Rhapsody is hoping to get a beat on its competitors by creating value-add via other, developing channels.

Aside from iHeartRadio, it’s the only one of its competitors to have an app on Xbox Live, and today, Rhapsody expanded its carrier billing support, announcing a joint billing agreement with AT&T. The agreement allows Rhapsody subscribers to pay for the subscription service by way of their wireless bills, and follows a similar agreement the company already has in place with Verizon, giving it carrier billing support for over half of mobile users in the U.S.

Carrier billing, for those unfamiliar, allows people to pay for services and/or content on their phones by charging it directly to their carriers. Over the last year, there’s been a steady stream of advances in carrier billing, as Google, Google Play, Facebook and Amazon have all either added this support for music (or other mobile services), or have struck up partnerships that will allow them to add that functionality down the road.

Rhapsody president Jon Irwin said that the company has been aggressively pursuing carrier billing because it brings more convenience to its subscribers and, in turn, means less friction. The value add for carriers is similar, he says, as it means higher ARPU and increased stickiness.

Screen shot 2012-12-20 at 12.25.49 AMIt also could mean more sustainable mobile businesses — and that’s not just for Rhapsody. That’s why Facebook, Google and others are on board. For music services, Irwin said, the billing agreements “reduce churn” on their end and allow it to expand its community “without giving away music for free,” which is critical to on-demand music businesses.

It’s also likely true that everyday listeners now view music as a native part of the mobile user experience, a behavioral change the company believes is responsible for the fact that 51 percent of all Rhapsody tracks are now played on mobile (and 42 percent of Rhapsody users listen exclusively on mobile). At the same time, if that’s true, releasing an iPad app 6 months or more after your competitors seems like irresponsible business policy.

Nonetheless, the real question is whether the addition of (further) carrier billing support can help Rhapsody steal market or mindshare from those who far outpace Rhapsody in the size of their user bases, like Spotify. In comparison, Spotify offers carrier billing support for Sprint, and Rdio both offers support for Verizon, while MOG has an agreement with AT&T. However, other than Slacker (which has all four mobile carriers), none of the other major music services offer support for more than one carrier. (Rhapsody also offers support for MetroPCS.)

That would seem to be a leg up for Rhapsody over its competitors and mean that it might just have a shot at chipping away at the leaders by offering earlier and/or more substantial support in carrier billing and, say, via smart-TV channels like Xbox. Of course, is carrier billing support going to be the make-or-break feature that makes you choose Rhapsody over Spotify? Probably not.

However, in September, Ingrid highlighted some research into the growth, efficacy and appeal of carrier billing services compiled by mopay, which found that, between 2008 and the end of 2011, traffic on mobile billing services increased four-fold. And, according to mopay, the increase wasn’t just in traffic, but also in the perceived value of the services, as social gaming companies implementing carrier billing saw ARPU rise by 40 percent.

Screen shot 2012-12-20 at 12.34.06 AMFurthermore, mopay holds that, when carrier billing is enabled more people use it (and will continue to use it) — to such a degree that people, on average, spend within 80 percent of their carrier credit lines, and some 55 percent of people used carrier billing more than five times over a six-month period.

That all seems like good news for Rhapsody (and for mobile content, entertainment and service providers in general), though the truth is that carrier billing is still by and large a relatively unknown (and not-so-regularly used) method of paying for content.

On the other hand, with Google Play adding carrier billing support last week and when-and-if Apple decides to join the club, it wouldn’t be surprising to see the “emerging” in “emerging market strategy” replaced with “viable.” And, honestly, for Rhapsody, which is starting from one million paying customers compared to Spotify’s five million, if these strategies can succeed in moving the needle at all, it’s a victory.