Lots of people have weighed in on today's announcement about the JV being formed between RealNetworks and MTV, Rhapsody America, to market music subscription services. Fred Wilson prescribes 4 ways to improve the value prop: offering downloads as part of subscription packages, integrating with more connected and mobile devices, and constructing a social network. J Herskowitz has some good insights and suggestions himself like how Rhapsody should buy Napster to simplify the message and the introduction of ad-supported streaming. Rafat has his usual in-depth coverage including an analysis of the structure and financials -- the notable one to me is that MTV is contributing a $230 M 5-yr note and that the JV will be oligated to buy...$230 M worth of ads on MTVN channels over the next 5 years. I'm no accountant, but isn't that what got Enron into trouble...? But no matter, Real & MTV are lucky to be getting so much free strategic advice (he writes, tongue planted firmly in cheek)...to which I'll of course add my unsolicited opinion and advice:

-It's not a bad move for each party. MTV can do something with Urge, which was not gaining traction. Real consolidates its position in the marketplace and benefits from MTV's promotional power.

-However, I'm skeptical that MTV's promotional power will move the needle that much. Otherwise, why didn't Urge take off? The service in question is hard to advertise - you kind of have to experience it to get it - and so I suspect that subscriber acquisition costs using ads on MTVN would be high considering that you'd be educating prospects and then expecting them to sign up with a credit card to create a billing relationship. For more on this, talk to Sirius, XM and Napster or look at their financials.

-Here's the thing: subscription on-demand streaming is a utility. Fred calls it the music dial tone. As such, it should be bundled and offered by utility providers as part of a package or upsell -- cable companies, mobile carriers and broadband ISPs. These entities have billing relationships with tens of millions of subs and they could easily add this service to their tiers (as they do now with MusicChoice) or upsell. The commercial relationship announced with Verizon today is a good start but there's much more they could do here.

-If they aren't already, they should look at Fred and J's suggestions...some good ones there.

[Cross-posted from www.ragsgupta.com]