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Rhapsody passes 1 million milestone

– Digital music service Rhapsody says it has passed 1 million paying subscribers in the U.S.

That keeps it in the lead as the most popular subscription service in the country, the company said last week. The Seattle company turned 10 years old this month.

Rhapsody allows subscribers to listen to as much music as they want for a monthly fee – $10 on all devices or $5 on computers only.

Rhapsody also offers a free trial period that includes use on mobile devices.

Rhapsody’s subscriber count had hovered around 800,000 for years, but several recent developments reignited the business.

In August, its service began being bundled into a cellphone plan for Android phone users on carrier MetroPCS. The plan includes unlimited data, talk, text and music for $60 a month.

In October, it gained other subscribers through its purchase of Napster from Best Buy.

Still, it faces tough competition from new entrant Spotify, the Swedish music service that launched in the U.S. in July. Spotify says it has 2.5 million paying subscribers worldwide.

Rhapsody President Jon Irwin said the company is alone “at this scale with what we believe is a sustainable business model.” He said Spotify’s rapid growth comes at a steep price because its extended free U.S. trial period on computers brings in some advertising revenue but costs a lot in music royalty payments. Rhapsody’s trial is limited to about two weeks.

“The weight of the costs of the free music they’re giving to people to get them to convert is clearly dominating their income statement,” Irwin said. “I don’t have that expense line item that they have.”

Spotify declined to comment.