It can’t hurt for Rhapsody to offer an iPhone app. However, they are going to have to compete with rampant iTunes, Pandora, and rampant piracy. While Pandora has a paid option, their free option satisfies many of the needs mobile users have for music. If RealNetworks offers a similar “free” option, it could provide a natural up-sell path to a paid subscription. Further, having such a free version, combined with MP3 music download micro-purchases, could boost the sales of both their subscription services and their MP3 sales. That would be goodness.

As I see it, subscription services for music, while viable, is going to be a relatively small niche of the music business. Users are pursuing music across multiple devices, and the burden to carry DRM [digital rights management] along with the music creates adoption hurdles that limit the size of the total addressable market.

If you look at Rhapsody subscription growth, it is largely driven by inorganic customer acquisition. The integration of Yahoo! Music Unlimited customers and Verizon Wireless probably accounted for all the growth, possibly offsetting declines that would have otherwise occurred. I think this is a mixed signal. On the one hand, at best there has been little to no growth in the business in the prior six months. On the other, adding new modes of consumption, like Verizon Wireless mobile devices, has resulted in some growth. Though they did not split-out the latter in their last quarterly report, I suspect that most of the growth in the six month period ending on June 30th was probably the result of the Yahoo! Music Unlimited integration.

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You are now going to see productivity improve at high tech companies because people will no longer have an excuse to sit around and complain about Bush. High tech employees generally seem to lean towards President-Elect Obama so morale is likely to increase as well, increasing productivity.

More seriously, in Washington State, we’re going to see a number of issues emerging after this election.

First, since Mike Kreidler was reelected as Washington State Insurance Commissioner, we’ll probably see continuing pressure to eliminate all association healthcare plans, which is what most startups offer as a benefit to employees. If this is the case, the overall cost of healthcare to high tech employers will probably increase because health incident rates are lower for high tech employers. Plans like the one offered by the Washington Technology Industry Association allow it to pool that lower risk.

Second, given the state revenue shortfall and a marginally increased anti-business mix of legislators, the R&D tax credit will come under pressure, even though it is good for the tech community, and our region.

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…is coming soon.

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