DigitalBeat

Real Networks is spinning off digital music service Rhapsody by the end of the quarter. While it will still own a significant stake in the new, independent entity, it won’t have more power than the other major interest Viacom. (They didn’t specify their exact share except to say that it was below 50 percent.)

The move is intended to lighten the load on Real Networks while simultaneously freeing up room for more investors in Rhapsody.

Even Rhapsody can raise more money, the music service’s prospects appear dim. It actually lost about 100,000 subscribers over the course of 2009. Plus Apple’s iTunes and companies like Europe’s Spotify may soon be competing against it in the U.S. with a subscriber model.

Rhapsody had the distinction of being the first service to offer streaming access to a full digital music library on-demand, but it’s proved too expensive for mass adoption. Its iPhone subscription launched last summer for $14.99 a month. It’s uncertain whether Rhapsody has plans to diversify or focus on a more niche audience.

Real Networks, on the other hand, is more stable. Off-loading Rhapsody will give it breathing room to grow the user base for RealPlayer, its digital media player. In fact, it just launched a new beta version of its RealPlayer for Mac. It will also focus more on the gaming side of its business, which could prove more lucrative than music. While the change comes shortly after CEO Rob Glaser decided to step down, the company says it has been in the works for a while.

Along with an $18 million infusion of cash from Real Networks, Rhapsody has a pledge from MTV Networks to run $33 million worth of ads on the service. Both companies will also retain seats on Rhapsody’s board.

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Companies: co:rhapsody, MTV Networks, Real Networks, Viacom