We do — that was that state of digital media when paidContent launched in 2002. Other weird things were happening back then too: People still got much of their news from television and newspapers, and they learned about major events after they had already happened.

There have been some huge shifts since 2002: Tablets and smartphones are now ubiquitous, lots of people read on their digital devices, and just about everyone is part of a social network or three. This summer is the tenth anniversary of our launch. In an effort to gain some perspective on the past decade in digital media, I’ve been reading back through paidContent’s archives — a collection of over 80,000 posts.

Since I was only a freshman in college when paidContent came to life, I often didn’t know, as I read through the stories from the early days, how things had begun or how they turned out. As I watched them unfold, I wanted to grab our readers’ arms and give them advice (“Don’t buy that Zune!” “Invest in Facebook!” “Go for the good Twitter handle now!”). But I also realized how difficult it is to predict success.

Some takeaways from my trip through the archives:  Some companies — AOL and Yahoo come to mind — have been consistently bad at predicting what consumers want. And a couple of companies, namely Apple and Amazon, have been very good at it. Also, being a native digital company helps, but it’s no guarantee of success (what up, MySpace?). And after all these years, it’s still not clear what content customers will pay for, or how much they’ll pay.

Streaming and Moviebeaming

What do analysts, CEOs and bloggers have in common? None of us can predict the future. Roger Ebert joked in 2002 that “on-demand streaming movies on the Web, like HDTV, are five years in the future — and will be for at least another 10 years.”

If Disney’s Moviebeam had been the only game in town, Ebert probably would have been right. When it launched in three cities in 2003, customers paid $6.99 a month to use a device that could hold 100 movies and plugged into the back of a TV set. They also had to pay for each movie they watched– billing was done via the phone line. The company went through various unsuccessful iterations before India’s Valuable Group bought it in 2008. It was never heard from again.

Netflix almost went down the same road. It had a plan to release a Moviebeam-like “proprietary set-top box with an Internet connection that could download movies overnight.” But instead, it decided to forge ahead with streaming — starting with a complicated “quota hours” system in 2007 and moving to unlimited streaming in 2008. By 2010, the majority of subscribers were streaming something, and the company began offering streaming-only subscriptions, though CEO Reed Hastings said that same year that the company would keep shipping DVDs until 2030. (We’ll see about that.)

ABC was the first network to sell episodes of its shows on iTunes, back in 2006, and to stream shows free with ads on ABC.com — and later on AOL. But by the time premium subscription service Hulu Plus launched in 2010, the platforms getting the attention were devices with built-in access, like Internet-enabled TVs, Blu-ray players, and tablets.

Return of the living dead

Speaking of AOL: It’s something of a miracle that the company still exists. In 2000, when it merged with Time Warner, it was valued at $350 billion, and the next year, more than 24 million people in the U.S. were paying for its Internet access service. By the end of last year, that number had dwindled to just 3.3 million subscribers. Here’s a quick recap of some of AOL’s miscues over the years:

• AOL Voicemail ($5.95 per month)
• A teen service called Red (featuring “a talking head—using the image of an actual employee—that uses software to answer users’ questions”)
• A digital music partnership with Burger King
• A reality show called “Gold Rush”
• Social networking site AIM Pages
• Going free
• The hyperlocal Patch blogs

Though AOL was once a high flier, no other company ever liked it quite enough to buy it. Google bought a five-percent, $1 billion stake in AOL in 2005, leading analysts to wonder if Microsoft missed out. That resulted in a $726 million writedown in 2009. Time Warner bought back Google’s stake and finally spun off “the albatross” in December 2009.  AOL is still promising a bounceback. “The executive team expects a profitable content business by next year,” CEO Tim Armstrong said in May 2011.

Yahoo hasn’t fared much better. The company launched Yahoo Platinum in 2003; for $9.95 a month, subscribers got access to audio and videos.  The program was dead by October of that same year. It later tried a Twitter-wannabe microblogging service (“Meme…where you share everything that you find that’s interesting,”). Perhaps the smartest move Yahoo ever made was not buying AOL.

Where did these companies go wrong? In 2010, former Time Warner CEO Gerald Levin pondered that question in an interview with the New York Times . The AOL-Time Warner deal was “undone by the Internet itself,” he said. “I think it’s something that no one could have foreseen, and to this day, whether Apple is going to dominate entertainment or whether Amazon is going to dominate publishing, all the old business plans are out the window. How do you get paid for content?”

Know what’s cool? A billion dollars

In 2006, an RBC Capital analyst estimated that a certain social networking company would be worth $15 billion in a few years, based on “raw, unprecedented user/usage growth.”

Six years later, Facebook went public with a valuation of $104 billion. Too bad the analyst wasn’t talking about Facebook but about MySpace. The social networking company that Rupert Murdoch acquired for $580 million in 2005 sold for just $35 million in 2011.

Why did Facebook soar while MySpace — and other social networking services like Friendster — sank? It allowed people to build real connections using their actual personal information, and rolled out a product that was ready to scale and had good technology. Other companies realized sharing was important too — in 2005, Yahoo SVP Jeff Weiner called sharing “the next chapter of the World Wide Web” — but Facebook was able to implement it in a way that kept users coming back. The site surpassed Yahoo and AOL for “stickiness” in 2009, when Nielsen found users spending an average of four hours and thirty-nine minutes a month on Facebook.

Social has already disrupted some industries — witness the rise of Twitter and the way it has changed the way news is reported, with stories like Osama Bin Laden’s assassination breaking there first. In a sign of the importance of these emerging platforms, newspapers like the Wall Street Journal and New York Times are launching “Everywhere” initiatives to deliver news to readers where they are already hanging out.

Fast food and music don’t mix

Hard to believe it now, but there was real skepticism that iTunes’ 99-cent songs would be able to compete with peer-to-peer file-sharing services. “According to academics who’ve studied the economics of digital music distribution,” we wrote in 2003, the year iTunes launched, “the cost still seems too high to attract users of peer-to-peer file trading services.” The piece cited an economist who believed “the appropriate price of a downloaded song is 18 cents.” In fact, Real Networks dropped its song prices to $0.49 in an attempt to compete against Apple.

In the end, consumers choose selection and convenience over P2P networks. We called iTunes “a kickstart for the micropayments industry.” Was it? While Steve Jobs said in 2004 that Apple wouldn’t hit its one-year, 100 million songs downloaded goal, global digital music sales crossed $1.1 billion in 2006. In April 2008, Apple surpassed Walmart  as the largest music seller in the United States.

The company that arguably started the digital music revolution — Napster — didn’t survive. Once it no longer offered “free,” it was done, though it tried to reincarnate itself: launching a mobile music service, “Napster To Go,” with AT&T in 2004 (the one smartphone that supported it could hold up to 6 songs), partnering with Circuit City on a digital music store, getting itself acquired by Best Buy in 2008 ,and then being bought back by Rhapsody in 2011. Unfortunately, Rhapsody was already losing out to newer (and free) streaming services like Pandora and Spotify.

The partnerships with Circuit City and Best Buy, though, were probably the kiss of death. One of the big trends of the past 10 years has been brick-and-mortar retail stores’ consistent failure to compete effectively against digital-native companies. Best Buy wasn’t the only retailer to try to crack the digital-content business — and fail: Target and Sears both took a shot. And McDonald’s sold digital content over its WiFi network and even tried DVD rentals in its restaurants.

Do you like the feel of paper?

Just as digital music didn’t really take off until Apple introduced the iPod, the ebook revolution didn’t take place until the arrival of the Kindle. In paidContent’s early years, ebooks were written off as a failure in part because publishers couldn’t figure out what to do with DRM. (In 2003, “temporary electronic ink” that would disappear after a few months was floated as a possible solution.) Barnes & Noble decided to stop selling ebooks in 2003, and Yahoo stopped selling them in 2004.

Meanwhile, Amazon and Google were pushing forward. Google launched Google Print – now called Google Book Search, and still besieged by lawsuits seven years later. Amazon tested two now-defunct programs: Amazon Pages, which allowed customers to buy access to digital copies of select pages from books, and Amazon Upgrade, which bundled print books with online access to the complete work.

Customers weren’t biting. Then Amazon came out with the Kindle in 2007 for $399. Less than two years later, Amazon was selling more Kindle books than print books, and ebooks now make up over 20 percent of some big-six publishers’ sales. Barnes & Noble has had some success with its Nook e-reader and digital bookstore, but bankrupt Borders shuttered all its stores in 2011. Meanwhile, the Department of Justice suit against Apple and five big publishers for allegedly colluding to set e-book prices drags on.

Good thing Steve Jobs looked beyond ringtones

A Forbes survey back in 2002 found that “business professionals” would be willing to pay for “news content to be delivered to their cellular devices,” and some media companies tried early mobile experiments. Verizon offered a cell phone version of the Yellow Pages — which, at $19.95 per year, gained 15,000 subscribers in three months. But starting in 2004, everyone decided the future was in ringtones. A $4 billion global business by the end of the year, one company projected.

So, so many ringtones. You could buy them from Rolling Stone or from an ATM-like device called E2Go. A fall 2004 marketing campaign let you mix your own ringtones on Levi’s website. Billboard launched a top ringtones chart.

Could ringtones “prove to be a passing fad”? we wondered late in 2004. Luckily, yes — a new technology came along to shake up the mobile market. No, it wasn’t the $500 ESPN phone, but the iPhone, which came out in 2007. And by opening its platform up to third-party app developers, Apple got users ready for its next ecosystem-changing device, the iPad, in 2010.

Monetizing mobile

Advertising has always been a fuzzy business — how exactly do you measure engagement and success? Well, that’s still the big debate about advertising in the digital era.  ”If here’s anything that’s really holding back ad spending on the web, it’s the lack of good measurements,” Tim Armstrong, then Google’s VP of national sales, said in 2007.

Mobile advertising has also faced obstacles. In 2006, mobile carriers began allowing advertising despite fears of annoying customers. Customers were indeed annoyed – 79 percent of them found mobile advertising annoying, according to a 2007 Forrester study — but they could “see the potential benefits of mobile advertising and marketing to themselves,” particularly if they could get a useful special offer or coupon.

Further complicating matters for advertisers: The smartphone market is fragmented among different brands — marketers don’t want to spend the money to create different ads for Android and iOS — and there are two mobile ad universes: mobile browser and apps.

Nevertheless, mobile advertising has gained ground, crossing  $1 billion in the U.S. for the first time in 2011, according to the Interactive Advertising Bureau, totaling $1.6 billion for the year.

The next opportunity is social media advertising. And once again, it will be a challenge to figure out some standardized metrics. What’s a retweet worth, anyways?

Back to where we all began

Though micropayments worked well for music when Apple launched iTunes, the path to payments for written content has been rockier. In 2004, we wrote that “micropayments today are still characterized by a large number of competing transaction types” – including direct-to-bill, merchant aggregation, prepaid accounts and direct transfer – and “each of these face the current incumbent in digital content distribution: the flat-fee subscription model.”

Eight years later, it appears that the subscription model has won out. The iPad opened the door for magazine and newspaper publishers to create new revenue selling content on that platform, but the results have been mixed. When Rupert Murdoch’s “The Daily” iPad newspaper launched in early 2011, the company called it “the model for how stories are told and consumed.” We wrote, “The bet here is that while consumers are less and less likely to reach into their pocket for a few quarters to buy a newspaper, they might not care about the 14 cents on their credit card for a copy of an e-newspaper.” A year and a half later, The Daily has over 100,000 paying subscribers — but it’s living on borrowed time and may not get through the five years its publisher has said it needs to break even.

Writing for the web, of course, has been around for awhile. At the beginning of the decade, blogging was called “nanopublishing,” and the question was how blogs could support themselves doing it. All sorts of models have arisen. For example, Gawker tried a licensing deal with Yahoo, but that relationship ended a year later. The deal “garnered way more attention than we expected, but less traffic,” Gawker CEO Nick Denton said in 2006.

Some bloggers have stayed independent and make a living from advertising (or from their day job); others write their blogs under a newspaper, website or larger magazine’s umbrella — see the Dish’s Andrew Sullivan, FiveThirtyEight’s Nate Silver, WaPo’s Ezra Klein. Or, they go to work for the Huffington Post!

Magazine companies have grappled with whether to bundle digital editions with print subscriptions or charge for them separately. Time Inc. — which first put digital editions of its magazines behind AOL’s paywall in 2003 — started out charging separately, but today Time Inc. and Condé Nast print subscribers get the digital edition free. Hearst, meanwhile, is charging separately, and it said its digital business in the U.S. became “solidly profitable” for the first time in 2011.

Could there ever be a Netflix for magazines? Time tried it for print versions with its 2008 Maghound service. It failed, due to a lack of marketing and reader interest. Magazine publishers are trying again with joint venture Next Issue Media.

Many newspaper publishers, most notably the New York Times, tried paywalls at the start of the decade and then abandoned them – only to return to the model in the past couple years.  In its most recent earnings report, the NYT said it has 454,000 digital subscribers. Is that enough to sustain the newspaper in its 21st-century transition?  Probably the best answer to that came from  Vivian Schiller. But it was in response not to the NYT’s recent digital subscriber numbers, but to the NYT’s decision in 2004 to close the paper’s first paywall, known as TimesSelect. Schiller, then the SVP and general manager of NYTimes.com, was asked whether TimesSelect had worked.  “It did work,” she said. “It’s just a matter of as compared to what.”

Birthday cake photo courtesy of Shutterstock user [Robyn Mackenzie].

TV photo courtesy of Shutterstock user [Somchai Buddha].

Zombie hand photo courtesy of Shutterstock user [lineartestpilot].

Piggybank photo courtesy of Shutterstock user [cardiae]

Fast food photo courtesy of Shutterstock user [Sergio Martinez].

Book photo courtesy of Shutterstock user [TrotzOlga].

Ringtones and apps photo courtesy of Shutterstock user [violetkaipa].

Cash register photo courtesy of Shutterstock user [titelio].

Magazines photo courtesy of Shutterstock user [bernashafo].

The Incumbent

On the eve of the big Midem music conference in Cannes, Rhapsody today says it is moving in to Europe by acquiring Napster International, the division service the UK and Germany. That is the latest piece of the jigsaw after the company in October announced Napster’s U.S. acquisition from Best Buy.

The company pioneered the unlimited music space in 2001 but, despite turning around customer decline following its spin-out from RealNetworks (NSDQ: RNWK) and Viacom (NYSE: VIA), its subscriber base has been overtaken four-year-old Spotify.

Last disclosed user counts were 750,000 versus 2.5 million. Napster brings an estimated 350,000 extra customers to Rhapsody. The combined figure of over a million, which Rhapsody itself disclosed on Thursday, is still shy of Spotify, but moving in to the big new territory of Europe – just as, vice versa, Spotify has embraced Rhapsody’s U.S. patch – could grow Rhapsody’s customer base further.

In Europe for the first time, Rhapsody will migrate Napster subscribers to its own platform in March, introducing its own web player, but the Napster brand and employees will remain in place in the UK and Germany.

What’s Happening

Rdio, Mog, Spotify, Rhapsody, We7 and all manner of others are jostling for early dominance in a promising new paid content sector that has been ignited by mobile and by music labels seeking new growth after the slowdown of track sales.

Global music subscribers grew by 65 percent to 13.4 million in 2011, according to labels’ IFPI umbrella. But that is peanuts compared to what the sector could become as consumers switch from ownership to access. The opportunity is to create an iTunes beater.

Labels’ support has opened a window of opportunity for new entrants to race to own this new area. Here are the latest…

The Massive Failure: News Corp

Beyond Oblivion, a fatally-named, New York-based unlimited music service invested in by News Corp and Allen & Co’s Stanley Shuman, has filed for bankruptcy, owing between $100 million and $500 million despite having not yet launched.

The company owes Sony (NYSE: SNE) Music Entertainment and Warner Music Group (NYSE: WMG) $50 million each, Reuters reports. News Corp.’s digital chief Jon Miller is a board director.

Reasons for the collapse are not clear. News Corp had invested just $9.2 million for a 23 percent stake in April 2010.

The Fringe Player: Aspiro

Norway-based Aspiro, which provides its music service WiMP through ISP and white label partners mostly in Spotify’s backyard of Scandinavia, on Thursday announced its latest ISP partner, the Netherlands’ Ziggo. The deal guarantees Aspiro at least nine million Swedish krona ($1.3 million) over two years.

Aspiro is now active in Sweden, Norway, Denmark, Portugal and the Netherlands but wants to expand in to new territories and is in the process of rolling out to Ireland and Germany.

The Radio Player: Pure Music

DAB and internet radio maker Pure on Thursday unveiled its own unlimited-access cloud music service, Pure Music, for £4.99 a month in the UK. Naturally, the service is available on some of Pure’s own radios, but also on web and on smartphones, where music subscription services are getting the majority of their paid custom.

Pure has the device capability to make an impact in music on radio, but customers may already be more excited about unlimited music on new-wave “radio” devices like Sonos and through AirPlay than conventional “radio”, even internet radio, per se.

In an interview with paidContent, Glaser didn’t specify what kinds of products the board is hoping to see from Nielsen, saying that it will be up to Nielsen once he fully starts. “We’ve decided not to comment on the strategy,” Glaser said, adding that he had been more involved in the company as part of managing the search to replace Lunsford. But now, he’ll step back a bit. “I’m taking the Goldilocks approach,” Glaser said, adding that he’s not completely stepping away from overseeing the company, but not being involved on a regular basis either. “In other words, ‘just right.’”

Lunsford has been with RealNetworks since 2008 and will continue to on at the company “in a senior capacity, reporting to Nielsen,” RealNetworks said.

While RealNetworks is a pioneer in online video and audio, with both a consumer side and an enterprise side, but a lot has changed in the streaming media space since the company opened its doors in 1995. For one thing, the increase in the amount of internet radio providers, including Pandora (NYSE: P), Last.fm and Spotify. While RealNetworks jettisoned subscription music service Rhapsody last year, the company has lately been looking to connect with other streaming services instead of simply offering direct competition.

For example, it’s looking to get some mileage from Apple’s delayed iTunes Match cloud service, which allows users to store their entire music library in the cloud for listening on their various devices. Whenever Apple (NSDQ: AAPL) is ready to launch the service, RealNetworks has released a software called “Rinse,” which promises “to clean up their music collections” before using iTunes Match. The service fixes misspellings of song titles and artist names, identifies songs without titles and remove duplicates.

Nielsen, 41, most recently served as VP of the Digital Imaging Group at Adobe Systems (NSDQ: ADBE), which includes Photoshop, Elements and Lightroom, in addition to mobile, web and tablet solutions. Prior to his seven years at Adobe, Nielsen spent five years at Microsoft (NSDQ: MSFT) in the media segment. Release

From there, the newly-single company could seek new investment. “There’s a lot of people looking for value plays in what is becoming an extremely competitive sector,” Benzing says.

Could Rhapsody follow music peer Pandora (NYSE: P) on to the Nasdaq? “There’s nothing precluding us from doing that,” Benzing says. “We dont have any near-term plans to do that. But private markets are a viable option for any company. We could look at that to capitalise the business or to help go international.”

Rhapsody has added 100,000 gross customers since the spinout and Benzing, echoing Steve Jobs in hailing the “post-PC era”, cites its mobile app, which supports Rhapsody’s $9.99-a-month service, as a major driver: “Thirty to 40 percent of our entire base is using our mobile apps now. The iPod was a closed device dominated by DRM, a tethered experience. But, with smartphones, you have your music accessible for 16 out of 24 hours – we’ve been able to increase total subscriber numbers.”

To keep that going, Benzing will need to carefully negotiate Apple’s new terms around iOS in-app subscriptions. With just one day to go, Rhapsody is not yet compliant, because its app still lets new users take out subscriptions – a feature Benzing suggests will be removed in order to protect revenue. “We are intending to comply to avoid being kicked off.

“We felt the terms were untenable for us. The realities of our business is, the margins are tight. Apple’s hearing feedback and have certainly made some tweaks to those regulations to bring pre-existing relationships to the table. They are certainly an improvement but it still doesn’t go as far as we like. It’s great that people who have a relationship with Rhapsody can continue to have access on iOS devices moving forward, we have a lot of users there.”

With 750,000 paying subscribers, Rhapsody is the big daddy and 10-year veteran of a U.S. on-demand music space that is getting crowded with upstart new services like Mog, Rdio and, soon, European darling Spotify.

“There will be winners or losers,” Benzing says. “There’s a long list of 10 servies in the U.S. offering s similar service to Rhapsody. We’re in a feature war – a significant advantage for us in the U.S. is, we have awareness and a brand and we have history. Remember Spiralfrog, remember Imeem?. Sustainability is a big issue not just for consumers but also for distribution partners.

“Even though there are competitors, it’s not like people are switching. The number one reason people might leave is not lack of music, it’s lack of use, if they don’t use it as much as expected.” So Rhapsody will be adding social features in the next few months to drive engagement, discovery and to incentivise customers with free time for referring friends.”

In the spinout, Rhapsody got $18 million in cash from RealNetworks and $33 million in marketing credits from Viacom – something which could be called upon again, if needed, to drive awareness against looming competition. “After the legalities and a lot of technical baggage, we’ve completed that transition – we no longer have any inter-dependencies between companies,” Benzing says, adding that management “take pride” in having added customers and brought the company to the brink of profitability.

In a music industry notoriously dependent on fractured territorial rights systems, Rhapsody has still not gone international. “It’s definitely a desire,” Benzing says. “It’s not in our 2011 planning horizon. But we would welcome that as an opportunity for growth. What’s happening in emerging markets is interesting – labels are interested in opportunities to grow, but labels in established markets are protective of established revenue streams.

“We are examining organic, partnership strategies to go international. We get a lot of inbound interest that would de-risk us going international. If we can get to profitability in the most competitive market, the U.S., that gives us a great platform.”

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»  RealNetworks CEO Kimball Resigns Suddenly

RealNetworks says Kimball is leaving the company because the restructuring, which involved several rounds of layoffs and the launch of the company’s first new product in years, is largely complete. In a statement, Kimball says, “I took on this role to lead a restructuring and transformation of RealNetworks into a more lean, efficient and effective business and we have completed that phase of RealNetworks’ transformation.”

However, Kimball had given no signs that his role at the company would end once the restructuring was finished. Indeed, earlier this year, he conducted a number of press interviews, including with us, in order to lay out his long-term vision for the company, which largely revolved on returning RealNetworks to growth by focusing on two of its long-standing businesses-its software-as-a-service business for carriers and RealPlayer–and also pushing the new product, Unifi, which lets consumers access their personal media from any of their personal devices.

The company has appointed EVP Mike Lunsford as interim CEO, while it conducts a search for a permanent replacement. One person who won’t be taking the job: Glaser, who tells GeekWire he isn’t interested.

– Until today, Spotify was claiming 750,000 paying subscribers amongst 10 million total users – a 7.5 percent premium conversion.

– Today, though, it declared a million paying subscribers and said this instead was 15 percent of its active users within the last 30 days – a group it didn’t initially put a number on this morning but which, talking with paidContent:UK later, it explained is nearly seven million.

Picking the active user count on which to judge its paying base, rather than the total, inflates the apparent success Spotify is having converting free, advertising-exposed listeners in to customers – something U.S. labels prefer.

Spotify’s new seven-figure number, built up in its seven European and Scandinavian countries, is likely aimed at portraying itself as more popular than North America-only Rhapsody, as it moves closer to a launch in Rhapsody’s back yard…

Just like Spotify, Rhapsody’s last publicly-disclosed user count was 750,000 – a number it’s sticking to for now. Asked by paidContent:UK today, the company didn’t disclose an updated figure and tried to gloss the previous one.

“750,000 subs is our latest figure, which makes us the largest player in the U.S. by a long way,” a spokesperson said. “It’s growing every day and we expect to release new figures shortly. Based on figures we have seen, we comprise more than half of the market and consumers love our service and our apps.”

Spotify’s one-upmanship gives it a sort of upper hand, as it looks to win its final major-label deals before U.S. launch – it suggests Spotify can sign more subscribers than Rhapsody despite (or, probably because of its majority-free model). But a pissing contest doesn’t necessarily help win contracts. And Rhapsody has built its paid-up base without the lure of a free taster like Spotify’s.

Meanwhile, Spotify’s declaration also allows us to make an interesting further observation about the service’s stickiness, beyond simply the freemium conversion rate. We estimate the total of active and inactive users has now risen to about 13 million. In which case…

– [Glass half-full]: About half of people who have ever tried Spotify (the active base as a proportion of the total base) liked it enough to continue doing so.

– [Glass half-empty]: About half of those who have ever tried Spotify haven’t done so in the last 30 days. Where have they gone?

What offerings would your ideal music streaming service have? Are any of the leading platforms — like Spotify, for example — up to par with your needs? Join the discussion on Facebook

For March and April, Rhapsody has upped its usual 14-day free trial to 60 days.

The move is fronted by a wide-ranging ad campaign across MTV channels – likely a benefit of the $33 million in advertising exposure MTV gifted Rhapsody when it span off from Viacom (NYSE: VIA) and RealNetworks (NSDQ: RNWK) (release).

But the real story may be the rationale for the extension. Rhapsody says 60 days is “unprecedented”. Business Insider suggests the promo is to win new customers ahead of Spotify’s seemingly imminent U.S. launch.

That’s highly speculative but a fine point. In the unlimited-access music segment, Spotify is not the only competitor to Rhapsody, which nevertheless predated Spotify, Mog.com, Rdio and the growing wave of such services. A customer acquisition drive at MTV’s expense could be just the thing to lock more users in to Rhapsody, not Spotify, ahead of the latter’s launch, which we would expect this summer or fall.

The pair have quite different approaches to how “free” can convert people in to paying customers…

– Spotify Open serves desktop app listeners with unlimited songs and advertising for no cost, though removing ads and playing off the desktop require subs.

– Rhapsody, like Mog though unlike Rdio, offers no free access beyond its free trial, and even that commands a credit card number (how many people become trialists only to cancel later?).

Which approach works best? Neither. Both Rhapsody and Spotify had just over 750,000 paid subscribers each, at their last disclosed counts. Let battle commence…

SocialEyes users link their accounts with their Facebook profiles so they can see and contact friends who also have accounts. Users can video chat simultaneously with several contacts — and also send video messages to friends who are not logged in. They can also find strangers who have similar interests.

In an interview, Williams said the startup hopes to capitalize on the ubiquity of video cameras on new computers, as well as the changing way people collaborate with one another. I asked Williams what happens when Facebook itself launches a video chat system — as has long been rumored. He responded that he envisions that a product from Facebook will focus on one-to-one communication and therefore be more of a competitor to Google (NSDQ: GOOG) Talk than SocialEyes.

The startup has raised $5.1 million, including $4.5 million in a round led by Ignition Partners. Glaser, who resigned as RealNetworks’ CEO in January 2010, subsequently joined VC firm Accel Partners as a venture partner, but Williams said that while SocialEyes could have raised the cash from Accel, it chose to do the deal with Ignition because it was able to do the deal “faster.”

Under Kimball, RealNetworks has focused its resources on two of its long-standing businesses-its software-as-a-service business for carriers and RealPlayer. It’s also in the process of launching its first new product in years, Unifi, a service that lets consumers access their personal media-including photos and music-from any of their personal devices. When we checked in with Kimball at the end of December, he told us that the company’s restructuring had taken longer than expected to complete but was nearly done.

In its announcement of the latest layoffs, RealNetworks says it has now “completed the restructuring required to create a more efficient and focused company.”

Today’s cuts impacted employees in engineering, sales, marketing and administration. The company says it expects to take a restructuring charge of $3 million related to the layoffs.