Should Apple take a chance with music subscriptions?
It's hard to figure why anyone would do any prospecting in the stony terrain of digital-music subscriptions.
This week, Best Buy acquired the remade and beleaguered version of Napster for a song. The deal is likely bad news for RealNetwork's Rhapsody, the current engine behind Best Buy's digital music store and one of the pioneers in music subscriptions. (I wrote a sidebar about the troubles RealNetworks' Rhapsody may face if Best Buy walks.)
And don't forget, the Yahoo Unlimited subscription service was shuttered earlier this year.
The all-you-can-eat music services are the ones getting chewed up. So why do rumors persist that Apple is interested in getting into music subscriptions? In March, the Financial Times reported that Apple had talked with the top record labels about the possibility of launching a service that would give iTunes users access to its entire library in exchange for paying a premium for iPods or iPhones.
Last month, an anonymous tipster sent e-mails to several Mac rumor sites claiming that Apple intended to charge $130 for "iTunes Unlimited" starting in October. My music industry sources confirmed that Apple has discussed a subscription service with the music industry but said that Apple has yet to sign any licensing deals.
Still, the question is what motivated Apple to consider subscriptions. And it isn't just Apple. CNET News reported on Thursdaythat Sony Ericsson, the mobile-phone maker, will launch a music service--that will likely include a subscription offering--as early as next week. The move is obviously designed to compete with Nokia's "Comes with Music" initiative. Nokia has begun selling phones that enable owners to access music from three of the four largest recording companies (EMI has yet to sign on) for 12 months. When that period is over, owners get to keep the music but must pay a fee to continue the service.
Ease the pain
What the Nokia and Sony Ericsson services have in common with Napster, Yahoo, and all the subscription services that have come before is that they are designed to generate a recurring income for the music industry. What Nokia, and presumably Sony Ericsson, will do differently is fold subscription charges into a customer's phone bill, where the music industry hopes consumers will find it less painful to pay.
This is just one of the many digital business models the labels are testing. What the cell phone companies must do now is prove they can overcome the obstacles that tripped up other services. One of the biggest challenges, if not the biggest, is consumers apparently don't like the idea of their music disappearing if they stop paying fees.
"I'm not certain how big the consumer (adoption) is going to be," said Mike McGuire, a digital-music analyst with Gartner. "When people think of subscriptions, they think of their magazines and newspapers. When I stop my New Yorker subscription, (the publisher) doesn't come to my house and take back old issues...even though my wife may want him to."
The industry has fared poorly, but perhaps Apple sees something no one else does. The company has a record of making money where others have failed. Digital-music players hadn't found much more than a niche market until the iPod.
Apple CEO Steve Jobs said during the "Let's Rock" press gathering earlier this month that iTunes has 65 million credit cards in its database. Apple already has these people used to buying music from iTunes. How much more of a sales pitch would be required to get them to pay a monthly fee for access to the iTunes' library?
Chris Castle, a longtime music insider and attorney, says he believes there's a market for subscription-based cell phones.
"There are people out there who have high-end home audio systems that want high fidelity and clean copies of songs," Castle said. "They don't want to rip lots of content. They aren't willing to pay a $1 a pop for it, but they'd be willing to pay something for it. I think preloaded hard drives are a business, provide they offer lots of stuff. The questions are what do the publishers want for it? Can you make a deal?"
Castle sees the potential for artist-driven or genre-driven preloaded devices.
Risks galore
There are still plenty of risks, Castle acknowledged. Here's just a few of them. Any new music service, whether selling downloads or subscriptions, must compete against iTunes, the No. 1 music retailer in the land, which just happens to be tethered to the best-selling digital music player, the iPod. In addition, mainstream consumers still aren't familiar with the music-subscription model. Napster and Rhapsody both spent a lot of money trying to educate consumers on how the music-subscription model works.
While some download stores, such as Amazon.com, have begun selling songs in the MP3 format--which means they will play on the iPod--subscription services still wrap music in digital rights management software. That means those songs won't play on the iPod.
Another big problem is that most of the subscription services that have come before have had to make themselves compatible with the plethora of iPod competitors. That meant every time a device maker upgraded its firmware, Yahoo or Napster had to make sure their service still functioned properly on the device.
Since Rhapsody and many of the other subscription services were forced to work with Windows Media, they often had little say on when upgrades or fixes to the software were made, said a source close to Rhapsody.
And when it comes to consumer adoption, there's not much to prove the cell phone music services will have an easier time acquiring customers. Research firm Strategy Analytics said Thursday a recent survey showed that although 83 percent of respondents listened to music on their phones, only 6 percent of the tracks were obtained from mobile stores.
Who knows, Apple could come in and prove the experts wrong, but at this point a better strategy appears to be to let others keep taking their whacks.
Greg Sandoval covers media and digital entertainment for CNET News. He is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at http://twitter.com/sandoCNET. 
Sorry, but your toy ain't all that popular (even the Sansa sells more units).
(Writer's note: I'm a Microsoft employee and I own both iPod and Zune - the iPod went into a drawer after the latest software Zune software update).
I'm also a PC. :)
I do thank you for say up-front that you work for 'em... there are far too many MSFT fans in here who try to hide it.
The best music is independent music, and for the most part is ignored by online music stores.
I plan on buying a Zune.
Changing the subject slightly, I am still waiting on iTunes to offered higher quality tracks that sound something like a CD played back on a decent stereo...Apple Lossless or similar...
It's about services, not gadgets. The article mentions Rhapsody, Napster, and Yahoo unlimited.
No law that says somebody writing about Apple's services (or lack thereof) needs to mention another piece of hardware that is in, what, fourth place? What about Creative and Sandisk? They have more market share than Zune, and they didn't get a mention either.
Besides, Zune is not cross-platform. Cross-platform is the way of the future. Handheld gadgets need to be cross-compatible, because Windows is not likely to regain 95% market share, no matter what the Windows apologists believe. And it's not about Apple or Linux or frikkin Amiga, it's about the market balancing itself (eventually) into a healthy equilibrium between three or four major players and some plucky minor players, with room for new challengers. That is where any consumer should want any market to be, and any manufacturer who is still pushing single-platform devices out the door should be spurned on that basis alone.
That said, I'm in the market to try something else and am two days into a Zune trial subscription (14 days free). Hats off, the software and especially selection is very well put together. No web based player, but if my experience during the trial stays this good I will order a Zune-- I can just transfer all my stuff and anything I download to the Zune and not need Windows too much. My iPod was stolen a couple months ago so I'm in the market, and iPod/iTunes just doesn't do it for me.
Subscription is not an either or choice. Zune offers both paid music which you can own, plus a subscription if you want it. There is no reason for Apple not to offer a subscription. If you Apple fanboys and apologists don't want a subscription, don't subscribe. Keep buying music one song or album at a time. But don't assume you know what everyone else wants.
Alex Alexzander
Why bother setting up a service that is obviously failing everywhere else? Rhapsody is alive only because of BestBuy (which means that since BestBuy recently bought Napster, this may not remain the case for long). Napster stays alive by being passed around like a $2 prostitute from sale to sale. It was bought for a relative pittance recently, in a tech world where even the obscure tech (stuff which does nowhere near the marketing) will often be bought for 10x as much.
Yahoo! Music is dead. MSN Music is dead. Zune Marketplace only offers it (and can) because Microsoft is pouring a ton of money into the whole project knowing there's no profit but hoping there someday may be (a'la xbox).
In short, the problem is, most of these stores are trying to turn a profit for themselves, but can't get enough volume to pull it off.
iTunes is powerful because it was conceived and built to do nothing more than three things:
1) provide music/media for sale
2) make just enough to self-sustain
3) --most importantly-- be an adjunct for the iPods, to drive iPod sales.
...and that's it.
Napster and Rhapsody are trying to survive against that, and are obviously failing. The Zune Marketplace is (finally) getting the same idea as iTMS, but they don't have the volume or potential growth to pull it off (at least not without a ton of money from MSFT to support it). To be fair, Apple spent a lot of money on iTMS at first, but they have the volume (via iPod usage) to keep it self-sustaining nowadays, with a small (but reportable) profit margin to boot.
The reason iTMS remains profitable is because they don't do anything stupid with their budget, like build and maintain pricey-but-obviously-failing business models.
I'm sure I've spent a thousand dollars on music either from iTunes, Amazon, or the record store over the past 5 years and maybe 15% of that I still listen too. Most I will probably not listen to again.
I've probably also NOT purchased a bunch of albums I would still be listening too because I was not sure if I wanted to take the chance with my money.
Nobody is "falling for anything". Some people such as myself get their money's worth because they're not wasting money buying stuff they don't really like, and they're being exposed to WAY more music they do like. I bet if all the albums and especially the songs in the "Genius" recommendations list in iTunes had a column of "Play/Download" buttons next them many many users would be going to the subscription model in a heartbeat.
you can't seem to control your purchasing habits ("thousands of dollars"?), but you instead want to toss money at a subscription service where you can only listen to it for as long as you keep paying them for the privilege to, and at a 5-year cost of $600-$1200 (depending on service)?
Not seeing much sense here, sir.
Do what you want with your money, but throwing money at CD's/MP3's regardless of whether I'll get my money's worth does not make sense to me anymore with subscription music on the scene. I've listened to 4 albums today for the first time. 3 were garbage, 1 I like a lot and will listen to more. I probably would not have heard any of them if I had did not have subscription music, or 1/4 chance I would have wasted $10 on iTunes. Today has cost me 50 cents, and it isn't over yet.
As far as your saying "as long as you keep paying them"... I for one like subscription music so why would I stop paying for it? I might change service but always will have access to music I like to listen to. I buy vinyl of the stuff I really love, always have even when I was buying CD's/iTunes so I really see how spending my money and being totally happy with that makes no sense. Do what you want, but saying a business model is a ridiculous concept and a ripoff is your opinion and I'm entitled to mine.
There is almost no chance Apple would stop letting people buy music outright. If they do a subscription it would be as a adjunct to the traditional model. Therefore, you'd be able to buy the music you want to keep forever and use the subscription to explore new music cheaply. $15 bucks a month lets you download lots and lots of albums. You can then listen to those multiple times and decide which ones are worth investing the money in to purchase. Its really a winning solution all around. You don't 'waste' money unless you are prescient enough to know that you'll like every track you download.
* If I spend $180 a year on a Zune Pass, I get all the music I want, and just music I like
* If I buy $180 worth the music in a year, I get maybe 200 songs, many of which I'll listen to once and forget about
I'd rather continue to pay a subscription, where at the end of 20 years I have an enormous collection of music I really like, and I still don't have anything I don't like. Whereas Penguisto in 20 years maybe still listens to 1/10th of the stuff he purchased in his infinite wisdom.
But, that means you're paying roughly the same amounts... which in turn means that when you stop subscribing, or the subscription store dies (e.g. MSN Music, Yahoo Music), you're still boned. Also - you may love it enough to pay on it forever, but given the economy, what if you had no choice but to stop subscribing?
Maybe it's a difference in how you and I test out music. I prefer to listen to it beforehand for free - at the local music store, on the radio, with friends, etc... there's lots of places I can do this without an RIAA lawyer raising so much as an eyebrow. I can give it a test-listen in the iTunes Music store, even after all of the other avenues, just to insure that the recording quality is what I'm wanting/getting.
@rapier1: Err, why pay $15/mo. and then pay $1/song on top of that? If I want to preview music, there are far too many means and places where I can do that for free. *shrug*.
/P
On top of that, these are just plain tough economic times. People are canceling monthly fees (TV, newspapers, cell phones, TIVO, etc.), not signing up for new ones.
For most of us, listening to music is an act of seeking comfort in the familiar-- which means we must eventually settle down on a set rotation of music. (If we don't, then nothing gets to be familiar.) Studies have even shown that people seek out and listen to new music up to about their 20s after which their musical habits are basically set.
What all this means is basically what you said. Who wants to pay over and over for the right to listen to the same set of music? Subscriptions just don't make sense for the typical consumer of music.
- by iBuzz September 19, 2008 1:21 PM PDT
- Access to a huge library of millions of tracks is great! But why must you restrict access to it via a subscription? Why can't I pay per-access or pay for minutes? So, for example, charge me $5 to listen for 500 minutes of total time. I don't want to sign-up/commit to a recurring charge. I want to pay as I go.
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- by DrtyDogg September 22, 2008 3:50 AM PDT
- $15 buys you 1 month want it next month, pay for it. If not then don't. I don't see the comparison of subscription music to purchasing music. They are completely different ideas, a more suitable comparison is comparing subscription music with XM radio. You get to listen to all the stations you want for a monthly fee. Now with the Zunes ability to stream from any wifi access point it is even more similar.
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