February 3, 2005 4:09 AM PST

Napster's 'rental' music service takes on iTunes

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Napster will open its long-promised portable music subscription service Thursday, which will make it the first company to put muscle behind a new music "rental" model aimed at undermining Apple Computer's digital music dominance.

The company said its Napster to Go service would go live Thursday, charging people $14.95 monthly for the ability to download an unlimited number of songs and play them on compatible MP3 players. The songs would be playable only for as long as the subscriber keeps paying for the service.

The company will kick off a $30 million marketing campaign for the service with a Super Bowl advertisement running this Sunday, aimed at contrasting the new offer with Apple's iTunes store, a representative said.

Napster's new service, which has been operating in a limited "preview" format for several months, is the first major iTunes rival to take advantage of copy-protection software from Microsoft that expands the flexibility of music subscription services.

That software allows MP3 players to monitor a song and block access if a subscription has run out. Previously, most online music subscription services limited subscribers to listening to music on the PC.

Other services have plans to launch the portable subscription plans as well. Cdigix, a company that serves college campuses, said Wednesday that it would launch a portable subscription plan later this month powered by wholesaler MusicNet.

Even RealNetworks, a bitter rival of Microsoft in some arenas, plans to launch a new version of its Rhapsody music subscription service using Microsoft's new rights-management technology.

Analysts have said that a key stumbling block for the services will be the idea of paying an ongoing fee, along with the idea that the music is not owned like a CD. Indeed, Apple's chief executive, Steve Jobs, has dismissed the idea of subscription-based services, saying people want to own their music.

"I think this is going to be one shift in behavior that takes some time to really articulate in a compelling way to consumers," said GartnerG2 analyst Michael McGuire. "It sounds really basic, but you can't overstate the challenge in convincing people that renting is better than owning music."

That's where Napster's marketing campaign comes in. Dubbed "Do the math," the advertisements will note that filling up an iPod would take about $10,000 using Apple's iTunes store. By contrast, filling up a comparably sized rival player using Napster To Go will cost just $15 a month, the ad will say.

The marketing campaign will also promote MP3 players from Creative Technology, Dell, and iRiver, all of which are releasing portable devices compatible with Microsoft's technology.

Despite skepticism, the subscription model has been gaining some ground. RealNetworks said last week that it had more than 700,000 subscribers to its music services, and Napster said earlier in the month that it had 270,000 subscribers.

25 comments

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Learn from the past
Does anyone remember Divx? No not the video codec. The competitor to DVD that was a pay as you go type service in which you never really owned a copy of the DVD.
It bombed spectacularly. I swear to god companies just DO NOT get it. People, by and large, want to own the media not rent it.
Posted by Jonathan (832 comments )
Reply Link Flag
I think this can fly
I believe that the rental model may come to be preferred by many mobile music users because the notion of 'owning' music is becoming increasingly fuzzier. For example, if I purchase hundreds of individual songs and download them to my PC or player and then my hard drive fails and I lose everything (because like most consumers I never bothered archiving on CD) then I may have to repurchase all the tracks again if I want to replenish my collection. Its nice to know that a single rental fee takes all this worry away.
Posted by (1 comment )
Reply Link Flag
That should teach people to back up
Exactly as i say in my title.
Look at it with a serious eye and do your sums. Also Napster assuming that EVERYONE rents their music only.
What about the rest of us, who are NOT napster's founders, who already own CDs?
Posted by (3 comments )
Link Flag
Napster's flawed argument
Too bad none of their rented tracks will play on the most
popular MP3 player out there, the iPod. You can spend $14.95/
month, $4.95/month, or whatever they want to charge but you
still out of luck.
Posted by dejo (182 comments )
Reply Link Flag
Another Monthly Fee???
I doubt that the masses will want such a subscription service. Add it up:

1)Broadband internet connection (DSL or Cable) $24.99 on up a month.
2) Phone Service (including long distance)
3) Cable TV

By the time that I am done with my monthly fees, I am paying between $90 - $150. This doesn't include HBO, pay-per-view, etc. I don't want to spend another $15 a month to subscribe to a service to put on a player that isn't as good as the iPod (for me at least). I would rather by the cd's at the used music store or buy the tracks on iTunes. Besides, there are very few people who have music collections that fill their entire 40 or 60gb iPod.

The subcription model is doomed to fail at this point in time. It may work in the future, but right now the public just doesn't want to pay to rent music. They want to own it. Jobs is right on this point for now, and 250 million purchased tracks can't be wrong (adding 1.25 millon per day going forward).
Posted by jypeterson (181 comments )
Reply Link Flag
Subscription Service: A Failure Before It Begins
Apple is correct. People want to own their music.
Renting music is not like renting videos. The youth of today and even older people identify with the music they choose. The music is an outward expression of their personality.
And as one commentor stated: NOT ANOTHER SUBSCRIPTION FEE!
We are trying to get away from as many subscriptions as possible. Subscriptions are like a tax and we all hate taxes. If I could live without cable tv just to get rid of my monthly fee I would. The same goes for electricity and mortgage. One thing I can do without is a Napster subscription service! This is a failure before it begins.
Posted by (4 comments )
Reply Link Flag
Rhapsody has over 700,000 subscribers
so, I wouldn't describe the subscription model as a failure.
Posted by (4 comments )
Link Flag
i've been using Napster To Go for 4 weeks...
I WANT TO RENT MY MUSIC! Really. Right now I have over $2,000 worth of music from Napster on my iRiver H340 portable player. I would need to subscribe to Napster for 11 years to rack up a $2000 subscription bill. I am able to try out new music, without worrying that I am paying for something I may not want later. I can keep getting UNLIMITED new music for up to 3 pcs and portable devices. All the music I buy or dowload is stored on Napsters servers so I NEVER have to worry about my music being lost (short of Napster going out of business).

Having said all this there are some serious problems with the service. The integration between Napster, Windows Media Player, and the portable device, is still lagging far behind iPod and iTunes (I've used both for quite some time) in ease of use and compatibility. Right now I have to use Napster to download songs, WMP to sync them to my device and an iRivium to organize songs on my player. I've been worrying with computers for about 10 years, and getting this work was kind of a matter of principle, but this definitely is a lot more trouble an average user would be willing to put up with. Especially when you can buy an iPod, download iTunes and be up and running in an about an hour. It took me about 4 days to get everything "almost" working right.

Does renting music have a future? I think so.
Is Napster ToGo ready for widespread consumer adoption? Not until the service is as easy to use as iTunes/iPod combination.

Ultimately though the future will lie in a kind of Satellite Radio/Download Service hybrid which will provide monthly subscribers on-demand streaming with no need to pre-download their music. Who ever gets that technology right will rule the digital music landscape.
Posted by (1 comment )
Reply Link Flag
Do your sums
Maybe you should think a little more carefully and do your sums.. Read The Registers take on it.
Posted by (3 comments )
Link Flag
Rental model cooked up by idiot MBA's
Suppose you were an idiot and suppose you had an MBA degree.
But, I repeat myself.... (Apologies to Mark Twain).

The difference between Apple's and Napster's approaches are
stark not only in their implementations, but in their origins.

Apple's approach is to create a high-quality, easy-to-use player
and couple it with an easy, cheap way to buy music. It's based on
what consumers want as can be seen from it's phenomenal
success.

The rental model, on the other hand, was hatched by myopic
marketing/sales weenies who are foolishly pushing a business
model that is highly desired by corporations, but not by
consumers. Subscription services are the holy grail from a
business standpoint. There's nothing better than the predictable
and guaranteed revenue stream that comes from subscribers
locked into multi-year contracts. Just as the wireless phone
companies about that.

But, there's a big difference between cell phone and music
distribution. There's no alternative to subscriptions when it
comes to cell phone service.

In short, Apple is giving consumers what they want and are
making a lot of money at it. Napster and the others are trying to
create a market where no market exists. These companies and
the pinhead MBAs that run them have realized they don't have
products that can compete with iPod/iTunes, so they are
hatching hair-brain ideas out of desperation and/or stupidity.
Posted by Jeff Lebowski 63 (33 comments )
Reply Link Flag
Release windows & subscription models
Sadly the current subscription model will not last - you have done the maths and see what it would cost to genuinely fill an iPod to capacity.

That cost structure is not much different for the record companies than that expereinced by the movie industry.

What will happen is what has happened with Pay TV / Cinema where you have numerous release windows to exploit a new song and with those release windows comes different prices.

This nirvana of all you can download all the time - will only last as long as it take the music companies to believe they have got the customer hooked and then just like Pay per view and cable and premium channels - they will begin introducing limits, price tiers, packages etc.

And it won't work - the idea of a celestial jukebox is a good one and will one day be any music any time on any device - but with the main players squabbling over formats, DRM solutions and artist rights / renumerations - that is a way off - in the meantime beware that the record companies are out to fleece you if they can and the Napster model will not last because it does not make them any money.

You do not get your cable for a flat $15 dollars and in time you will not get all the music you can eat for a flat $15 either
Posted by (3 comments )
Reply Link Flag
Napster will alienate recording industry
I can't believe that Napster again will commit suicide. The
Recording Industry only relented to online distribution after
agreeing to a model of one dollar for one song.

The Napster campaign seems less anti-iPod than it does anti-
Recording Industry and in typical Napster fashion anti-
consumerism.

The effect at best will be to devalue and commoditize digital
songs in the minds of consumers to a point of fractions of a
penny per song. This will spell disaster if Recording Industry
execs don't wake and smell the coffee.
Posted by (1 comment )
Reply Link Flag
Uhhh Rhapsody???
Your comment "The Recording Industry only relented to online distribution after agreeing to a model of one dollar for one song." is incorrect. Rhapsody has been doing this for years. Napster just wants to get in on the game. If anything kills Napster, it's going to be Rhapsody, not the recording industry.
Posted by (4 comments )
Link Flag
Not good for record companies
This is the same type of strategy being used by Dell and
Walmart, except with a HUGE difference... you only have six
suppliers and they are all VERY large companies...
You can't price squeeze what is essentially an oligopoly of
recording companies. From their perspective, it is much better
for one to "buy" the music with the extra money because there is
incentive for them to produce more music from more musicians.
There is absolutely no incentive for them to produce and
distribute new music if it doesn't add a dime to their bottom
line. You can't "muscle" a giant into dropping prices or changing
their income model... you have to have hundreds of small
producers to be able to do that because each will be worried
about loosing business to their competitor. In the long run,
you'll get a good base of customers who just want to milk the
service for everything that it has, while those who want a few
good songs will end up choosing a "buy" service such as iTunes.
For Napster, they are not going to be successful with this
strategy long-term.
Posted by Awesomebase (134 comments )
Reply Link Flag
I prefer Magnatune or Old fashioned P2P
DRM gets in the way of copying even for backup. Magnatune is my favorite legal music source. Plain ol' MP3. You can buy a CD and even download uncompressed .wav! And their commercial licensing is up front and very fair. And whats even better the artist gets around half of the revenue!
Posted by GreatInca (3 comments )
Reply Link Flag
Balanced opinion
Read the following with an open mind and decide if Napster to go is worth anything at all..
<a class="jive-link-external" href="http://www.theregister.co.uk/2005/02/04/napster_go_away/" target="_newWindow">http://www.theregister.co.uk/2005/02/04/napster_go_away/</a>
Posted by (3 comments )
Reply Link Flag
Subscriptions good for Indie Music
For all the flak Napster gets regarding its "rental" business model, and now the "252 CD burn" hack, it's actually getting good reviews from users.

Music subscription services in general are great for new music discovery. I was blown away by 7 bands within the first three weeks of using Rhapsody, which is incredible. Though I'm not currently a subscriber, the move to mobile devices is making me reconsider...

Subscriptions are great for independent music, as they give more exposure to bands trying to get their music out; listeners are more willing to experiment. And that's good for the music industry in general, which could use a shot in the arm. I'm sick of manufactured pop.

My 2 cents,

Mike
<a class="jive-link-external" href="http://www.GarageSpin.com" target="_newWindow">http://www.GarageSpin.com</a>
Posted by GarageSpin (5 comments )
Reply Link Flag
HELP!!!!
How did you do IT?!?!? I'm lost... I have the iruver H340 and tried to sync the clocks, use WMP and on and no. Still no music. Am i syncing the clock incorectly...I don't know. I know I have a $361.00 paper weight though...

Thanks,
Posted by (1 comment )
Reply Link Flag
Rhapsody has it...
I have been using Rhapsody for about 2 years as well, and am completely satisfied. I have expanded my music repetior exponentially since I have no limit on the songs I can listen to. I have traced the "influence" artists from one band to another and found gems that I would never have heard in a million years using iTunes or whatever. Owning music? Man I buy what I want, when I am convinced that it is worth keeping around longer than 3 months. And I know this because I will have heard it enough to know, never an impulse purchase, which never get's factored into these other calculations as wasted money. I mean how many people would have bought Achey Breaky heart in the early 90's and now it makes them naucious... that is wasteful. I love the Rhapsody model. Far better for really exploring and making informed music purchases, IMHO.
Posted by (1 comment )
Reply Link Flag
Rhapsody, etc. w/iPod
You wrote your comment a long time ago. Do you still love Rhapsody? I think I might subscribe. Are there any subscription services you like better w/the iPod in mind? Thank you.
Posted by juddrizzo (6 comments )
Link Flag
Gookbox is the way to go...
I think ******* service is the best way ahead. <a class="jive-link-external" href="http://www.*******.com" target="_newWindow">http://www.*******.com</a>
Posted by ghoster (1 comment )
Reply Link Flag
 

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