Tuesday, December 15, 2009

3 Reasons For And Against Digital Music Subscription

It seems like everyone in the music industry now believes that the subscription model will be the ultimate solution for digital music and the inevitable direction that the industry will take. Subscription means that you pay a basic fee like $10 - $15 per month and then are able to access any song you want whenever you want where ever you want.

This view has been held by those inside the industry for a long time, but I really didn't get it until recently. In helping my partner clean up the hard drive on her laptop, we were eliminating everything that was outdated, already backed up, or simply no longer needed. After much work there was still wasn't much drive space reclaimed, so I took a look at her iTunes folder. Sure enough, she had well over 20 gigs of songs! At that moment, I understood that subscription was the future of the business.

Here are the reasons that I believe it will work:

1) It's a lot more cost-effective for the consumer. As industry pundit Ted Cohen states, “For $10 a month, you can get 10 songs on iTunes or 10 million songs on Napster.”

2) Managing a lot of songs takes time and a lot of storage space for the consumer (see my story above).

3) There's potentially a lot of money to go around - much, much more than the business is generating today. The potential buying public in the US alone is 100 million. If only 50% of those subscribed at $10 a month, that's $500 million a month spread around to everyone in the business. The consumer will never be happier and the industry will grow overnight.

Here are the reasons against it:

1) It's hard for people to get over the idea of "renting" music after buying it for almost forever.

2) Most artists are afraid of subscription. Oh, they like the idea of steady income every month, but as of yet there's no way to ensure they'll actually see any of it. Most fear that the labels will take the lions share of the money and the artists will not see their fair share.

3) It's a publishing nightmare. As of now, the artist and publisher split a grand total of .18 cents (less than 1/4 of a cent!) each time a song is streamed. Most publishers claim that they now get statements that may be 5 phonebooks high of reported streams that add up to maybe $12, of which they only get to keep $3. In other words, it costs way, way more to process the paperwork than they're capable of making in it's current form. It's great that you can get the type of granular information about number of plays that publishers always hoped for, but they'll never sign off on subscription until they stop losing money on the deal.

I'm convinced that subscription digital music will eventually take over the business. Already Rhapsody has nearly 800,000 users and Napster has 700,000. The upstart Spotify has over a million subscribers in Europe alone (it's not available in the States yet due to licensing issues, but it's coming in 2010) and is getting rave reviews. But as our friend Ted Cohen says, "If iTunes announced subscription tomorrow, we’d be over the hump."

We keep hearing rumors that might happen, and with Apple's recent purchase of LaLa, they seem to have the infrastructure in place. Stay tuned as the digital space continues to be the most interesting part of the music business.

Portions of this post came from a previously published post on bobbyowsinski.blogspot.com from about 6 months ago, but it's even more relevant now.

1 comment:

Lamat Kan said...

I want to add to the negatives that subscription music isn't currently feasible for those who travel a lot. That includes artists like myself, college students on walkabout (a large section of the industry) and other mobile music lovers. It was the same issue with DRM and needing to be near a signal to "authorize" in order to play (before DRM died of course). As MiFi and WiFi tech evolves--dropping in price, increasing in range and strengthening the signal--these mobile markets will become more accessible to subscriptions. Until then, hardcopy data is going to be the standard for these markets.


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