Tuesday, April 6, 2010

The Ramifications Of A Lower Priced Rhapsody

As you may know, I'm a big proponent (along with a lot of industry pundits) of subscription music. It just makes so much sense for all the parties involved. It's a steady income stream for the artists, publishers and labels, and it's definitely a lot better for the consumer. Why download and fill up your hard drive when you can have every song at your fingertip anytime and anywhere? You can read a lot more about the advantages and disadvantages of subscription on my previous post.

Subscription hasn't hit critical mass yet, but it's used every day by a lot of people world-wide. Spotify is used by over a million subscribers in Europe, and Rhapsody, MOG and Napster together have over a million subscribers in the States.

Now comes word that Rhapsody (who last week was just spun off into a separate company by its owners - Real Networks and MTV) is lowering the price of a subscription from $14.99 to $9.99 a month. Why is this important? Because $9.99 is thought to be the magic price point where consumers feel comfortable paying a monthly fee. Why pay $10 for only 10 songs via download when you can have millions for $10 via subscription?

But Rhapsody was also forced into action. It has about 675,000 subscribers, but that's actually a decrease from last year, and both MOG and Napster offer $5 plans. But the real reason may be to strike before the 800 pound gorilla in the industry (iTunes, of course) introduces their hypbrid-subscription service, where you can put all your music in the cloud (their servers) and easily access what you don't already own. There's been no firm date for it's introduction, but industry insiders firmly believe it'll be sometime this year.

Subscription also holds promise in both the mobile industry (some can't fit all their music on a smartphone), and the possible licensing to various ISPs, which might end up just being an industry pipe dream.

That being said, it's important to stay tuned to the subscription story, since it has major ramifications for musicians and songwriters as well. How so? Most record label and publishing contracts don't account for record label income from subscription yet. There could be a lot of money that makes it into a label's pocket, and not yours.

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