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 In helping my partner clean up the hard drive on her laptop, we were eliminating everything that was outdated, already backed up, or simply no longer needed.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.

Meet The Contributors To Music 3.0

Like my other books, Music 3.0 would be nothing without the contributions of some of the most respected voices on the cutting edge of different aspects of the current music business.

Let me briefly introduce them to you:

Ted Cohen - Known throughout the technology and music industries as being "part ambassador and part evangelist," Ted Cohen has been on the cutting edge of digital music from its inception. Currently a managing partner of the industry consulting firm TAG Strategic, Ted is one of the most influential voices in digital music today and can be seen speaking on the subject worldwide.

Richard Feldman - A very successful songwriter, producer and Grammy winner with platinum and #1 records to his credit, Richard is the CEO of a music library publisher called ArtistFirst Music and the president of the Association of Independent Music Publishers. Richard comes to publishing from the point of view of a musician and songwriter, and he has a unique perspective on the changes that M30 brings.

Larry Gerbrandt - An expert on entertainment analytics, Larry Gerbrandt’s Media Valuation Partners advises its clients on the economics of media and content on traditional and emerging technology platforms. Formerly a Senior Vice-President with research giant Nielsen Analytics, Larry provides a wealth of experience in entertainment market research that we’re pleased we could tap. Get ready for some interesting and insightful facts and figures regarding sponsorships, branding and advertising - all the things necessary to monetize M30.

Bruce Houghton - Bruce Houghton started his highly influential Hypebot blog because he wanted to better understand the changes in the music business in order to help educate the clients of his Skyline Music agency. Since then, it’s become a must-read for anyone at any level of the music industry. Bruce’s keen observations come not only from being a highly prominent blogger but as a booking agent working in the industry trenches every day.

Thom Kozik - A seasoned tech industry executive for over 20 years, Thom Kozik has spent considerable time on the gaming side of the tech industry, having served as president of gaming search engines Wazap!, and All-Seeing Eye, (which he sold to Yahoo in 2004), before he became Director of Business Development for Yahoo!’s Media Group. Thom now serves as Managing Director for Bigpoint, one of the largest gaming companies out of Europe.

Gregory Markel - One of the pioneers of search engine optimization and marketing, Gregory Markel’s Infuse Creative touts major entertainment clients such as Gibson Musical Instruments, New Line Cinema, The National Geographic Channel, Led Zeppelin, the Rolling Stones, the television show 24, and many more. As a recording artist formerly signed to Warner Brothers (and a great singer too), Gregory has a deep empathy for the plight of today’s artist and provides an abundance of social media advice in his interview.

Rupert Perry - One of the most respected and beloved executives in the music industry, Rupert Perry held a variety of executive positions with EMI for 32 years, from VP of A&R at Capitol, to president of EMI America, to managing director of EMI Australia and later, EMI Records UK, to president/CEO of EMI Europe, to the worldwide position of VP, EMI Recorded Music. During his time at EMI, Rupert worked with variety of superstar artists such as The Beatles, Blur, Duran Duran, Iron Maiden, Nigel Kennedy, Robert Palmer, Pink Floyd, Queen, Radiohead, and Cliff Richard. Rupert is well up on the latest technology and trends within the music business and shares some surprising contrasts between the old business and the one we’re in right now.

Ken Rutkowski - Ken Rutkowski is widely considered to be one of the most informed and connected people in the media, entertainment and technology markets today. His daily radio and Internet show, World Tech Round-Up at kenradio.com, is a source of inside information for listeners in more than 40 countries, often scooping the major media and giving perspective to emerging trends, developments and industry maneuvers. Ken is also the creator and guiding force behind the Media Entertainment Technology Alliance (METal), a members-only group of alpha influencers.

Derek Sivers - Derek Sivers' life has certainly been interesting so far, from working as a musician/ringleader of a circus to a stint at the publishing giant Warner/Chappell to being on the road as a touring musician to creating and running CD Baby, one of the most widely used music distribution services today. After selling CD Baby in 2008, Derek now spends his time thinking of new ways to help musicians. As you’ll see, his insights are as thoughtful as they are cutting edge.

Howard Soroka - I first met Howard Soroka when he was the primary programmer for the famed GML recording console automation system some 25 years ago. Since then, Howard’s gone on to being more executive than programmer, rising to vice-president of media technologies at Universal Music Group's eLabs. Always on the cutting edge of technology, Howard had some great insights on the digital workings of the world’s largest record label as well as a look into the future of the music business.

Jacob Tell - Jacob Tell’s Oniracom is a new breed of company that provides a full line of digital media services to artists, labels and management.  Helping artists in the digital space before there was a YouTube, MySpace, and Facebook, Jacob has watched the development of Web 2.0 and learned how an artist can best take advantage of it along the way.

Michael Terpin - Michael Terpin is the founder of SocialRadius, a marketing and public relations company focusing on social media outreach and strategy. Among the projects that the firm has worked on include the outreach for recording artist Will.i.am’s Yes We Can video for the Obama campaign (which won 2008 Emmy, Global Media and Webby awards), social media event marketing for Live8, LiveEarth, the Green Inaugural Ball and the David Lynch Foundation, and the social media launch of start-ups ranging from Software.com to Shapeways.

As with my other books, the full interviews are included because they're not only insightful, but a fun read as well. As an example, here's an excerpt featuring Infuse Creative's Gregory Markel.

Thanks once again to all contributors!