Analyst Sees Subscription-Based Music Services Eclipsing Pay-Per-Download
TMO Reports - Analyst Sees Subscription-Based Music Services Eclipsing Pay-Per-Download
by , 2:35 PM EDT, May 17th, 2005
Strategy Analytics analyst Martin Olausson has authored a report positing an eventual sea change in the online music retail space. While Apple's iTunes Music Store (iTMS) dominates with a pay-per-download model that commands 70% of the market, Olausson writes that he "believes subscription services will supplant downloads as the dominant model for selling music online, driven by changing consumer expectations as well as the interests of broadband service providers and content owners."
In the report, a copy of which was obtained by The Mac Observer, Mr. Olausson explains the key points that led him to this conclusion. First, he writes, "consumers will gradually place greater value on having access to a wide range of music rather than owning a much smaller number of songs. Consumers will recognize that the a la carte purchase model is costly and inefficient, and that subscription-based services offer additional benefits such as improved interoperability and portability."
Looking at Apple's iTMS and Sony's Connect, Mr. Olausson observes that "buying tracks in a a-la-carte model is costly and inefficient" and "the supply of music, and enhanced services, in subscription-based business models will continue to improve."
"Furthermore," he writes, "with different Digital Rights Management (DRM) standards on the market and little interoperability between them, it's not even certain that the tracks consumers buy today will be playable on new devices in a few years' time." And with subscription-based services adding the ability to take music on the go (except on the iPod, of course), Mr. Olausson believes that "consumers will realize the value of universal access to music and eventually put greater value on access than on ownership."
In addition, "Broadband Service Providers should drive availability and adoption of subscription-based services in order to promote broadband usage, 'lock-in' existing customers and participate in music service revenue sharing," he writes. "Major record labels should make every effort to stimulate demand for subscription-based services in order to increase revenues from online music and combat illegal peer-to-peer music sources."
Mr. Olausson recommends that Apple Computer and Sony add subscription services to their pay-per-download business models while Napster, Rhapsody and Yahoo! "should work towards universal accessibility of their content and partner with broadband service providers to maximize sales."
Observer Comments
This guy is right up your alley, RC! You should send him a thank you note or something.
Of course, this all depends on the type of user. For a person who likes to listen to a wide variety of music, a subscription service makes sense. For someone who doesn't update their library very often, paying a monthly ransom to keep your music doesn't make sense, and a pay-per-song model works.
You can bet that as the demographics and preferences of the music consuming public changes, Apple will keep up with them, and do it with style. No doubt Apple has a subscription option in their labs, and are just waiting for the right time to spring it.
Tue May 17, 2005 3:06 pm Subject: Gee, What A Surprise
Companies and anal-ysts have been pushing subscription-based stuff (not just music) for years. It provides a reassuring cash flow, since there's no real incentive to do anything new. As long as people want music or whatever it is, so the story goes, they'll keep paying. The problem is that people will eventually get tired of paying for stuff they really like and/or need. If they like it, they want to own it, not rent it. What the record companies, ISPs, and everyone else with their grubby little fingers in this pie would like is for the "ownership" option to go away. Apple keeps screwing up the master plan because people have shown, with their pocketbooks, that they like to own things, not rent them.
I can hardly wait until inflation goes up and the comapanies that offer a subscription service "have to" jack the prices on the current subscription model. Nobody promises that the subscription fee will remain the same forever. At least when I buy a song on iTunes I know that I have it forever.
Good luck explaining to your kids, well umm,....Napster raised prices to 30 dollars a month for your music and we can't afford that anymore, so umm, yeah, your 500 dollar music collection is worthless. Sorry!!
I'll just stick with iTMS
Andrew
Tue May 17, 2005 3:17 pm Subject: artist/composer royalties
I can see the subscription model getting into trouble on the royalties paid to the artists/composers, since there is no specific revenue related to a specific work. Presumably the artists/composers get a per download fee, but since there is no limit to the number of downloads per subscriber, that won't work. Be interesting to see how they work that out.
"...it's not even certain that the tracks consumers buy today will be playable on new devices in a few years."
If anyone will do this the Right Way, it's Apple. After all, who else can make QuickTime movies from 1991 and MacPaint from 1984 run (in double-emulation, 68K + Classic) on 2005-vintage hardware?
"Olausson believes that "consumers will realize the value of universal access to music and eventually put greater value on access than on ownership.""
And when exactly will that be? Music rental services have existed for well over a year, and judging by how successful they are, most consumers think that they have no value.
The truth is, if rental services could overtake the pay-per-song services, they would have shown some sign of doing it by now. They've had plenty of time. Instead, the iTMS continues to grow, not shrink.
Also:
""consumers will gradually place greater value on having access to a wide range of music rather than owning a much smaller number of songs. Consumers will recognize that the a la carte purchase model is costly and inefficient, and that subscription-based services offer additional benefits such as improved interoperability and portability.""
The music rental model is costly and inefficient, forcing you to cough up money every month, forever, or else your music get deleted.
As for interoperability and portability, the rental services are Windows only. That's certainly less interoperability than the iTMS offers. And as for portability, the rental services require you to regularly plug your MP3 player into your computer and let it phone home. That's not very portability-friendly. Sorry, Martin Olausson, but you've mistaken inferiority for improvement.
... and of course there is no form of pirating subscription tracks is there ,,, oh sorry actually there is. As for the sellers/owners of music and the consumers of music both getting a better deal out of subscription well I will believe that when they show me how they are able to contradict the laws of physics. Meanwhile having convinced me of that I shall just go out and sell my house and rent knowing that I am getting a far better deal from my conversion to their cause.
Tue May 17, 2005 3:47 pm Subject: Good point, Steve W...
Remember the ASP model, where software would be subscription based and you always hav ethe latest version of MS word because you subscribe to it?
Well the Application Service Provider model didn't payoff the dot coms and renting music isn't going to pay off either.
How will they even measure this? Is a $5.99 Yahoo subscription month the same as six iTMS downloads?
Tue May 17, 2005 4:07 pm Subject: sounds like he bought into...
Napster's Math.
Unfortunately, it's about as accurate as a Pentium III (can anybody say recall?)
I don't want to pay for rental music. I don't pay for radio music. Have you heard the crap lately? It's hard to rent out garbage.
I think you're going to see iTMS and iPod sales decline. Sure. Because of market saturation. But music sales have been declining for years. Why? Because the product is awful. Plain and simple. Consumers are burnt out on the Brittney Spears and other has beens. When's the last time Madonna, Ricki Martin, or Michael Jackson had a legitimate hit? Or an illegitimate one at that?????
And these were the megastars. Madonna has gone maternal, Ricki's retreated to Puerto Rico, and MJ is facing major jailtime for after hours indiscretions.
Is it any wonder we're burnt out on the music industry as a whole?????
Tue May 17, 2005 4:58 pm Subject: Told You So - iPods Costly And Inefficient
Tue May 17, 2005 5:05 pm Subject: Why does it have to be either/or???
This growing obsession with pay-per-download vs. subscription is getting silly on *both* sides of the fence.
For a hundred years or so, people have listened to music over the radio (paid through advertising for most of this time, and via sattellite subscription more recently) AND purchased music via phonograph/record album/cassette/CD/etc.
Both methods have thrived.
He's probably correct that there will be a healthy market for subscription services. So what? The iTMS will *also* continue to grow and expand.
So, how does this subscription thing work when burning CD's? Once a song is burned to a CD, the player in my car doesn't know if I paid Yahoo their $5 tax this month? If they don't ALLOW burning to CD's, then that kills it for me right there. I love my iPod and take it everywhere, but there are places where the CD works much better!
Tue May 17, 2005 5:27 pm Subject: To quote Mary Wells
QuoteBlueDjinn wrote:
This growing obsession with pay-per-download vs. subscription is getting silly on *both* sides of the fence.
For a hundred years or so, people have listened to music over the radio (paid through advertising for most of this time, and via sattellite subscription more recently) AND purchased music via phonograph/record album/cassette/CD/etc.
Both methods have thrived.
He's probably correct that there will be a healthy market for subscription services. So what? The iTMS will *also* continue to grow and expand.
To quote Mary Wells, "You Beat Me To the Punch" http://www.cmgworldwide.com/music/wells/bio.html on the subject of having it both ways. I was going to make a similar post this morning, but two rush jobs came in and I need to make money to feed my music habit.
One plus I can see to subscription service is the ability to listen to a whole track instead of short clip the way we currently do at the iTunes Music Store and some other online shops before making a purchase. However, I do want to "own" the music I like.
Magic Time the new Van Morrison album was released today. I haven't decided wether to buy a CD in a brick and morter shop or download it via the iTunes Music Store.
Two points:
1. The statement "it's not even certain that the tracks consumers buy today will be playable on new devices in a few years' time" is absurd. iTunes has always allowed consumers to re-save files in different formats, even burning them (sans DRM) to those ancient discs known as CDs, which aren't likely to disappear "in a few years." Even if aliens destroyed all our iPods today, our iTMS purchases would still be around to download into the Next Big Alien Resistant Thing. Rental schemes, however, seem much more likely to vanish sooner, along with all "your" music (without any help from extraterrestrials, btw).
2. Record companies still make a fortune off the sale of physical media (CDs) vs the few pennies they siphon off of subscription-based rentals, so "lending" music isn't in their best interest long-term. The profit model just doesn't hold up, but they're willing to go along with it as long as it seems to combat illegal peer-to-peer activities.
And if subscriptions DO start seriously impacting CD sales, watch those prices rise, kiddies... and you'll HAVE to pay if you want to keep listening. "Unlimited" can apply to future pricing too, and, after several years of downloading, will you be happy to have your collection wiped out if you don't pay up? Better read the fine print...where it says that "these terms are subject to change at any time."
Sorry. Too risky for me. If I want unlimited songs, I'll turn on the radio. I might even pay for XM or Sirius, but this analyst is waaaay off base.
-Ken P
Subcriptions are a waste of money. Pay and pay for the rest of your life and what do you get in return. Nothing! The minute you stop paying you lose all your music which really isn't yours. iTunes model is still the best out there. It works for both platforms, has the largest selection, the easiest interface, and you own your music once you pay once for it. What could be better. Certainly not the subcription route. Steve Jobs knew from the begining that subcriptions wouldn't work and he was right. They were out there before iTunes and they didn't work then and they don't work now.
My wife met someone today with an iPod Shuffle. He uses Napster and was unaware he couldn't download to shuffle AND that his songs would disappear if he let his subscription lapse. He was quite perturbed when he learned more about Napster. If someone less schooled than those who visit this site were to look at the Napster site, it would not be obvious to them that the songs would disappear.
QuoteAnonymous wrote:
Subcriptions are a waste of money. Pay and pay for the rest of your life and what do you get in return. Nothing! The minute you stop paying you lose all your music which really isn't yours. iTunes model is still the best out there. It works for both platforms, has the largest selection, the easiest interface, and you own your music once you pay once for it. What could be better. Certainly not the subcription route. Steve Jobs knew from the begining that subcriptions wouldn't work and he was right. They were out there before iTunes and they didn't work then and they don't work now.
Thanks, Mr. Gruber.
Wed May 18, 2005 12:51 am Subject: For the moment …
… iTMS is king.
And, for us, the only solution, as cleverly pointed out by RC. Even if Janus were to be implemented on the Mac, I would definitely NOT install on my computer; the only MS software I have is Office X, for convenience when dealing with people who insist on sending me documents and presentations made with that that I have to work on and return.
One thing that strikes me in all the quotes--I'm not really interested in reading the whole article--is the repeated use of "should". This makes it sound that the man isn't so much predicting what WILL happen as what he WISHES will happen … he seems to be writing a blueprint for all the big actors to follow so he can be proven right. Does he have an agenda he's not mentioning ? Sounds like another Rob Enderle to me … ![]()
Wed May 18, 2005 1:14 am Subject: One more thing …
I fail to see what the big deal is for the labels in encouraging the subscription model … except that they probably get to keep a larger share of the royalties than from downloads, where individual tunes are accounted for, so artists can find out exacty what's owed them … But it would take a gigantic increase in the total number of subscribers to even begin to create a significant alternative to iTunes/iTMS, unless, of course, people switched from one to the other, meaning that iPod sales would all of a sudden drop to nil … but, for the moment, iPods are # 2,3, 6, 9, 12, 14 before the first music "outsider" appears on the list of the top electronics at Amazon, and it is … a Citizen CD player, not even an "iPod killer" … then # 23 is another iPod, and the only actors in the top 25 are all iPods--no Creative, Rio or iRiver.
Doesn't look like Yahoo! music is having much of an immediate impact !
"Too bad iLemmings the pied piper of music Steve Jobs led you down the primrose path to buy music a la carte."
Sorry, but most iPod owners are also Windows users, Reality Check. You lose.
"I know you're drooling over the thought of unlimited music downloads for $5/month from Yahoo, but just can't bring yourself to admit it."
There's nothing unlimited about music that commits suicide if you don't caugh up monthly payments. Infact, that's a very strict limitation.
Then there's the fact that if a person wants to burn their rented music on to a CD, they have to pay up even more money to fully purchase it.
And of course, if Yahoo's music service ever goes out of business, then you can say goodbye to your music collection. Without a home for your songs to phone, they'll all kill themselves in a month's time. Having your music's life tied to Yahoo Music's, or Napster To Go's, or Rhapsody's life is a VERY strict limitation.
But to be fair, the iTMS doesn't offer unlimited music, either. They only have the biggest music catalogue in the business, not an INFINITE selection.
By the way, is it me, or is Reality Check been getting hostile lately? I guess getting hit with the facts so much is starting to make him sore.
QuoteAnonymous wrote:
"Too bad iLemmings the pied piper of music Steve Jobs led you down the primrose path to buy music a la carte."
Sorry, but most Mac owners are also Windows users, people. My pants are loose, think I'll use my iPod shuffle cord as a belt.
"I know you're drooling over the thought of unlimited music downloads for $5/month from Yahoo, but just can't bring yourself to admit it."
There's nothing unlimited about monthly payments, except for maybe twelve in a year. Infact, that's one per month.
Then there's the fact that if a person wants to burn Yahoo out of business, then you can say goodbye to your home, your songs, your phone, your car, etc... Napster To Go's pretty cool!
But to be fair, the iTMS doesn't offer the best music catalogue in the business.
By the way, I'm sore.
"I know you're drooling over the thought of unlimited music downloads for $5/month from Yahoo, but just can't bring yourself to admit it."
hey RC, what happens when you stop paying for the monthly music? where are all your tunes? POOF! right into thin air. As usual, you have your head up your ass, right where a billy gates left it.
poor silly, deluded, trailer dwelling RC. Someday, when you move away from the sticks, you might, just might see how much of an ass you are.
till then, keep up the stupid posts...you DO know we all laugh at you, dont you? you should, everyone else does!
"Quote
jacrav wrote:
I fail to see what the big deal is for the labels in encouraging the subscription model …
I fail to see what the big deal is for Mac fans in discouraging the subscription model.
"
you fail to see the waste of $ it is. Do you really believe its better to rent music that will dissapear when you stop paying? I'd POSSIBLY consider a subscription if it had a wide margin to rent to own...MAYBE. Otherwise, its a scam and a waste of $.
Or are you sucking on M$'s teat as well? Hmmmmmm?
Wed May 18, 2005 2:07 pm Subject: Re: i fail to see...
QuoteAnonymous wrote:
you fail to see the waste of $ it is. Do you really believe its better to rent music that will dissapear when you stop paying? I'd POSSIBLY consider a subscription if it had a wide margin to rent to own...MAYBE. Otherwise, its a scam and a waste of $
Kind of like cable TV, right?
I have no need for music subscription, but I keep thinking about everyone out there who pays to get TV each and every month.
Why wouldn't a lot of those people be just as happy to do the exact same thing for music?
I can't answer that.
Quote
Anonymous wrote:
you fail to see the waste of $ it is. Do you really believe its better to rent music that will dissapear when you stop paying? I'd POSSIBLY consider a subscription if it had a wide margin to rent to own...MAYBE. Otherwise, its a scam and a waste of $
Kind of like cable TV, right?
I have no need for music subscription, but I keep thinking about everyone out there who pays to get TV each and every month.
Why wouldn't a lot of those people be just as happy to do the exact same thing for music?
I can't answer that.
Well, I dont pay a dime for cable TV either, even more a waste of $. I think that inherently, music is a different beast than tv. Lets say this: there are many people that can and do listen to the same albums, songs over and over again. But, can you really say that the same people will watch the same tv show over and over again? If I come across an old twilight zone episode on tv, i might watch it, granted I know everyone, for a bit then do something else...like put some music on and then do something else again. true, some folks will rent music, but they also will spend $ on cheap walmart crap because its cheap. Some people ( me included) would rather spend the extra bit on something of quality than buying something 5 times over because its cheap.
Again...once you stop renting the music...you have nothing to show for it. And god knows this country pushes the "ownership" label at every corner.
Same as leasing a car, another scam. Just becasue alot of people buy into the scam (like WMD's) does not mean its best for all or the best at all.
Wed May 18, 2005 2:36 pm Subject: Re: To small white car
QuoteAnonymous wrote:
Same as leasing a car, another scam. Just becasue alot of people buy into the scam (like WMD's) does not mean its best for all or the best at all.
Right. Also, McDonald's isn't all that great either.
But none of that matters. The issue isn't whether renting music is a good idea, the issue is whether or not people will do it.
Certainly some will...but how many? Sadly, I think the number is going to be higher than we think.
yes, some people will, but you know what? I dont care. Im happy with my ipod and itunes. I'm happy with my Mac.
Yes some will throw $ away with rentals...but this is not the early 80's anymore...and hopefully the sheep wil see that M$ cannot strangle hold the whole world like they thought they could.
I really feel Apple and Jobs have learned alot and will be the ones to implement some kind of subcription that will blow the doors off napster and yahoo....if there really is a solid demand for one that is.
( quality, not quantity )
thanks for your informed posts!
QuoteAnonymous wrote:
"I know you're drooling over the thought of unlimited music downloads for $5/month from Yahoo, but just can't bring yourself to admit it."
hey RC, what happens when you stop paying for the monthly music? POOF! It goes right into
a poor silly, deluded, trailer park where Apple programmers are forced to work. Someday, I'll stick a paper clip in my Mac to get my backup disc out of the disc drive. Until then Apple, keep up the stupid design on your sloat-loading computers!
QuoteAnonymous wrote:
"Quote
jacrav wrote:
I fail to see what the big deal is for the labels in encouraging the subscription model …
I fail to see what the big deal is for Mac fans in discouraging the subscription model.
"
you fail to see the human waste instead of coming out my ass comes out in these ridiculous Mac fan poats of mine. Do you really believe its better to rent music that will dissapear thsnks to the magical music fairies that zap it with a wand? I'd POSSIBLY ...MAYBE. Otherwise...
I fantasize sucking on Mac Products? Hmmmmmm!!!
"Subcriptions are a waste of money. Pay and pay for the rest of your life and what do you get in return. Nothing! "
Buying cds is a waste of money. I have 400 cds in the garage that cost a total of about $5000 dollars. I have 100 of those cds on my ipod. I now listen to music on napster and will probably switch to yahoo. If i pay $15 a month to listen to what music I want and transfer it to a mp3 player that allows subscription content, it will take me 25 years to spend $5000 dollars. I love subscription now as is mostly what I listen to. I am going to sell my ipod on ebay and get a player that plays subscription content. I don't understand why apple won't let me play other music files on my ipod. They make their money from ipods not itunes.
Most people get bored of their music and want to hear new stuff. Add your wife and two kids to the mix and you will be spending at least $50 a month buying new music they will not listen to in a year or so. Or buy them each a subscription mp3 player and let them download to their content.
Each model works, but the guy is right that most people will figure out that subscription model is the best. I have already converted 10 people I know in the last month and I own an ipod. I tell them to get a player that can play subscription music. Look at satelite radio. If you quit paying you no longer can listen to over a 100 stations. Same thing with subscription. Don't knock it til you try it. Plus why is it so cool to buy a song first to see if you like it?
QuoteAnonymous wrote:
awwww......me, is that you?
hello boys and girls, its time to troubleshoot your Macs.
( really, Microsoft perfected the cut&paste that Apple couldn't originally use. I invited azzclowns to my birthday party... )
but go ahead, the rest of the computing world enjoys laughing at my "buy a clue, try again" Mac zealot posts here, they all do!
"awwww......me, is that you?
hello boys and girls, its time to troubleshoot your Macs.
( really, Microsoft perfected the cut&paste that Apple couldn't originally use. I invited azzclowns to my birthday party... )
but go ahead, the rest of the computing world enjoys laughing at my "buy a clue, try again" Mac zealot posts here, they all do!"
......aww, soo nice to see you trying soo hard RC. really gets you pissed eh? thats ok, cmon , Im laughing my azz off at you and your retarded lil posts!!
cmon son, gives us another!
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