By BoLOBOOLNE payday loans

Apple’s subscription music service

Many times I’ve been asked about the possibility of Apple offering a subscription music service for iPods and iTunes.  Here I’ll lay out why I think this will happen, what the timeline is for it, how that relates to the future of DRM, and what impact it would have on the competitive landscape.

First off, I am confident Apple will launch a subscription music service.   As every Rhapsody fan and many industry analysts agree, subscription services are the best way to consume music.  Just like Hotmail moved email into the sky, and Google Docs are doing the same for office productivity applications, music can and will go the same way.  Being tied to a specific piece of hardware to enjoy your information services is so 20th century.  The reason we’re not there yet is that it’s not easy to provide a great experience.  And considering people’s long-standing investments in legacy music media like CD’s, non-hosted music services actually provide a smoother transition.

When I worked for Real people generally spoke of Apple launching a subscription service with fear.  I argued that it would actually be one of the best things for the company.  The reason being that even modern electronic music consumers don’t understand what a music subscription service is.  If Apple started spending their quarter-billion dollar per year marketing budget to explain this to consumers, it would do wonders for Rhapsody.  Especially considering the low-quality, poorly-funded advertising campaigns Real has traditionally engaged in.  I wish I could find some of the infomercial-style TV ads they used to run.  Glaser built Real Player without advertising and still believes all internet services should be able to bootstrap themselves.  Maybe the alliance with MTV will help there. 

Also, managing a multi-million song library is not easy.  Rhapsody does a pretty great job of it.  Although they’re going to get obsoleted unless they can figure out how to democratize the music editorial process.  But they’re still way better at it than Apple, who has frankly never been very skilled at online services.  So if Apple were to start spending their huge marketing budget tomorrow to explain why it’s not important to own your own music, it would be a huge boost to Rhapsody.

It won’t happen tomorrow though.  My guess is that within 5 years iTunes will offer all-you-can-eat music for a recurring monthly fee.  The timing depends on a couple of key factors:

  • Uptake of network-enabled iPods
  • Availability and quality of wireless net access

Before the iPhone, Apple could not launch a subscription music service for one simple reason.  If you stop paying your monthly fee, your subscription tracks need to be disabled from your portable device.  Otherwise somebody could pay the fee for a single month, go on a shopping spree and load up their device with all the music they’ve ever wanted, and never pay another dime.  So even though DRM is going away for track purchases, it has to stick around for subscription models, at least until many other things change.  How does this limit Apple’s ability to launch a subscription service?  As anybody who has used a portable music device with a subscription service can tell you, it is incredibly frustrating to pull your mp3 player off the shelf only to see a message that says it won’t play any of your music because your licenses expired and you need to plug it into a computer to verify that you have been paying your bills.  Even if you are paying, you need to constantly tend to your device or else it bricks itself after a few weeks, by design!  Steve Jobs would never allow his iPods to do this.  The solution is to enable the device to check your subscription entitlement itself — wirelessly, in the background, automatically

That’s exactly what the iPhone and iPod touch can do with their built-in networking stacks.  Even a slow network like AT&T’s EDGE network is good enough to verify that the monthly fee has been paid up.  Or for the wifi-only Touch, at least once per month you need to pass by an open hotspot or be in your house where it knows how to connect and it keeps working.  Not a serious burden.

So once there is a sufficiently large installed base of connected iPods, Apple will start selling a subscription service.  If I had more motivation to figure out the timing of when this would happen, I’d look at adoption/saturation curves for iPods and typical turn-over rates for such consumer electronic devices.  Other factors include the financial and market success of competing services.  I leave all this as an exercise to the reader for those of you working in this challenging industry.  My gut says it’ll be in 2010.

  1. Anonymous says:

    I haven't tried Slacker, but they're definitely running with a great idea. It's an idea that I believe Rhapsody launched to the public first, but slacker is clearly taking it where it should go while I don't see Rhapsody making much progress. I'm hesitant to talk too much about Slacker without doing a bunch of research into what's been announced since I know some stuff about them that at some point wasn't public. Might be now.

    Broadly speaking I think Slacker is an example of why the digital music industry is a really tough place to try to be a service provider. There's a long post there, but in short the RIAA has all the power and is happy to let companies die trying new business models, while investors and entrepreneurs are trying to gain dominance in this fledgling market before the $10B/yr physical music market completely collapses. If you look at Porter's five forces, it's a rough place to be working.

  2. Geoff says:

    Leo – You didn't mention the Slacker service in this post, although it seems to be related to the concept. thoughts?

    Geoff

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