Virgin Digital Music Shuts down gracefully
Paul Thurrott over at the Internet Nexus reports on the apparent shut-down of Virgin Music downloads in the US. Apparently they've struck a deal to hand off their music subscription customers to Napster.
This highlights what's likely to be a trend - there's not really any profit in running a standalone music service (Apple and Zune are likely to make the money from hardware sales, not from service fees), so the standalone guys are left with a real challenge. Expect to see more consolidations, shut-downs, and outright acquisitions in this space over the next 12 months.
2 Comments:
I disagree that content subscriptions are not profitable. Virgin simply did a lousy job with marketing. In addition, they didn't have a recognizable device that gives consumers instant access to their store. Rhapsody have changed course and probably are in a better position because of it.
Content subscriptions are more profitable (to the music label) than a la carte download. And they could be more profitable to the service provider. But they need to reach some level of volume to pay for the fixed overhead costs. And it's just not happening because no one, not even Microsoft or Yahoo, is providing any compelling reason for people to switch their behavior from buying to "renting".
For the most part, people hate to rent. That accounts for part of the reason why people are predisposed to dislike their cable/DSL company and their cell phone company. (The other part is lousy service.) So to convince someone to do so, to overcome that inertia will take a huge incentive. And there just hasn't been any.
By the way, Yahoo makes money on ads, altho I'm not sure how successful they've been with ads on Yahoo Music. In any case, hardware is not the only way to profit. And we know that Microsoft knows that as they busily chase Goog...
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