Ongoing consolidation of $14.99 music subscriptions
..."consolidation" being perhaps a kind word...other candidates would be "collapse" and "culling".
Longer term readers will remember that I've previously posted how surprisingly difficult it is to make a music subscription offering work.
This has been the summer of long knives for subscriptions. Virgin, AOL, URGE, and now Yahoo! are all leaving the business. Napster is burning cash and will run out sometime in the next 24 months. Rhapsody appears to me to be spinning off of Real into a separate entity, perhaps to clear the books to Real can be all about technology and games.
Yet, I'm still a happy subscription user and somewhere deep inside a believer. But clearly, something is busted. The interesting question is, "what?". My list of candidates:
- pricing. $14.95 is just too high a price for the value proposition they offer. Thank you, labels and publishers. Might they be more successful at $9.99? $4.99?
- no devices or integrated end to end. Using mix-n-match Playsforsure devices with existing services has generally been pretty painful.
- experience. Building a good subscription service is harder than it sounds.
- Ownership/collecting. Do music users really, really want to own music? Do they want a feeling of owning their collection? For such users, subscription would be like coin-and-stamp rental - what's the point?
- Piracy. Are the most engaged users already getting all-you-can-eat music for free? Will they ever pay for music again?
It's almost certainly a combination of these, but you've got to pause and say "hmmmm...." at the current state of the business.
17 Comments:
Every time I try one of the subscription services, I find 50 songs I want (and never managed to collect on CD) and then do nothing for 6 months. Then I ask myself "do I want to rent these for the rest of my life?". The answer is always no so I quit the service and buy the tracks for 99 cents.
It's all about price. You should read my post on subscription services at: http://ad-supported-music.blogspot.com/2007/09/subscription-music-services-are-for.html
How about an ad-supported subscription service from Microsoft? That would be a great way to use the wi-fi capability on the Zune.
I tend to agree price is a huge issue. I also agree with Boo's point - that the services tend to deliver value for a month or two, then you're just paying them not to turn off your music collection. That feels bad.
Exactly right David. The value proposition is not really about "subscriptions"... it's about being able to get what we want when we want it.
We talk about music as a utility (like electricity or cable)... but we charge an exorbitant flat monthly fee. I think people would feel better about "subscriptions" if the pricing was linked with use. I think it would be a mistake to introduce the confusion and annoyance of "minutes" ala cellphones, but a very upfront indication of "credits" used for access would be great. These would almost certainly have to be prepaid, and could be capped at $x/mo or (80x)MSPTS/mo. I always feel like I should cancel my subscription when I see the charges hit my credit card, and realize I haven't even used the service that month...
Naturally advertising could be used to offset the "use fee", but I think that should be optional at the users end.
See I guess I have a different perspective on this. I can see where price might be an issue if you're using a subscription service and buying music. But for me, my subscription has completely replaced purchased music. I have downloaded over 200 albums from URGE/Rhapsody, and I'd download a lot more if my Zen wasn't pretty much full. To me, the only advantage of actually purchasing music is to have it on a CD. Since I can use my Zen anywhere I listen to music (car, home, anywhere else period), I have absolutely no interest in having music on CDs. It just takes up space.
Another thing with the price, is that 15 bucks a month does seem like a bad deal if you're only downloading 50 songs or so, but if you're like me, and you've downloaded 200+ albums, suddenly it looks like a much better deal, even if you don't download any more than that. If you consider the average price of a CD to be 10 bucks a pop, I'd have to spend about $2000 to get all the albums I've downloaded. With a subscription, it would take me over 11 years to spend that much money, ON THE SAME MUSIC! And that's not even taking into account the fact that I will most likely continue downloading more and more albums over the course of those 11 years. If you look at it that way, suddenly subscription services seem like a really awesome deal, even at $15 a month.
Subscriber services will come into their own in the connected world. Subscription is all about discoverability of music - and would work much better once these services have more community features.
Maybe this is a better angle... Reduce the monthly price to something negligable and make the subscription music a try before you buy proposition. Play three times before it expires. Or make the service free and tack on a commercial at the start or end of the track.
It would be great to send a link to somebody without a Zune of a few tracks for them to listen to. Something like the online greeting cards, with links to listen to the music and purchase it.
This should help shift a few units.
i think there needs to be a compromise of sorts. i have a lot of music, and back when i had a subscription (to napster actually, not zmp) i was downloading well over 250 tracks a months. the main thing thats stopping me from using a subscription service now, is that its $15 a month, and i would have to keep paying that, regardless of whether or not i download anything new.
i think there needs to be a compromise, maybe a $5 monthly subscription service, but you have the choice of making the track a permanent addition to your collection for a small fee of 25 cents or something like that. that way you can keep downloading to your hearts content for the 'discovery' aspect, but when you realize that only half of your music will fit on your zune, or think its time to cancel your subscription, you won't be at a total loss.
Wow, I agree with much that has been said here by each of you. Personally I wouldn't mind the $15 if there was more value than just Zune music. I can name a two fairly compelling options that Microsoft could throw in to sweeten the deal.
- MSN Direct, with Zune's FM radio receive updates even if you are not connected to the internet
- Internet Connection to Nationwide Hotspot network. This should be some Microsoft negotiated deal that gives users access for limited purpose (downloading music, etc)
The big problem with the subscription services is that they have *such* a huge lock-in problem. You can't transfer your subscription from one place to another, and you're much more invested in flagging and collecting all of those songs than the few that you might buy on iTunes or another digital music store.
For example--I was an early Yahoo subscriber...I loved the cheap offering they initially had. After a year of using their utterly hopeless software, I wanted to try Napster. The problem? Now I needed to somehow transfer the 1,000 songs I flagged on Yahoo to Napster. The only way to do it...manually.
Then Zune came along, and I bought into it. I downloaded a bunch of music, and then noticed that unlike most online music services, the Zune store doesn't actually allow you to add songs to an "online" library, meaning that I was even more locked in.
Now I'm back to my iPhone and CDs, and happy that both just work. Not to mention that two years of using Yahoo/Napster/Zune software, it's nice to use a music store that's actually well-run and not super-buggy.
My personal opinion is that music is timeless. Fads come and go, but good music will always be good music. And I also feel that the music you listen to becomes the soundtrack to your life.
For myself and others with similar beliefs, why would an alternative to permanently owning your music collection even be a consideration? For that reason, CD's are the only medium for me.
In addition to philosophical reasons, owning the CDs gives me lyrics, artwork, and a potentially impressive display, although some now probably think a wall of CDs is an eyesore.
Finally, with CDs, I am not restricted to any format or limited to any bitrate. I have "the master".
But for all my love of physical media, I don't think the current state of the industry is healthy. I don't pay any more than $10 for a CD, typically purchasing from used CD stores or pawn shops. I'm really only saving the landfills, I guess.
anachostic, "owning the CDs gives me lyrics, artwork, and a potentially impressive display"
Well, you certainly have a winning arguement there. Although, many vinyl afficianos made the same arguements when CDs came on the seen. I think the things you mention have been ignored in the rush to digitize music. Partly it was because the technology wasn't there to do it right. Apple is trying to fill the void with things like Coverflow. J Allard said one year ago, that Zune and the industry need to address this and I think there is still hope.
Have you guys seen this article on Rick Rubin in the NYT? http://www.nytimes.com/2007/09/02/magazine/02rubin.t.html?pagewanted=all
In one section he talks about the future of the music business and what he sees in the subscription model.
With regards to "owning" the music, if you can at any time, and at any place, download or check out new music on your device(s). Is this any different than owning the music itself? Right now, being tethered to some point, to check out new music is probably what is hindering the model.
Also.. i think amazon's latest venture into the mp3 marketplace is the best. I have yet to buy an album from itunes specifically because i hate DRM. While I haven't checked out the zune marketplace I imagine it is a similiar experience. Having cheap/unlimited use mp3's that i can pay for is awesome.
Let me support the artist, not some model your company mocked up with some other company that represents the artist. It is unfortunate that not every band can go the same route as Radiohead just did with their new album.
"Finally, with CDs, I am not restricted to any format or limited to any bitrate. I have "the master"."
Unfortunately, this isn't true. While the bitrate is higher than anything you could conceivably need (~1411 kbps), it still doesn't capture the warmth of Vinyl. Personally, I can get near-CD quality (or close enough) files from online stores that give me the same usefulness as CDs. If I'm going to purchase physical media, it's gotta be analog.
You guys are awesome. ;)
Excellent post, David. I think your observations and analyses are accurate, and I'll add a few thoughts of my own.
For the record, I think the $15/month subscription price is fair for what consumers get in return. Some people always want cheaper, of course, but where would it stop?
In my opinion, the primary issue is *time* rather than money.
Most consumers don't spend much time "dealing" with their music collection. A lot of people just load up their iPods or Zunes once and leave the content unchanged for weeks or months at a time (or longer).
I update the library on my 4 GB iPod Nano once every day or two, but that's because of the limited memory and my love of podcasts. (I use smart playlists to rotate "fresh" songs to replace those I have listened to.) But my actual music collection that it pulls from? I probably add less than $10 of music each month. (FYI, I am 35 years old.)
Everyone else I know just leaves songs on their music players for a long time. If they want a new album or something, they buy it & rip it (CD) or download it from an online store. Adding songs to their music library is a once-in-a-while thing.
For casual music consumers, a subscription service feels like a tax that must be paid each month. Pay the tax or your music disappears, even if you're listening to the same songs you listened to last month. "Owning" your music is a much more comfortable model for these people (myself included).
For hard-core music fans (those who love to keep up with the latest music, or those love to dig deep into old catalogs), a subscription service makes a lot of sense. They have access to almost *everything,* and at a very reasonable price. All they need to invest is a little time to find the tracks they like and add them to their music player.
Unfortunately, the hard-core music fans tend to be those that are most attracted to piracy. "Sharing" music involves a certain time commitment (whether it's a mix CD or a peer-to-peer online service). Hard-core fans already invest a lot of time looking for new music, and "sharing" songs can save them a lot of money in the process.
Anyway, those are my thoughts on the subject. Thanks for a thought-provoking post.
Here's my experience--I subscribe (for a full year) to Napster, thinking it will work with Zune (it doesn't). Silly me, I think, I will subscribe to URGE since it is installed by default on WMP11. Oops, also not compatible with Zune. I was able to cancel URGE, but got 8 worthless months on Napster to Go to use up with no compatible player. I did subscribe to Zune and am quite satisfied. The whole experience keeps me from trying new services.
Suprisingly (to me) this post actually made me think more about the subject of a subscription service. I'm not sold yet, but I am seeing the benefit of having a massive rental library at my disposal.
I would only use the service for discovery. If I didn't like something, it'd be trashed right away. If I liked something, I'd buy the physical media and trash the subscription version. So I guess I could get away with an on-again, off-again subscription. I'm sure I could find a few new bands in a month's time.
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