Apple's subscription prescription

Peter Burrows
31 Mar 2008

Arik has expressed his views, but I can't help weighing in on the possibility of iPods that come pre-loaded with some or all of the labels' catalogs, or with an all-you-can-eat subscription so consumers can pay a monthly fee to get that music whenever they want. As we reported yesterday, don't hold your breath. Sources tell us that Steve Jobs hasn't really changed his tune on the merits of subscriptions, and doesn't believe consumers will pay much more than they already pay for iPods. I've written stories in the past about discussions of this sort, so don't doubt that somebody at the labels is talking to somebody at Apple. But I doubt the labels are going to license their music for anything close to the $20-per-iPod that Apple would be willing to pay, according to the Financial Times. And given the state of relations between Apple and the labels, there's more than enough complexities to prevent such a deal from happening.

That's too bad"”because such a deal could be good for everyone: the labels, Apple, musicians and, most importantly, consumers.

First, the labels. They would get some money from the millions of people who would like to carry around a few million songs in their pocket without having to fork out millions of dollars at the $.99-per-song iTunes store to do so. And with a protracted recession looking likely, now would be a great time to make honest people of as many music fans as possible"”before they start reconsidering whether to spend anything at all at iTunes in favor of spending nothing at piracy sites.

Apple could come out ahead as well. It would certainly bring in sales from the few million people who already favor subscriptions, and many more who would if these services worked on iPods. That would be a nice addition, at a time when iPod sales growth is expected to slip from 31% in 2007 to a measly 5% or so this year. I'd certainly buy one. I love my Rhapsody-to-Go service, so I carry an iPod for podcasts and audio books, and a Sansa for listening to music via Rhapsody. If Apple inked the rumored deal, it's safe to assume my Sansa's life would be in grave danger. I'd much rather carry only an iPod.

More after the break:

But who really needs to carry millions of songs in their pocket"”to essentially pay for songs they'll never listen to‾ That's been Apple's main argument against expanding beyond a la carte downloads: that subscriptions and similar services are not a good value, which is why the market remains so small. But for many people who actually use such services, this argument precisely misses the point. The fact is, you don't pay extra so you can get the songs you know you want. You pay extra for the songs you might want to hear once or five times but don't want to pay a buck to get, or more important, to be exposed to the vast universe of music you don't know. With Apple's marketing muscle and a slick new interface designed more for discovering music than for buying it, I'd bet Apple could single-handedly expand the size of the music subscription market by an order of magnitude.

In that sense, this represents a design challenge that would seem to be right up Apple's alley. "Getting to what you want (as with iTunes) isn't hard. Getting to what you don't know you want is far more important"”helping you find things you wouldn't find in a physical record store in a million years," says digital music pioneer Ted Cohen, who used to work at EMI.

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