Analyst: Apple could ‘flick the switch on subscriptions’ | iLounge News

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Analyst: Apple could ‘flick the switch on subscriptions’

Merrill Lynch analyst Steven Milunovich said today that Yahoo’s low-priced subscription music service could cause Apple to offer a similar plan of its own through iTunes. “Apple could flick the switch on a subscription model,” Milunovich said in a research note obtained by iLounge. “Yahoo clearly is a problem for Real Networks and Napster, but will it hurt Apple? We do think Yahoo’s entry could cause Apple to offer iTunes as a subscription model later this year, especially if there is evidence of share loss.” He noted that subscriptions account for about 15% of the legal download market with iTunes holding over 70%.

Milunovich also said Apple is working to protect iPod profits. “Meanwhile, Apple isn’t standing still,” he said. “Industry observer Robert Cringely examined the new Tiger OS and found unused icons and support of the H.264 codec that hint at video capability on the iPod and an iTunes video store. Similarly, we have speculated that an iPod running video clips could be out for Christmas and that H.264 was important to future hi-def plans. Cringely also believes Tiger may have support for competing music formats, indicating that if iPod margins get squeezed Apple might license its software and switch to software-driven profits. That’s more of a stretch though Apple does appear to have learned from past mistakes.”

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Comments

1

Maybe it’s just me, but it seems like most of the publicity is coming from people wondering about competition.  Yahoo really hasn’t said much, but everyone knows about their service because of that question.  Sort of ironic, no?

~Dan

Posted by papayaninja on May 12, 2005 at 3:13 PM (PDT)

2

I don’t know why Yahoo’s entry creates that much of an issue.  There have been subscription models before.  None of them work with iPod, the market leading MP3 play.  I thought it was comparably priced with Napster and Real Player, isn’t it?  I guess I just don’t see the issue here.  Apple is maintaining share, and a dominant one at that.  Speculation that subscription is a force seems to be driven primarily by the fact that there are three big players doing it, but I personally don’t know anyone who uses them.  I haven’t seen any research on this, but I’m curious how many people WANT a subscription service.

Posted by Gatsby003 in New York on May 12, 2005 at 3:24 PM (PDT)

3

I personally don’t know anyone who uses them.

Latest figures show 950K Rhapsody and 450K Napster subs. Add in misc others and you are near 1.5 million monthly subs for digital music (and excluding satellite subs). And the sector has been growing 30/40% quarter-on-quarter for the past year or so.

Maybe you just don’t know the right people?

Posted by Demosthenes on May 12, 2005 at 3:30 PM (PDT)

4

Well lets see how long they keep subscriptions at $6 or 7.

I think iTunes may be subsidizing this low subscription price to some extent.  If the RIAA wasn’t making gobs of money on iTunes, they probably might not have agreed to a cut rate for Yahoo.

And probably, they’re going to want more down the line, meaning Yahoo will have to raise prices, like XM did, going from $10 to $13 a month.  You thought your cable TV bill went up too much?  How about a 30% increase!

Posted by wco81 in West Coast on May 12, 2005 at 3:59 PM (PDT)

5

Yahoo’s service is a game changer because it is the first to hit a very consumer-friendly price point (excluding some questionably legal sites). $60 per year is unbelievable to have access to a million songs. For less than the price of lunch out per month, you can sample new music, explore different genres, go back and find old favorites and all with higher quality 192 kbps tracks.

I am very tempted by this offer. Just being able to listen to new music would be worth $5 /month to me. I’ve been planning on getting an iPod mini to replace my 40 GB iPod and now I’m seriously thinking about getting an iRiver h10 or zen micro instead. I can’t be the only one with this shift in thinking.

Posted by kemphoto on May 12, 2005 at 4:34 PM (PDT)

6

As I’ve said before, I can’t wait for a subscription service.  I already spend more than $20 a month on iTunes already.  That same amount or less for unlimited songs?  Right on!

If Napster To-Go had come out BEFORE I bought my iPod, I probably would be over at ZenMicrolounge.com right now.

I don’t see why everyone is so against a subs. service.

“Well if I stop paying, I can’t listen to my music anymore!”  DUH!—That’s the point of a subscription!

“I want to ‘own’ my songs!”—How much money do you shell out a month for your cable bill, movie rentals, satellight radio?  You don’t own anything there.  If you have a subs. and want to ‘own’ a song, you’ll still be able to buy it.

I see a subscription service on iTunes as a real good thing for apple and their consumers.

There’s obviously a demand out there.  I just wish Steve J. would open his eyes.

Posted by matt928347 in California on May 12, 2005 at 4:45 PM (PDT)

7

The Yahoo model is the first sub that tempts me.

The price is cheap at $5/month, compared to $15 for Napster. Plus, I can buy songs at a higher bitrate for 79 cents.

If you hate subs, you can even think of it as pre-paying for complete song previewing (instead of the 30 second iTunes snippets)!

Happily Steve has stated recently that he is not “religious” about subs…I hope Apple lets Yahoo and Real and Napster cannibalize each other a bit to determine a marketable product/pricepoint, and then step in with the competitive iTunes music/video subscription to keep the podders happy customers.

Posted by Tom Affinito on May 12, 2005 at 5:55 PM (PDT)

8

I’d sign up for a subscription service if Itunes offered one, mainly to broaden my musical horizons.

I don’t buy any songs off Itunes currently, instead I just sample them on Itunes and then buy or order the CD.


But there is no way I would downgrade to some second-rate MP3 player to try one of these services though.

Posted by Topmounter on May 16, 2005 at 6:48 PM (PDT)

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