Mix: Apple music biz, subscription model, Engadget awards | iLounge News

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Mix: Apple music biz, subscription model, Engadget awards

Steve Lidberg of Pacific Crest Securities says that a flash memory-based iPod, and new initiatives in 2005, should help Apple grow its music business to more than $5 billion by 2006.

Apple rivals Napster and Yahoo say the iTunes Music Store’s 99-cent pricing is the wrong formula for digital music, and that subscription-based models are the future.

The fourth-generation iPod was named “Gadget of the Year” in Engadget’s 2004 awards. Picking up the “Disappointment of the Year” and “Worst Gadget of the Year” honors was Sony’s Network Walkman NW-HD1.

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Comments

1

“With the top-of-the-line iPod, “You can fit 10,000 songs on it,” Gorog says. But “to do that would cost you $10,000 if you bought the songs from Apple. With our plan, customers can get 10,000 songs on their device for $180 a year. It’s an enormous value.”“

I can’t wait until this is hacked, and for a mere $15 you download 10,000 songs, cancel your subscription and laugh at how dumb this idea is.

Posted by granitopod on January 3, 2005 at 5:22 PM (PDT)

2

You both made great points.  I think ultimately I like the subscription model more.

Posted by Talking Madness in Los Angeles on January 3, 2005 at 6:20 PM (PDT)

3

It’s always fun when people with no market share talk about how wrong the one with all the market share is.  It’s like the reverse of owning a Mac

The problem with a subscription service is that at the end of the day you are only renting your music.  I’m going to listen to the records I buy off iTunes today, tomorrow and ten years from now.  If I were instead to invest in a subscription service after one year at $180 a year I would own nothing.  Whereas from iTunes I’d own 18 new albums.  The reason the iTunes model works is that’s how everything in the real world works with the exception of video rentals, and there’s still a huge DVD market.

Posted by Jazzlawyer in Kelowna, BC Canada on January 3, 2005 at 10:05 PM (PDT)

4

Jazzlawyer-

I hear what you’re saying and I think ultimately the music companies will try to create a market where both methods coexist.

You’ll subscribe and when you hear something you like enough you will buy.  In fact that’s what we have now with free radio.  You hear something on the air and you may go and buy it.

It is funny hearing a company striving for market share say the company that owns the market is doing it wrong, but only time will tell.  I think the best move for Apple will to be open to both strategies.

The problem I have is that after awhile I get tired and want to be turned on to something new.  I think satellite radio is a great way to find new music.

I think the marketing angle of “spend $10,000 with Apple to fill up your iPod, or $15 a month with us too” could catch on.

Ultimately with iTMS songs you’re just renting, too.  You’re at the mercy of Apple and their desire to modify the license agreement.  Apple is very lenient with the play policies, but who knows if the will get stricter or looser.

Posted by Talking Madness in Los Angeles on January 3, 2005 at 10:47 PM (PDT)

5

It would be a real stunner to think that Apple doesn’t already have some sort of subscription plan in place. It’s just not the right time for that now in their opinion.

I agree with you granitopod, it will be amusing when they get hacked. And let’s face it, everything out of Redmond gets hacked.

Posted by jharyd in Philadelphia on January 4, 2005 at 3:12 AM (PDT)

6

Speaking for myself, a subscription plan would be useless.  The number of songs on my iPod has not grown much in the last month or two.  There isn’t anything on the radio these days that really gets my attention, so I’m just not buying much new music at all.  To throw $xx.xx out the window per month would be a waste in my case.  However, if I do hear a song I like, I’ll gladly drop $0.99 for it.

Posted by jfarrx19 in Pittsburgh, Pa. on January 4, 2005 at 5:29 AM (PDT)

7

There’s room for both. Buying may be most popular, but renting clearly has its uses for some. If that becomes important enough, Apple can surely add that to iTMS in future.

Posted by Nagromme on January 4, 2005 at 6:02 AM (PDT)

8

I think the real issue here is that Napster and Yahoo are just plain wrong. They might as well say: “No one wants to buy an iPod, they all want to buy the Sony Network Walkman.” Which is clearly not true. iTunes is smokin’ them and since it doesn’t offer this service, they are using it to their favor by claiming something that isn’t true. They’ll do anything at this point to attract new members.

There may be people that like the idea of renting music, but I would imagine most of them won’t be happy when they decide to end their service.

Posted by starflyer in Madison, WI on January 4, 2005 at 9:05 AM (PDT)

9

I can understand their $10,000 song theory, but when does anyone have time to listen to 10,000 songs???  Better yet, can anyone find 10,000 songs that they’d really want to have?  It’s simply not managable. 

I don’t know for others, but I tend to listen to a CD at a time, maybe create a playlist of 20 to 30 songs.  When I get sick of that music, I move on to something else after a week or so. 

One of my friends was ripping his entire collection of CD’s to his iPod - in total about 8,000 songs.  I asked him, “Yeah, but when are you going to listen to all of that?”  All he said was, “I don’t know, it’s just cool.” 

Having music on your iPod is only cool if you actually listen to it. 

Posted by ipod21 on January 4, 2005 at 9:55 AM (PDT)

10

The point is not being able to listen to 10,000 songs.  The point is being able to find particular songs or albums or artists when you want to listen to them.

You might as well ask what’s the point of going to a library that has tens of thousands or hundreds of thousands of books if you’re only going to check out 2 or 3 books!  Or what’s the point of carrying a little black book with a couple of hundred phone numbers listed in it if you’re only going to call few people on any given day?

Posted by yyoo on January 4, 2005 at 10:27 AM (PDT)

11

I’ve got 14 gigs of music on my 40gig ipod (which also serves as a portable harddrive) and while I don’t listen to every playlist or album, I’ve found that it’s useful as a gamer geek to have every CD there.  My friends can say ‘We need to play THIS song’ and I whip out the iPod and fill the void.  As for mood music at work, traveling, etc, I’m never without a soundtrack.  I listen to about 80% of the songs on my iPod, though it takes me months to cycle through it all. And I like it that way.

Posted by Ipstenu on January 4, 2005 at 10:28 AM (PDT)

12

so let me get this straight, to listen to the music on your music player you have to keep paying the subsciption fee (if you’re using microsofts copy protection for the additional $5 a month) what happens when you decide to get rid of the service? bye bye music that you’ve been basically “borrowing” from the napster service also what happens when you decide to get rid of the service but want to keep the music, you have to pay $1 for each, I really don’t see the advantage in the end.  As i see it I’d rather, purchase a song for $1 then borrow a song for a subcription fee.

Posted by MATRIXsjd in Burbank, Ca on January 4, 2005 at 10:56 AM (PDT)

13

“You might as well ask what’s the point of going to a library that has tens of thousands or hundreds of thousands of books if you’re only going to check out 2 or 3 books!”

The point was that’s not practical for some users, that’s all.  In a subscription model, you are actually checking out the ENTIRE library - to use your example.  You’re paying to have access to songs you’ll never listen to, and could probably care less for. 

The main point I was trying to make is that I’d rather pay for music I listen to than have load my ipod with junk I could care less for. 

Posted by ipod21 on January 4, 2005 at 12:44 PM (PDT)

14

They are the one going against the history of people buying recorded music.

Plus, once they have a captive audience, they can raise the subscription prices.  They would love to be the new cable TV companies.

Posted by wco81 in West Coast on January 4, 2005 at 3:37 PM (PDT)

15

Obviously the idea of subscription services is attractive to businesses. What a great scheme - you get the customer paying you every month. Even if your new artists this year suck you have the customer paying for all the old stuff.

Is there a place for a subscription club? Sure, but only in the context of letting the music lover find things to buy. But to me, all of this is a moot point. I find DRM so offensive that I don’t spent a penny on any digital media. In fact, all I buy are used CDs. I refuse to give a penny to the record industry.

Posted by david_b on January 4, 2005 at 6:31 PM (PDT)

16

The problem with a subscription service is that at the end of the day you are only renting your music. I’m going to listen to the records I buy off iTunes today, tomorrow and ten years from now.

We’ve been here before. With “lawyer” in your moniker you’d think you wouldn’t make a simple mistake like this, but you don’t “own” any of the tunes you download from Apple.

You get a license from Apple to play them back on Apple-approved hardware. So basically, you are looking at two different licensing models. The difference between them is the up-front and the residual costs - but the principle is the same.

In the Apple model, you pay a premium license fee up front for Apple hardware to play back your tunes. Then you pay a single unlimited-use license fee per track. But to play back that track you are always going to have to use Apple hardware. If your iPod breaks, and it will within your “ten years from now” example, then you will have to pay a premium Apple hardware license fee to play back your tracks.

Every month between 1 and 2 billion tracks are downloaded from p2p networks. By comparison, Apple recently reached a grand total of 200m downloads after many months. When you stretch that 200m downloads across all the million of iPods you see that a vanishingly tiny percentage of iPod disk space is being used for licensed downloads.

Therefore the iTMS model is not a main consideration for iPod buyers. They overwhelmingly choose to fill their iPods from music they own (via CDs, vinyl, etc) or they download from p2p sites and friends.

The only way you can guarantee that th music you “buy” will be listenable 10 years from now on your device of choice is to buy it in physical form, probably CD or SACD. Relying on either the Apple or the Rhapsody/Napster subscription model is a pipedream.

And a final thought for those who derive comfort from the fact that the iTunes software is currently free. iLife was free, once upon a time, until Apple unilaterally changed the rules of the game. You think within 10 years, when people have invested billions of dollars in FairPlay DRM’d files, Apple won’t feel attracted to the idea of introduing an annual iTunes license fee? You’re brave.

Posted by Demosthenes on January 4, 2005 at 8:11 PM (PDT)

17

In a subscription model, you are actually checking out the ENTIRE library - to use your example. You’re paying to have access to songs you’ll never listen to, and could probably care less for.

Rhapsody is actually very useful for parties and suchlike. You boot it up and people can find and play pretty much any song they want. They can go for songs they already know, or use collaborative filtering and recommendations to find similar music they will probably enjoy.

Personally I think one of the great things about music is that you can always look forward to finding new tunes to listen to. Subscription services are just another way to do this. I think it’s a model with legs… otherwise how to explain the undying popularity of radio? Within broadcast radio you have ad-supported stations and listener supported stations. And some countries even have government/license supported stations.

Subscription services are also a good fit for college and corporate networks. They provide a way for network bosses to enable their users to listen to music without infringing copyright by downloading or sharing files illegally.

Rhapsody has passed 700,000 monthly subscriptions. That’s a serious bit of change anyway you look at it - and remember that Real gets to keep much more of the monthly take (less broadcast royalties) than Apple does from its iTMS license model.

When we have proper 4G networks then subscription radio will come into its own. Imagine when every person’s mobile phone is bluetooth enabled and people walk around with a simple unobtrusive earclip. Their telco-subsidized phones have music subscriptions so they can stream and play back pretty much any tune their wearers want to hear. They can share playlists over the network, or arrange to listen to music simultaneously for a community feel.

The monthly subscription billing is handled by the telephone company, and is probably a line item for $5 like today’s texting add-on. Given the efficiency of telco billing, they could even begin to microbill on a per-minute basis (0.0001 cents ?)  for a la carte users.

This is why Apple is rushing to get a phone out with Motorola - the combination of high-bandwidth networks, streaming subscriptions, and ubiquitous, cheap-or-free high-fidelity audio phones is a killer combination and a challenge for a boutique, low-volume, high-cost device like the iPod.

Posted by Demosthenes on January 4, 2005 at 8:25 PM (PDT)

18

Here’s some math for you…

iPod is average of $400.  The way most people on this site talk, you would think they upgrade their iPod once a year, but let’s play it safe and say on average when you combine battery life, the desire to upgrade and what whatever else may happen to an iPod that most people will upgrade once every three years.

$400 / 36mos. = $11 per month

Of course that doesn’t include any new music.

Some articles have speculated that Microsoft will introduce a $50 player and charge a $10 per month few for the right to transfer any song to your device and play it as long as your subscription is valid.

$50 + (10 * 36mos.) = $410

And, this includes all the songs you want to listen to.  Sounds like a better deal to me…especially if you raise the cost of the iPod in the equation to reflect the highest end device (60GB iPod photo would come out to ~ $16 per month with no new music).

The one thing Apple has going for it is the hottest machine on the market and this will allow them to dictate the direction of the market, but I believe possibly only for the short term.

The media companies love the idea of licensing material as opposed to selling it, and they will not deviate from this course.  The days of us music consumers actually owning something are long gone.

It will be interesting to see what model works out best for the artists.  They also have the power to change markets.

Posted by Talking Madness in Los Angeles on January 4, 2005 at 10:55 PM (PDT)

19

I boldly predict that RealNetworks will develop a new version of it’s Harmony technology that allows for music rentals.  It will debut with RealPlayer 11 in Q3 2005, and will offer 192Kbps AAC files, and will be iPod-compatible.  Apple is caught by surprise.

Posted by Galley in Greenville, SC on January 5, 2005 at 12:32 AM (PDT)

20

With a subscription service can you burn the tracks to disc? I guess not as you would be able to keep the music when you cancel your subscription. But this would be useless to me as I would not be able to quickly stick a CD on in my car or home stereo without having the bother of cables and somewhere to put my iPod (and then having to cary my iPod around with me at the other end)

Posted by struddie on January 5, 2005 at 1:52 AM (PDT)

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