Apple Rivals Ready Ways To Knock Off iTunes

When Apple raised the curtain on its online digital music store a year ago this week, there were more than a few skeptics in the audience. Why, they asked, would websters buy something they could get for free through numerous file-sharing networks?

Well, after selling 50 million songs from its iTunes store, it’s apparent that Apple is doing something right — and its success has spawned a coterie of pretenders itching to carve into the Cupertino, California-based company’s 50 percent share of the online music market.

Apple’s song-selling success in the last year hasn’t surprised some observers. While there was plenty of free music before iTunes opened shop — and there still is, for daredevils willing to risk the legal wrath of the Recording Industry Association of America — music downloading was a gamble at best, according to Jarad Carleton, an IT industry analyst with Frost & Sullivan in Palo Alto, California.

Enter the Pretenders

“When you’re buying from iTunes or any of its competitors, you’re getting a digital file with a guaranteed level of quality,” he told TechNewsWorld. “For people who want a good listening experience, something like that is important.”

When you download a free file, Carleton explained, “Chances are, the recording will have pops and snaps in it, or it will cut off early, or its volume will fluctuate.”

But Apple’s success at selling songs online may be less important than its success at getting the music industry to buy into the proposition. “The music industry was hard-core set against selling songs online,” Carleton said. “Something happened in those negotiations between Steve Jobs and the record label executives where Steve Jobs was able to soften their position on it.

“After Steve Jobs softened their position on it, they began to roll out similar models to different online storefronts,” he added.

The iTunes model is called a la carte. Listeners peruse a library of songs, pick a few and buy them. But another model is emerging that, its proponents say, will supplant the Apple approach in the future. That is the subscription model.

With that model, listeners pay a monthly fee for unlimited access to a music library.

Model of Choice

“What we think is going to be interesting in this next year is the rise of subscription services,” said Bob Ohlweiler, senior vice president for business development at MusicMatch, the San Diego-based maker of a popular media player and operator of an online music store.

“People will be spending more of their music consumption dollars subscribing to services,” he told TechNewsWorld.

For the cost of a CD, subscription services give listeners access to any kind of music they want, observed Brad Duea, president of Napster, a Los Angeles-based online music provider.

“That’s what’s going to be driving subscription, and that will be the model of choice going forward,” Duea told TechNewsWorld. “I foresee every online home having at least one music subscription and, depending on how many folks in their family, maybe more.”

Harder Sell

Ohlweiler admitted, though, that subscription services are a hard sell because music consumers are accustomed to owning their music, not leasing it from someone. “That’s the reason why the adoption of subscription services is running slower than the adoption of a la carte download sales,” he said.

“It’s a bit of a harder sell,” he noted. “It’s more difficult to communicate the simple value proposition. But once people realize that for $10 a month — the price of buying one album — they can access an entire catalog of music that’s available, word will spread like a virus.”

Whatever models emerge for selling music online, some things never seem to change. Case in point: the latest news that major record labels are mulling over raising prices for songs sold online.

“I don’t think it makes sense to raise prices on the Internet right now, because really what we’re doing is competing with free distribution, with piracy,” Ohlweiler contended.

“It’s crazy, and it’s highway robbery,” added Frost and Sullivan’s Carleton. “They have no packaging costs, no distribution costs, all they have is a fixed infrastructure cost. I think the record executives are being greedy,” he said, “but, then again, that has pervaded the industry for a long time.”

4 Comments

  • After years of pushing subscription services from long before the introduction of the iTunes Music Store, you’d think they’d have figured out that people really actually would rather own their music, whether that means buying it legitimately or downloading it.
    Seriously, no matter how often and how loud the subscription horn is tooted either by the tech press or the companies themselves, the numbers show that nobody’s buying into the hype. The totals from iTunes alone show that consumers still prefer to own music, not rent it.
    Subscriptions aren’t as attractive as they sound. You’re tied to listening to them via computer, can’t put your supposedly paid-for music onto a portable player to take with you, and the services may not host all the music you like anyway.
    Unless Microsoft does something really AM azing with Janus that really does let you take your subscription with you, and some WMA licensee makes a really AM azing iPod killer to put it on, and every single label all signs on at once, AND all this is done in just such a way as to make it completely invulnerable to hackers and crackers, it’ll just never fly. And that’s a LOT of if’s.

  • But the whole subscription things begs a lot of questions about how precisely it would be used, and how people perceive the nature of their music and entertainment purchases.
    Currently I have a great free subscription service – it’s called the radio. Granted it doesn’t always play what I want, but it also relieves me of the decision making process of scheduling out all of my music listening choices. I personally like the aspect of having a ‘library’ of music, physical or electronic in which I have a practical selection of music that I have invested in, both financially and emotionally.
    I don’t particularly see any advantage of a subscription service nor how an effective interface could be developed to manage a large online everchanging music library. Granted interfaces can be developed, but given the lackluster performance of all the other iTMS competitors trying to reproduce what we have today, I hold small hope that they’ll be able to tackle a subscription service effectively.
    I cringe when I think about all of the potential pricing complexities and interactions. How do the labels and artists get paid? By the download? By the number of times played thus implicating a massive tracking system/invasion of privacy?
    A movie subscription service makes sense, since because the decision making process of what to watch, given that you’re going to be investing a couple of hours, is completely different from selecting music for a 2-3 minute time investment.
    Generally, I leave my iPod and iTunes on random mode so it’s like a private radio station without the annoying personalities and exclusively made up of music that I’ve selected. The best I could hope for in a subscription service would be a ‘smart playlist’ based on some listening preference criteria, but I fail to see the advantage over selecting an appropriate radio station (or a satellite radio station).
    I think that fundamentally the people designing these offers simply don’t understand the music buying and listening decision process of the majority of people out there. iTunes reproduces the buying and owning experience of today that people understand and can relate to. The only missing piece is the physical media, and you can bet that I back up my purchased music on CD, so it’s practically the same thing, with the advantage of the immediacy and a smaller physical storage requirement since it’s all in AAC.
    There are a slew of logistical problems to look at for the long term – how will they (and the users) manage an ever growing library that must be maintained online for dynamic downloads? Will songs expire? The iTunes experience guarantees that the moment the music is on your system, and if you burn it to CD, you have a guarantee of longevity.
    All of the investors are enamored with the service model since it (theoretically) provides for a stable growing revenue stream. I wish them luck, but I think that most of the investors are throwing away their money.

  • did you really think people are so new to this that they didn’t know that there were already subscription models long before itunes?
    that is why itunes succeeded, because they were smart enough to realize people can’t stand subscription models…. not from anyone…. and they can’t stand "renting" music that they’ve always owned in the past…..
    that was the secret ingredient that made itunes so successful…..
    geesh…. do some research into how old the subscription services are……… and how stupid and unsuccessful it has been…. remember they existed LONG before itunes….
    jon.

  • While this may be appealing to some people who don’t care to own their music, I would never waste $10 on a monthly subscription service. I buy about 10 songs a month, every month. I’m certainly not going to pay 19.90 a month for 10 songs through a subscription service when I can get the same 10 songs for 9.90 elsewhere.

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