March 19th, 2008
Subscription iTunes? It can't come soon enough
Apple may be finally getting a clue about music subscriptions. We can only hope that Apple gets on the subscription bandwagon.
Apple is in discussions with the big music companies about a radical new business model that would give customers free access to its entire iTunes music library in exchange for paying a premium for its iPod and iPhone devices.
The “all you can eat” model, a replica of Nokia’s “comes with music” deal with Universal Music last December, could provide the struggling recorded music industry with a much-needed fillip, and drive demand for a new generation of Apple’s hardware.
For what it’s worth, the Financial Times report appears to be a trial balloon (Techmeme). I doubt that there will be one premium for forever access to the music library. The model will be something like this:
- You pay a premium for a year’s worth of iTunes all you can eat access when you buy a new iPod;
- After that year you renew for something like $80;
- Apple collects recurring revenue and subscriptions become a big business.
Greg Sandoval reports that no one is commenting, but does acknowledge that revenue sharing and prepackaged music would be a dramatic turn for Apple.
I could never figure out why Apple hasn’t offered a subscription service before. Apple has the DRM, it has the platform and it has the critical mass. Instead, Apple CEO Steve Jobs has always maintained that people want to download music and own it. That may be true to a degree, but there is a dirty little secret about all of this downloading. You have to manage your library. You own music you don’t want anymore. And you still have to go out and get new stuff. It gets old.
My hunch is that Jobs has gotten used to the idea of recurring revenue with iPhone and its monthly kickbacks from AT&T. It’s possible that Jobs had a financial epiphany about subscriptions and the power of recurring revenue.
Enter subscriptions. I’d rather have a subscription music service. I’m sick of my music. That’s at least part of the reason why I subscribe to Sirius–I’m lazy and would rather have someone just play new tunes I haven’t heard than have to go looking for them. Of course, the other primary reason for Sirius is Howard Stern, but that’s another post.
The point: Apple has what it takes to make music subscriptions the norm. In fact, Apple can make music subscriptions palatable to the masses. Music is perfect for the subscription model if done well (and Apple can do it well).
If this Financial Times report is true, I’m a happy camper. Apple’s move to a subscription service can’t come soon enough.
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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