Subscriptions Are the Future of Digital-Media Delivery

I've purchased more than 250 songs from Apple Computer's iTunes Music Store and probably a few dozen more at other online music stores such as, Musicmatch Downloads, Napster, and the RealPlayer Music Store. But these pay-per-play music stores are obviously a passing fad, and the future of online content delivery clearly has nothing to do with ownership of music. We'll soon look back on services such the iTunes Music Store and shake our heads, as we probably do today when discussing black-and-white TV or 8-track cassettes.

Although 99 cents might seem like a reasonable price for one song, it's expensive when you consider the capacity of a 20GB Apple iPod, Dell Digital Jukebox (DJ), or similar portable audio player. To fill up such a device using the iTunes Music Store or a competing service, you'd spend $19,800—more money than I spent on my last car (which, incidentally, I'm still paying off). That cost puts the exorbitant price of an iPod in perspective, doesn't it?

And although you might argue that even 99 cents is a bit high-priced and that downloadable songs should cost 50 cents or less, consider that most of the CDs you've purchased during the past year were far more expensive. Over the years, I've routinely spent $15 to $18 each on hundreds of CDs, raising the cost per song to as much as $2 per song. I've probably spent more than $30,000, therefore, to fill my 20GB Dell DJ. Goodness knows what the total tab is for my CD collection. And let's not forget what my time is worth. After all, I also had to spend the time and effort ripping my entire CD collection.

iTunes - iSubscribe?Let's end this depressing discussion (I can intuitively feel that my wife is upstairs, silently stewing over these money concerns) and look instead at today's partial solution to the problem. Some companies, such as Napster and RealNetworks, offer streaming music services in addition to the more standard online music services. These streaming services, which cost about $10 to $20 a month, offer unlimited, 24 x 7 access to their entire music collections (typically 400,000 to 500,000 songs), which you can stream to your PC. But streaming services have a limitation: You have to be sitting at a PC to take advantage of the service. And if you want to burn a song to CD, each service handles things a bit differently. With Napster Premium, you have to purchase the song (typically at 99 cents); RealNetworks' RealRhapsody service gives you a bit of a discount, offering burnable songs for 79 cents if you're a subscriber.

But why would you want to burn streamed songs to CDs? We're living in the 21st century, after all. For the up-and-coming music lover, portable audio devices are the way to go because they're more portable and less fragile than CD players and can hold far more songs. But that $20,000 price tag to fill them is a bit steep, especially for college students and other music-loving youngsters on a budget. Wouldn't it be nice if you could pay a subscription fee to one of these streaming services and fill your portable device with the streamed music?

Alas, you can't. Indeed, the big weakness of today's streaming music services is that you can't use them to fill portable audio devices. That situation is going to change, however—and soon. When it does, I think we'll see a quick migration away from the iTunes Music Store-style services that offer only downloadable, pay-as-you-go music.

Here's how the streaming services of tomorrow will work: Microsoft is developing an extension of its copy-protection software that will extend the Digital Rights Management (DRM) technology in Windows Media 9 Series to subscription-based services and portable devices. The basic idea is that content will be on a timer. If you pay for your streaming-music subscription through August, your portable device will play any content from that service through August. If you pay through December, you're good to go through December. You just have to connect your device to the PC when it's time to renew the subscription. But you'll probably be connecting all the time, anyway, to download new music.

Why is this functionality important? First, you don't actually buy any music. But you have access to the more than 500,000 songs that these services currently supply. And you can do some fairly amazing things with a portable device. For example, you might instruct Napster to download the top 20 songs for each of the past 25 years. Or you might take advantage of Napster's community features to download all the songs that your friend Bob is listening to. The possibilities are staggering, and companies such as and Virgin Music will soon launch their own music services that are specifically designed to take advantage of this functionality.

Still not convinced? Let's do the math. Let's say you have a 20GB Dell DJ or a similar device. Remember that it would cost $19,800 to $30,000 to fill that device using old-fashioned methods such as buying and ripping CDs or purchasing songs online. How long would it take to spend that much money on a constantly evolving music-subscription service? Even if Napster doubles the cost of Napster Premium to $20 a month, it would take 99 months—more than 8 years—to hit the $19,800 figure. And during that time, your selections would change and grow with your tastes and the release of new music. I think that streaming music services are a no-brainer. In fact, I'm almost positive they'll spell the end of music stores such as the iTunes Music Store unless those services evolve to support the subscription model.

Napster - Dead Duck Swimming?

Here's the final nail in the pay-per-song coffin: Stores such as the iTunes Music Store don't actually make any money because record companies demand a high percentage of each sale. The iTunes Music Store is in business only because Apple hopes it will generate more iPod sales, and the company earns a healthy margin on each sale of that overpriced device. Today, streaming services such as Napster Premium and RealRhapsody make more money than their pay-as-you-go brethren, even though they have relatively low subscriber rates. Imagine how good their situation will become when subscriber rates skyrocket as consumers learn about the possibilities of using subscriptions with portable devices. Such demand will drive healthy competition in the market, which will benefit consumers by leading to better services with lower prices.

As innovative and exciting as the iTunes Music Store was a year ago, this year's subscription and portable-device advances will be even more revolutionary. What started as a whimper will quickly evolve into a bang from which all music-loving consumers can benefit. Today is a great time to be a music fan.

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