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Microsoft-based Subscription Music Services to Expand in Early 2005

While Apple's iPod garners all the publicity this holiday season, Microsoft and its partners are planning an expansion of the Plays For Sure campaign in early 2005 that they hope will tilt the favor of consumers in their direction. That's because today, only Napster and a few hardware makers are taking advantage of Microsoft's latest Digital Rights Management (DRM) technology, which lets users copy subscription-based content onto portable devices. But in early 2005, the ranks of compatible services and devices are expected to swell dramatically.

Compatibility is the key to the success of this strategy. Though the best-selling iPod represents about 43 percent of all portable audio player sales, it is incompatible with the wide range of online services available to Windows Media Audio (WMA)-based players, including Napster, MusicNow, Wal-Mart Music Downloads, MSN Music, XM Radio, Court TV Extra, FYE Downloads Store, Puretracks, Live365 Radio Network, and others. Meanwhile, all WMA-based players can play purchased content from the stores listed above that provide such content. What's been missing is a way to play subscription content.

Today, that choice is limited to Napster and a handful of portable devices. Napster offers a $15-a-month Napster-To-Go subscription, which provides subscribers with access to any of Napster's tracks, at any time, while sitting at a computer. But if you have a compatible portable player--including the Creative, iRiver, and Samsung Portable Media Players, or the Gateway MP3 Photo Jukebox, you can copy any of this music to your device and listen to it on the go for as long as your subscription is active.

Most in the industry--with the notable exception of Apple--believe that subscription-based offerings are far more viable, financially, than a la carte 99 cent downloads. That's because the download market is constructed in such a way that it can't make money (indeed, is barely Apple breaking even on its iTunes Music Store) thanks to one-sided contracts with the recording industry. Furthermore, subscription plans offer a better deal for consumers. You'd have to spend almost $1000 at iTunes to purchase 1000 songs, but you can subscribe to any number of songs for a full year at Napster for just $180. That means the price of your music collection won't go up as you buy larger capacity portable devices. And as your musical tastes change, you can simply swap out older, never-listened-to songs for fresh tracks without paying more.

To make this plan viable, however, there must be more compatible devices. And sure enough, Microsoft's hardware partners are stepping up to the plate, offering consumers software upgrades for their players that will make them compatible with subscription content. Creative will update its Zen Micro to support the subscription technology; Dell will ship software updates for its Dell DJ and Dell Pocket DJ; Rio will update its Rio Carbon and Forge devices; and Virgin will update its Virgin Electronics Player 5 GB.

As for services, you can also expect others to join Napster in the WMA-based subscription game. And Yahoo's MusicMatch already offers a lucrative subscription plan that sits outside of Plays For Sure, while RealNetworks' proprietary Rhapsody Service has already attracted 650,000 paying subscribers. In the meantime, Apple is grabbing all the headlines, from the very deserved (the company has sold hundreds of millions of tracks from iTunes) to the dubious (despite frequent stories about iPods being "sold out," that is obviously not the case). But then, that's what happened when the company shipped the first Mac in 1984, and then the iMac in 1998. Like the iPod and iTunes, both were trend-setting in their day, but both were trampled under the collective stampede of Microsoft's hardware partners.

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