Switched On: Fixed Fees and Diminishing Returns
posted September 14th 2005 3:10PM
Several weeks ago, Switched On discussed the delights and disappointments of Napster-To-Go. Despite all the software glitches experienced using the service, I had found at least a few new artists that I liked within the first few days (and even more that I didn't), but generally noticed that my music collection had well penetrated the subgenres I enjoy.
This exemplified one of several paradoxes of the service. Subscription music services have the most theoretical value to music enthusiasts. However, the bigger one's music collection is, the less incremental value one will find in the service. The ideal customer for these services is a mythical musical virgin whore - someone who has a limitless appetite for music, but who never buys it. Napster-to-Go competes with Napster Lite, the company's more "traditional" online music store. As more tracks are purchased, the subscription value decreases.
This could become more than an academic curiosity for Napster because it�s easy to see how many consumers could burn out on Napster-To-Go. The first time they transfer a newfound track they love, they�ve won a small lottery. Hey, they got this song they would have otherwise bought for �free!� Maybe they even found more than one CD�s worth of music and really socked it to The Man. However, unless they have copious time (to explore and to listen) and exceptionally broad musical taste, most consumers will likely find diminishing returns in terms of the amount of new music they like through the service.
At that point, they may be continuing to pay every month for mostly the same music (a losing value proposition). Alternatively, they may start using the service as a new form of entertainment in itself, taking more joy in exploring what they like and don�t than in actually justifying it as a substitute for purchase. That may not work at Napster�s $15 per month price, but it might at Yahoo Music�s $5 per month price.
Of course, the amount of music available on these services increases constantly. The library of online stores grows in three ways � by adding songs from the back-catalog of labels, by adding exclusives (often live cuts and remixes), and by adding the latest product shoveled over from the pop mines. If you love the direction of the latter or just always want to be someone who is hip to the latest beats, subscription music services may be a good investment. If you�re more of an oldies fan, the service will become a progressively worse deal as the catalogs fill out. And if you�re enough of a fan to want to track down the Album Version Hutch Mix versus the Album Version Jamie Mix of 2Pac�s Thug N U Thug N Me, then you probably want to own them.
The current field of Internet music subscription companies understand part of this message. They have wisely invested in better recommendation engines and presentation than the iTunes Music Store. Unlike for Apple, where new downloads �merely� represent incremental revenue, subscription services cannot be justified unless you keep discovering and downloading new music. The value message is somewhat similar to the one that satellite radio has been successful with, but unfortunately finding and downloading music is still too much work when compared to pressing a button on an XM or Sirius receiver.
Similarly to how the limits of consumers� current libraries have made it more difficult for Apple to sell higher-capacity iPods, limits on their time and appetite for music exploration will pose challenges for music subscription services.
Ross Rubin is director of industry analysis at NPD Techworld, a division of market research and analysis provider The NPD Group. Views expressed in Switched On, however, are his own. Feedback is welcome at fliptheswitch@gmail.com.
finally someone sees the light.
so is the engadget RSS feed down or what?
Was that 2nd to the last paragraph totally deja vu or what?
I can understand the POV of the author, having tried Napster and now subscribed to Yahoo. Basically I view it as paying $5/month to forego those annoying 30 second clips and be able to listen to an entire song or album.
Indeed there are drawbacks (ex. screwed up tags, DRM restrictions, DAP transfer problems), so much so, that if I find something I like, I usually just buy & burn it or try to find the CD in a B&M store.
I think that goes a long way toward explaining the redued capacity in the iPod Nano- most people are happy with 1000 songs. More than that requires a serious commitment to obtain, identify, and orgainize your music. Most people are going to be happier with a lot less.
If Apple could do a DRM'd (expiring) podcast based recommendation service, that might bridge the gap - providing targeted recommendations and pushing them to users. Want to keep listening? Got to buy the track.
"If Apple could do a DRM'd (expiring) podcast based recommendation service"
New Music Tuesday...
It sucks, but it exists. They could always expand upon the idea and do several for different genres and tastes, rather than just playing a bunch of random crappy clips like they do now.
I wouldn't be surprised to see the equivalent of real music-based "radio show" type podcasts coming directly from Apple, with the obvious point being to promote the purchase of those songs.
Of course, then every record label will be trying to buy a spot on those podcasts, so it's not like it's going to be an unbiased view of new music. It's still going to be crammed full of corporate-rock and bubblegum pop.
Eventhough I know the limitations Napster or other services have, I truly realized how ridiculous it is when I bought my car that accepts mp3 files on SD card. I pay my $15 a month for napster to go and can't play any of this music in the car without a separate player of some sort. It is complete retarded nonsense. For now I'll just enjoy my free satellite radio trial and listen to podcasts.
You mean Napster still exsists? They sure have been quiet since their so called "Media Blitz".
yeah, totally deja vu.
Lots of free music podCasts out there, don't need a subscription service to partake. I like blues... The Roadhouse and IndieFeed ...subscribe through iTunes.
I love Rhapsody. For two years I've been an extremely happy customer. At least once a week I think, "damn, I love this." So Real gets my money, I think its a fair trade. Here are some thoughts off the top of my head:
* I'm someone who likes listening to new music and lots of genres.
* I love to look up old stuff I listened to when I was younger -- which * I quickly recognize as not worth paying to own.
* I hate buying music and after listening to it once or twice deciding that it is lame.
* I'm near a internet computer most of the day, so "owning" the music doesn't really make any difference to me.
* I like talking with friends about our favorite music or new bands that might be interesting. We can sit around and just check it out.
* I spend very little time commuting, so portability isn't that important. Once the "to go" features are improved it should mostly work itself out.
* When I throw parties, the "infinite" jukebox I've got set up is always a big hit.
* I have a number of friends who are also subscribers for many of the same reasons. So, I'm not the only one.
I guess it depends on where you listen to music and how you like to listen that makes one type of service better than another.
Spoken like an Apple enthusiast - wishful thinking that subscription music services are a diminishing value.
At five bucks a month - yahoo's service beats the snot out of I-tunes.
Prior to signing up for this service I collected CD's for years. I have hundreds of them. I hardly ever listen to the older ones. So for $60 bucks a year I get all the new music I want. How many songs will $60 buy you on I-tunes? It is a pittance and well worth it. You Ipodophiles better get with the program.