Entelligence is a column by technology strategist and author Michael Gartenberg, a man whose desire for a delicious cup of coffee and a quality New York bagel is dwarfed only by his passion for tech. In these articles, he'll explore where our industry is and where it's going -- on both micro and macro levels -- with the unique wit and insight only he can provide.

With the introduction of the iTunes Music Store, Apple brought the business model of buying music online to the masses at 99 cents a song. iTunes changed the dynamic of the music business: consumers re-discovered the single and no longer had to buy a whole CD to get the one song they might want. It's a model that's worked well: I've bought a lot of music from the folks in Cupertino over the years, and so has everyone else: Apple's one of the largest music retailers in the industry.

Having said that, Apple's model isn't the only one out there. Microsoft, Real, Napster and others have all tried to push the subscription model that allows users to consume as much music as they wish from a catalog of millions of songs for a monthly fee. Some services, such as Microsoft's Zune Pass, also allow users to keep a certain number of songs each month in unprotected format. Although subscription services will likely continue to need be protected by some sort of DRM I don't really have an issue with that. Technology like DRM should be used to create new business models, not protect old ones.
I like the subscription model a lot. For one thing, it's one of the last ways for vendors to set themselves apart from Apple and the iPod. Clearly, there's a consumer market for subscriptions as well, even thought current services haven't taken off the way iTunes has. There are two things missing that's preventing these services from going mainstream. First, there has yet to be a clear articulation of the benefits of this type of service to consumers. As I've said in the past, consumers have traditionally had only two ways of getting music: free radio and purchased music. If subscription services are ever going to take off, there's got to be some effort to explain the benefits of the subscription model to consumers.

But that's only part of the story. The second is devices.

Connected phones and subscription services together can help generate the next big inflection point in the music industry.

Subscription services have until for the most part been linked to the PC, and the PC isn't where most consumers want to listen to music. Yes, there have been some good efforts, like the Rhapsody integration with Sonos, but that's not yet a solution that's practical for everyone. The real key is to link subscription services with connected devices that consumers already own: phones. It's a no-brainer. Take a device that's already used for listening to music, already has a ubiquitous internet connection and pair it with a few million songs that can be streamed with ease. Oddly, vendors such as Nokia and Microsoft who offer both subscription music services and phones haven't figured out how to pair them together.

In the last week, Apple approved the Spotify app and Rhapsody submitted a new iPhone app. The iPhone is particularly important -- according to Interpret's data, it's the one phone users are purchasing for its media capabilities. With these two apps, consumers will for the first time have the chance to create powerful individualized services, optimized for the their listening tastes. If Rhapsody and Spotify bother to take the time to explain just how the subscription model can co-exist with the music already owned by the consumers, we just might see theses services go from niche, music aficionado-oriented brands to mainstream success. It's been a long time coming, and if these services do start to gain traction, I expect we'll see Apple launch their own service as well. Connected phones and subscription services together can help generate the next big inflection point in the music industry. Now if Apple will just approve that Rhapsody app so I can finally get my stream on.


Michael Gartenberg is vice president of strategy and analysis at Interpret, LLC. His weblog can be found at gartenblog.net, and he can be emailed at gartenberg AT gmail DOT com. Views expressed here are his own.

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