So Apple finally gets into the music subscription business….well sort of. Today Apple announced the first of its iTunes Pass offerings, in partnership with EMI and 80’s electronic music pioneers Depeche Mode. In return for $18.99 a month buyers get
“…new and exclusive singles, remixes, video and other content from their favorite artists over a set period of time, delivered to their libraries as soon as they’re available. [They] will also receive the new album on its street date plus great music and video exclusives before and after the album’s release over the next fifteen weeks.”
Make no mistake, this is a big deal, but there are also holes in it.
The big deal part first:
- Apple has held off getting into the subscription business for years, with Steve Jobs casting disparaging ‘music rentals’ jibes at Napster et al every time they raised their head above the parapet. Apple were never going to get into the temporary download business, but there was no ideological or business reason why ultimately they wouldn’t get into the subscriptions business, as long as it was on their terms and didn’t detract from the core value proposition of iTunes.
- The ‘rental’ subscription business isn’t exactly in vibrant form. Rhapsody posted solid enough growth but that is against a back drop of persistent declines at Napster and Yahoo jumping out of the game. And even Rhapsody has failed to push music subscriptions out of a niche of tech savvy music aficionados. The iTunes Pass has mainstream appeal because a) it is targeted at specific fan groups b) it is cheaper c) it delivers permanent content
- Q4 was another record sales quarter, but replacement sales were a big chunk. The growth in new iPod customers is slowing so Apple needs to look at ways of leveraging more ARPU out of its existing customers.
- But the most significant part of all this is not what it means to Apple, but what it means to the music industry. This is a glimpse into the future. As we shift from the distribution paradigm to the consumption era the straight jacket of the album format and release schedule can be cast aside. We’d been saying for years at Jupiter (and now Forrester) that the record labels should start delivering a constant stream of content to fans, not just waiting for landmark release dates. In short, build an engaged, ongoing relationship with fans based on content not just artist pages on MySpace etc. This is a brave first step in that direction. Yes there have been similar efforts direct to fans via artist sites etc. but that misses the mass market opportunity and misses the point: this is the future of music retailing, not just some fan boy offer. Great work to EMI for driving this forward. Mark my words, much more will follow.
And now the gaps:
- Subscribers get exclusive content but no exclusivity on the album. Even if the main release date was delayed by a week or two this would have given much more value to this offer. I can understand the reasoning, principally attempting to mitigate against lots of copies leaking onto file sharing networks ahead of release. But this logic is flawed as a) it only takes one copy to get up there and the recent U2 experience shows that there are always leaks, however tightly you police across the value chain b) most of those who would download from P2P networks are lost customers anyway. Those customers who pay nearly $20 in advance for content they’ve not even heard yet are the ones you should be worrying about. Everything should be focused around making them feel special, not some Quixote-esque tilting at Bittorrent.
- My other minor quibble, no disrespect to Depeche Mode, but wasn’t there some bigger, more current act this could have been launched with?
Those caveats aside, this is a really exciting initiative. Welcome to the future of music retailing.