Music Subscriptions: Dead or Alive?

[Please note that this post first appeared on the Forrester Consumer Product Strategy blog.  Over the coming month or so I will be migrating all of my activity there.  I will soon be posting new information here for you to amend your feeds and subscriptions. Thanks]
Mark Mulligan[Posted by Mark Mulligan]

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Real Networks yesterday announced that they intend to spin-off music subscription service Rhapsody as a stand alone business. Rhapsody has long been held up as the best of breed music service, but in the age of Spotify and Comes With Music it and other premium rentals have increasingly struggled to maintain relevancy.  Spotify and Comes With Music each may have

fundamental business issues and are very different offerings, but they both provideunlimited music free at point of consumption.  Once you have that proposition in the marketplace selling 9.99 rented streams looses its shine, however good the discovery and usability may be.

This time two years ago Rhapsody, Napster and Yahoo had about 1.8 million paying subscribers between them.  Since then Yahoo got out of the game (passing its subs onto Rhapsody), Napster got sold and the total count is now around 1.3 million. So just as the music industry is meant to be booming online, its premium tier sheds over a quarter of its value across its heavyweight proponents.

The simple fact is that charging 9.99 or more a month for music that often only sits on your PC is not a mass market value proposition.  It’s great for aficionados but mass market consumers aren’t used to buying music that way.

So is this the end for subscriptions?  No, not at all, in fact they’re doing better than ever, it’s just the old guard that is struggling to keep pace.  A new generation of subscription services are being built that place portability at their core and that often hide some or all of the end-cost to consumers.

Let’s take a quick look at the numbers, here are total paid subscribers by territory (all numbers are approximate):

  • Europe: 1.25 million (key players: Spotify,Vodafone, Napster)
  • US: 2 million (key players: Rhapsody, Napster)
  • ROW: 5 million (key players: Melon)

That gives a global total of about 8.25 million, which is promising though still short of where they need to be.  If subscription services are to help digital music break free of the iPod orbit and go mass market then two things need to happen:

  • Premium subscriptions need to be unlimited MP3
  • Mass market subscriptions need to have channel partners such as telcos and device companies hide some or all of the cost to consumers i.e. subsidized subscriptions (For the record I think the ‘cost to consumer’ price point for unlimited music should be 3 euros/dollars/pounds  a month.)

The first generation of music subscriptions may have been niche also rans, but the next wave – given the right business models – could be much more important.

2 thoughts on “Music Subscriptions: Dead or Alive?

  1. Hi Mark-

    We have been following, with great interest, your ongoing posts on the music industry/music subscriptions /social influences and the cloud.

    We believe that this highly volatile transition period presents both challenges and great opportunities. We wanted to share with you, our take on this space and how our company, GrokMusic, LLC is taking a somewhat unique approach.

    We agree with you that the entire social element of participation with real human beings is critical to a deep and evolving music experience. Pure algorithms based on a digital breakdown of song components, or simply what’s in your iPod have real limitations.

    Our company is focused on a discovery approach that is: 1) Based on the subjective input of hundreds of thousands of actual music fans and; 2) is supportive of a wide range of discovery experiences no matter how one consumes music. We feel that personal social music tools (sharing with my friends) are only part of what’s required. Equally important are aggregated social experiences (what other people who like what I like also like). As the “cloud” liberates us from the limitations of our personal music collections, people are going to need multiple tools to guide them through the infinite (and ever-expanding) musical universe.

    We also concur that mobile is the key area of growth, as you say people can turn, “… a bored 10 minutes waiting for a train into a connected a fun engaged interaction with a friend, sharing playlists on MySpace.” The other behavior that this connected “time filling” will drive is a need for short, highly interactive applications that enable a user to not just listen to 3 songs linearly, but to quickly sample and explore. That’s another key focus of what we’re doing with our GrokMusic® technology. We currently have iPhone and Android versions under development.

    Thanks for your efforts in leading this conversation, we are eager to be a part of it.

    You can learn a little more about who we are here in the Hearst News article published this week:

    A couple of relevant quotes from the article:

    “If you already use Pandora, MOG, Rhapsody or LaLa to get your music, GrokMusic can be your starting point…” Harold Davis, Hearst Newspapers

    “Pandora is not a great way to find new music, but I think this site is. One of the nice things about this is that it can keep people on it for 15 to 20 minutes to an hour and you can come back the next day find out more. It’s not a one-trick pony,” ….Mark Pruner of Web Counsel, LLC

    Another story in the Sacramento Bee described us as:

    “Easy to use, fun for play, the site suggests music far afield from home entry.”

    Again, we enjoy your reading your blogs and your take on this fascinating evolution in music consumption.

    Best regards,

    Tom Sharrard

  2. So You Want To Be In The Music Business?
    Your tools to success depends on the ability to take the knowledge given and apply it! Every artist has the potential for greatness based on talent, but talent is only 10% of the formula. Your music biz will provide you with the tools for success in the business. You will stay informed on issues such as marketing, publishing, contracts, copyrights, downloads and more. Now is a great time to be in the business with the advances in technology and more independent selling outlets. The internet has leveled the playing field for artist globally. So expand your ability to learn the legal and practical aspects of getting your business of music paperwork in order.

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