Scott Kessler, director of information-technology research for Standard & Poor’s Equity Research Services, says the online giant’s new music service poses more of a threat to RealNetworks and Napster than Apple in a Q&A session with BusinessWeek.
Q: How does Yahoo’s entry affect the digital music market?
A: The headline everyone is talking about today is that Yahoo is now going to become a formidable competitor to say, Apple, which has its iTunes service and the iPod MP3 service. But the first thing is that there are two segments right now in online music: Pay-per-download, like Apple’s iTunes, and subscription services, like what Yahoo is about to offer. The reality is that they are moving into a different segment in online music than Apple. It’s one that is occupied primarily by two other players, Napster and RealNetworks with its Rhapsody service. Those two are going to be much more seriously affected.
Q: Both Napster and RealNetworks have seen shares fall drastically. Do you think those price drops are justified?
A. Napster is really at risk here. While it’s widely acknowledged that they have a well-known brand in online music, what they do is not substantially dissimilar from what Yahoo is now offering. They have the same kind of compatibilities, and I think they even use the same standard for the file formats. What’s worse, online music is really Napster’s only business.
More in the full article here.
Related MacDailyNews articles:
Yahoo’s music play hurts Napster, RealNetworks; may force Apple to offer iTunes subscription service – May 12, 2005
Napster To Go Soon? Reports $24.3 million net loss on $17.4 million net revenue – May 12, 2005
J.P. Morgan: Yahoo music service ‘does little to break Apple’s tight grip’ on digital music market – May 11, 2005
Yahoo launches Napster To Go, Rhapsody To Go killer (takes aim at Apple’s iTunes Music Store?) – May 11, 2005
RealNetworks drops 21%, Napster plummets 30% on Yahoo music news – May 11, 2005
Apple debuts iTunes Music Store in Denmark, Norway, Sweden, Switzerland; over 400,000,000 songs sold – May 10, 2005
Goobye Napster… It’s been nice knowing you!!
Wow–someone who demonstrates a bit of real knowledge.
How strange among “anal”ysts–and curiously refreshing…
First Post!
Yeh-heh-hesssssss
Yahoo’s poop threatens poopster and poopNetworks more than my poop
The former Roxio, now Napster II, is going to regret the bet they took on getting out of software and into the online music biz. Everybody and their momma is in the biz and only Apple has been able to gain traction. On the WMA side, Yahoo and Microsoft (via MSN Music) can burn through money for YEARS if they need to. Real Networks and Napster are going to join a number of other wannabes and shutter their ops in the next 6-12 months. My 2¢.
Yeh-heh-hesssssss
poop
I love how nobody even mentions Microsoft’s MSN Music store. That certainly is telling of its irrelevance.
Seems to me that Google gets a lot more notice currently than Yahoo. Google has actually become part of the language; ie., to Google. What has Yahoo done lately to keep from going to 2nd place?
He’s right… Kinda. Until Apple (if they ever do) releases a subscription service, those also-rans have a niche… Yahoo is taking that niche by storm…
And give this some thought:
Suppose Apple and Yahoo! get into a price war. Who can go lower, longer? Even if the price of a song is $00.00 Apple continues to make money selling iPods. Sony Walkman sold several times the number of currently installed iPods during Walkman’s heyday. So there’s still a 100 million or so iPods to be sold at a minimum. In this scenario, Apple goes its merry way while Yahoo!, Napster, and RealNetworks try to figure a way to sell songs at a profit while Apple is giving them away. Reminds me a bit of Netscape browser versus Microsoft IE.
He makes good points.
This just illustrates how the “plays for sure” companies are all competing with each other until 1 or 2 survive to challenge iTMS/iPod/iTunes. In the long run, Apple may be forced by the market to open up the iPod/iTMS/iTunes, but at this point in the game and with position as the field leader, their strategy protects them from this competition (as does their techology and software package).
Addendum:
One possible scenario is that the subscription services try to subsidize money losing subscription rates with as much embedded advertising as the market will bear. Imagine streaming video commercials, meriad persistent pop-ups, etc. How does that play against the iTunes “it just works” experience?
And then there’s the short term consideration customers of those other services have to think about. Like, “What happens to my subscribed Napster music base, that I’ve been paying for every month when Napster locks its doors sometime this year?”
With Yahoo jumping into the subscription service, now the world knows why subscriptions won’t work. Every time one provider has a lower price, the user must totally dump their entire music library to save a few bucks.
If the user does not switch, they will feel like they are getting ripped-off. Pay more or trash your 500 rented albums; the subscriber is screwed either way!
Music subscriptions are not too dissimilar to being a drug dealer.
wow.. it’s almost as if all the subscription services are avoiding competition with itunes..
no wait.. that’s too logical..
Zeke: If Apple pulled something like that, I think they would be game for an anti-trust lawsuit. You can’t sell your products below cost for the sole purpose of pushing competitors out of the market.
MikeR,
‘Seems to me that Google gets a lot more notice currently than Yahoo. Google has actually become part of the language; ie., to Google. What has Yahoo done lately to keep from going to 2nd place?’
In Calgary, Yahoo is still part of the language, especially during Stampede.
There all going down except iTunes. No one wants to rent music only to see it disappear the minute you stop subscribing. Whether it’s $6 or $15 a month you keep paying and paying and paying.
LordRobin,
Explain that anti-trust argument to Bill Gates. I’m sure he’ll have a good chuckle.
Rent music. Great idea. Then I’ll rent oxygen. While I’m at it, I’ll make ongoing payments to rent sleep.
Yes rental. Fabulous idea.
I think I’ll sell my house and just rent one. Instead of a garage, I’ll just rent a parking space.
Life will be so wonderful without all those strings attached. I’ll just jump around to get the lowest price from whoever is still in business this week. Bargain oxygen, cheap parking spaces, rented iPod.
It’ll be swell.
One big point that is never mentioned is that if you get in heavy with a subscription service you are at their mercy with pricing. Sure Yahoo is cheap now but what happens if you spend hours and hours downloading thousands of songs and then they raise the price?
You would have two choices – pay through the nose or lose all your effort and start over on another subscription service and spend hours and hours all over again redownloading the same music – until THEY raise their prices.
No thanks – I will pay once and be done with it. Peace. Of. Mind. There are so many ways that using an Apple product delivers on this. And that is one big reason why I am going to continue to be a Mac User.
LordRobin, It won’t be that obvious. Maybe something like buy an iPod, get 200 free songs. Sound familiar? Like buy an Airport Express, get 30 free songs…
But alas, it won’t be necessary. Napster just has a store (server). But since they don’t provide the player software (client on both computer and player), it is much harder to truly innovate and differentiate as it costs too much time and money to get their software integrated on each of the player hardware mfrs. And if MS innovates (ha!) in Janus or WMP, all their WMA competitors get the innovation too. So no differentiation. Which leads to lowest-price commodity. Which Yahoo will win because they have a great advertising business to support their music business.
Don’t forget that these songs cost Apple about 70¢ each. They can’t give away 200 of them with an iPod.
I spent 100-200€ every month to iTMS. I want to own my music.
This is the way to go.