“According to Strategy Analytics, subscription services will replace downloads as the dominant music online model and cause the success of iTunes to be short lived. The shift towards subscription music services will be driven by a combination of changing consumer expectations as well as pressure from broadband service providers and record companies,” Wolfgang Gruener reports for Tom’s Hardware Guide.
“‘Downloads tend to be too expensive,’ said Martin Olausson, senior analyst with the Strategy Analytics’ Broadband Media & Communications service. ‘If you were to download 10,000 songs at 99 cents each, you are talking about a lot of money.’ Instead, subscription services such as Napster and especially Yahoo’s Music Unlimited offered access to the same amount of songs ‘dirt cheap’ and therefore would be more attractive to consumers,” Gruener reports. “Even if iTunes controls about 70 percent of the online music market this time, Olausson is certain that Apple will lose market share to subscription services and the fact that iTunes is deeply tied to the iPod. ‘iTunes is positioned to increase hardware sales for Apple. Other services focus on content,’ he explained. ‘Apple is about to make the same mistake that they made in the PC world. They also lost their lead they had with computers in the 70s and 80s.’ The stronghold the company tried to keep with iTunes and the iPod could soon be broken with more open subscription services and music-capable mobile that could outsell the iPod ‘very quickly,’ Olausson said. According to the analyst, Napster and Yahoo were best positioned to take iTunes’ place as the dominating music service.
Full article here.
MacDailyNews Take: If faced with any market share losses, not seen to date, what’s to prevent Apple from adding a subscription option to iTunes Music Store? Does this analyst really believe that Apple’s iTunes Music Store doesn’t “focus on content?” Has he ever explored Apple’s iTunes Music Store? Does he understand that an iPod is not required to use the iTunes Music Store and vice versa? Does he realize that Motorola and Apple are about to introduce a music-capable mobile phone line? Just how much analyzing went into his analysis anyway? Can anyone with a demonstrable pulse be an analyst?
Again, iPod+iTunes is not the Mac, no matter how weary we grow of having to repeat basic common sense, here goes: The Macintosh platform required and still requires huge investments by developers to create compatible software. So, when faced with budgetary contraints, they chose and still sometimes choose to go with the most popular platforms. The iPod simply plays music that can be encoded, for very little cost, in any format the “developers” (musicians and labels) desire: AAC, MP3, WAV, AIFF, etc. The music doesn’t need to be rewritten, recorded, and remastered. It’s like writing Photoshop once and then pressing a button to translate it for use on Mac, Windows, Linux, etc. To draw an analogy between Mac OS licensing and the iPod/iTunes symbiotic relationship simply highlights the analyst’s ignorance of the vast differences between the two business situations.
Related MacDailyNews articles:
Merrill Lynch analyst: Apple could ‘flick the switch on a music subscription model’ – May 13, 2005
Enjoying Apple’s iTunes and iTunes Music Store without owning an iPod – May 11, 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
Motorola expects to launch first Apple iTunes phone this summer, second iTunes phone in 4th quarter – May 11, 2005
Motorola’s Apple iTunes phone software screenshots posted online – May 11, 2005
Will cellphones eat Apple’s iPod or vice versa? – May 09, 2005
Another day, another ‘iPod may go the way of the Mac’ article – August 16, 2004
The iPod is not the Mac, so stop trying to compare them – August 13, 2004
One more thing: The analyst said that Apple is not focused on content. Have these people ever looked at iTunes? It has a lot of really cool exclusive stuff. A lot of out of print stuff. A lot of obscure artists. That’s what makes iTunes so cool.
I have 6195 songs on my iPod, of which 97 have been downloaded from iTMS (72 Pepsi Caps!). I can tell you I had a real problem picking out the last 10 songs.
Am I in the minority here…because I actually own some music already and only need to pick up a song or album here and there?
Who buys an MP3 player and doesn’t own (or ‘have’) any music?
Do people actually have time to pick out and download 10,000 songs? I know I don’t.
As I’ve indicated, the majority of my music is from my CD collection (I ripped about 2/3 of it). I think I have more CD’s than most(and it’s taken me 15 years to acquire).
I can’t imagine paying a monthly fee for 15 years to get around 8000 songs I give a crap about. AND have the chance it could vaporize at any moment.
I guess I no good at math!!
Al:
Depending on the company producing the CD (MCA’s CDs being the absolute worst) the adhesive which binds the halves of the disk together will begin to decompose. Many video disks from before the DVD era have decomposed to the point of unplayability. Some progress has been made in improving the adhesive, but your disks probably have a life expectancy of about 20-40 years (again, depending on who produced the disk).
MDNMW: chance – as in: Civilization is taking a chance putting the sum-total of all our knowledge on optical disk.
I have spent well over $400.00 on music at itune and it has been well spent. I can take my music anywhere, burn to CD, listen on my computer, ipod and not have to worry about a subscription running out. Paying less means getting less in terms of online music subscriptions. I believe Apple and should hold its course and we all will see the doom of subscription go by the way side. I want to own my music. Who wants to be forced to constantly pay every month for fear of loosing their music.
If anything this and similar articles can be seen as sources of the new myth relating to mac: that subscription trumps a la carte services.
Al: I believe Camus meant that CD’s will not last forever as the dominant format in which music is sold.
I agree with that prediction. However, I suspect that the music industry will delay this by their fears of and mishandling of legal downloads. While I would guess that the majority of current CD owners will always want to keep that or a similar (DVD-audio, SACD) format on a physical disc, people youger than 25 (or 22, whatever) are not as attached to it.
I prefer CDs because it’s a very good archival source, but also because that’s essentially the highest quality of sound you can get from the music industry (yes, there are exceptions). Sound quality is a key stumbling block for me in moving to downloads or subscription – I only buy stuff from iTMS that I know I won’t play much.
However, I’m also attached to owning the music. I will always retain this preference, but I suspect that the younger crowd have less problem with subscription services where songs are rented. Renting is fine if you mostly enjoy the current hits from major labels, subscription should appeal to you because you can hear all the new albums. The subscription is cheaper than buying those CDs. Personally, even though iTMS has a very good selection (and more songs that most other major download services), I still can’t find more than 50% of what I want there, so a subscription wouldn’t appeal to me even without the sound quality & ownership issues.
This is my verbose way of saying that I think subscription services will take hold, but I don’t believe the analysts predictions that it will overtake pay-per-song download services. I think they can live together and that, if Apple loses major marketshare, they’ll simply add their own service (as others have noted above).
Camus: while you make a legit point about DRM and how that relates to MDN’s take on this, it doesn’t impact their bottom line. Yes, it is an impediment, but one that can be taken care of by freeware. MDN’s essential point that businesses won’t be forced to make large investments equipment or development to switch between formats (as was the case with windows and windows boxes). The ability to Apple to add a subscription service essentially at any time also argues against the “same as Mac market share in computers” arguments.
With a subscription, you pay even while you’re not listening!
Evolution,
I agree with basically all your points, even the personal lack of appeal of a subscription service (at the moment but not discounting the idea in the future). However, when analysts compare the Mac to the iPod/iTunes, I think the comparison is not as much regarding actual similarities between the two, but rather the decisions that Apple makes regarding the two. If subscriptions become popular and iTMS starts losing market share, will Apple either offer subscriptions, license Fairplay, or open up the iPod? They could do any of these three options rather easily, but that doesn’t mean they will. Refusal to alter their business stance based on changing economics may be their biggest threat that could bring their marketshare down. If that happens, then it will be like the Mac in that both had a huge lead in marketshare which they eventually lost. I think that is the only worthwhile comparison between the Mac and iPod/iTunes, but it is a noteworthy one that should not be regarded lightly because Apple can sometime be kind of stubborn regarding its policies.
I did an impromptu poll of 10 of my coworkers. I asked them this:
Would you rather own your music outright, or pay a monthly rental fee for life.
10 of 10 said they would rather own it.
I don’t know who these people are surveying, but it is apparant in my circle that people would rather own music. I like to pay for what I like and have it forever.
I just hate the notion that if you subscribed for something like 10 years and missed one month, your library is useless.
Oh btw…only 2 of the 10 people were Mac users.
-G5Man
I’ve read many articles claiming that Apple will lose out because of subscription services. Even Billy Boy claims this.
Now, I didn’t do well in math, flunked algebra in fact, but when someone says the record companies like subscription services over Apples iTunes I have to do a reality check…
Let’s see, if we sell a song through iTunes the record company gets approximately 65 cents… If we rent millions of songs the entire recording industry get a miniscule percentage of Yahoo’s 5 buck a month fee or someone elses $14.95 fee. Doesn’t matter what the amount, it’s got to be less income per song than Apple generates for an individual label.
It would seem to me that virtually everyone would have to be using subscription services to come anywhere near what Apple generates for them each month. And that isn’t going to happen.
It looks like all the subscription supporters are blowing smoke up each other’s ass… I’d sure like to know if I’m insane or are them.
I am curious what is going to happen when hackers break the DRM of windows media. It will be on the net everywhere and people will sign up for a month, load up 10,000 songs and then use a cracker or hack to unlock the songs and then drop the monthly service stealing all the music. I can’t imagine that the record companys will be thrilled with that. I give it a 90% chance of being a real problem. ( yes there will be ways to cercomvent Apples DRM and give it away but at least it will have been paid for once)
Subscription services are basically a ripoff for artists, especially the songwriters. Of course major record labels pocket huge money either way, but at least the payoff is easy to calculate (the average artist probably gets about 6-8 cents per track, the songwriter/publisher gets 8 cents). With subscription its probably so difficult to see if you are getting ripped off by the label you probably would do better on welfare.
No matter what the other folks do, if it won’t run on the iPod (ie Microsoft DRM) few folks will buy it.
Can anyone with a demonstrable pulse be an analyst? The answer to that question seems to be YES! They don’t care if they don’t have any facts on the subject. They just type whatever they feel like and post it on the web.
There certainly was no analizing here.
I agree w/ Colonel Panic. Its a FUD campaign.
here the one thing i’ve never read any analyst take into consideration: all the accessories that are made just for the ipod. it’s an eco-environment that cuts across every price point. carl largefield designs ipod cases for christ’s sake! do you think griffin would be wasting it’s time producing fm transmitters, cases, and car chargers specifically for the ipod it they felt the ipod would loose market share? hell no. when 3rd party producers begin making accessories for the iriver or the dell dj then we’ll worry. till then get an ipod, plug into itunes, download some music, and have a good time.
If a significant portion of consumers (doesn’t need to be a majority) want a subscription option, Apple will eventually need to do it. And there’s no reason for Apple not to do it. Either way, purchase or subscription, Apple will make money. Presumably, the purchase model makes Apple more money, that’s why they prefer it, but they’ll make money either way. I hope they’re not willing to give up too much market share in order to avoid the prescription model, because then people will start to believe the doomsayers that say Apple is going to lose out again. And it could become a self-fulfilling prophecy.
For now, though, there’s no evidence that there’s a great demand for subscriptions, and iPod’s dominance is clearly INCREASING, with the Shuffle’s massive market share gains in the flash drive segment. I bet Apple is monitoring this whole issue month-to-month like a hawk. SJ seems very committed to winning this one, as he should be–he’s no Gil Amelio!!!
“‘Downloads tend to be too expensive,’ said Martin Olausson, senior analyst”
Yes, I agree. So what make the analysts think that the record labels will let this “free” access to their musics go on?
Once the record labels realize reduction in their bottom line, they will pull the plug on the subscription. If they don’t pull the plug, they are making more money than download, thus consumers are paying more for their music.
this guys sole purpose in life is to be validated by Paul Thurrott.
Yikes.
He really must feel great that one man agrees with him.
I am not remotely impressed by Yahoo…
“WE SELL ADVERTISING!”
Everytime I read the “downloads are too expensive” line I have to think the person writing it is less than 25 years old.
When I first started buying music, it came on shiny black plastic disks about 6 inches in diameter. They were called records, and you got two songs per disk. As I recall, over the span of a decade, the price went from about 49 cents to about 98 cents per disk. Taking into consideration (along with the costs of many other typical material goods and services) that a gallon of gas was 19 cents then and is about $2.50 today, today’s music ought to be priced somewhere between $3 to $6 per song.
The entire article stems from a single faulty premise: MP3 is going the way of the dodo. As long as people can buy CD’s and rip them to their iTunes Libraries, iPods are going to sell. The core of my iTunes library is the CD’s I bought myself. The iTunes Music Store helps me fill in gaps and helps me to acquire new audio easily.
There is a number of CD’s and LP’s I lost or damaged that I enjoy on my iPod because of the iTunes Music Store.
Microsoft is hostile to mp3. The vast majority of the music listening public is not. Analysts who don’t understand this or are deliberately carrying Microsoft’s water on the topic will always sound idiotic. Likewise, no right-minded consumer wants to “rent” music. The subscription services may become the “flavor of the month” for a while, but people want to own their music outright. The continued existence of P2P software offering shared mp3’s bears this out. And–illegal or not–those mp3’s play on iPod. There will be no loss of Apple marketshare in the mp3-downloaded music space until someone else embraces that reality.
Taking into consideration (along with the costs of many other typical material goods and services) that a gallon of gas was 19 cents then and is about $2.50 today, today’s music ought to be priced somewhere between $3 to $6 per song.
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how the fuck is music a scarce resource like oil pfft
you’re using INFLATION to say that music should be more expensive, kinda like how candy bars used to be 5 cents?
good call..