Digital NARM Discusses Subscription Services

May 17, 2007

I am big fan of the subscription service concept and it is discussed in the business from time to time, but in the music industry the majors still don`t push this pricing concept.
Digital audio insider writes here from a panel discussion at the Digital NARM and explains why that could be:

” (…) Also, I’m not sure about how truly enamored the labels are about that “steady, predictable revenue stream.” The revenue stream may be steady and predictable, but it’s flowing to the subscription companies, not directly to the labels. As I understand it, a label only shares in that revenue when subscribers stream that label’s content and it’s only a penny or so per stream. (The subscription companies are truly based on the health club model — an active subscriber can cost them more than the monthly subscription fee in payments to labels, but they get to keep all of the revenue received from an inactive subscriber.) I suspect the labels’ current push with Apple for subscriptions is part of their overall negotiation strategy, not a huge sticking point.

In the short term, there’s obviously more upside to labels by selling an expanded digital product directly to consumers, hence the greater enthusiasm for downloads, ring tones, wallpaper, etc. Any income from subscription services is welcome, but there’s much less of an incentive for labels to push them directly.

On the consumer side, what will it take for music fans to embrace subscriptions on the scale necessary to make them a major part of the equation? I’m guessing it will require a truly seamless listening experience — the ability to immediately hear what you want to hear on your computer, portable device, in the car, etc., with minimal buffering and at a reasonable sound quality. We’re not quite there yet with the technology, though we are getting closer. Until that happens, music fans are unlikely to give up the idea of ownership even if what they “own” isn’t appreciably different from the streaming sound file of a subscription. (…)”

Good points, but I think all this can get fixed in the future. The most important argument mentioned above is the “truly seamless listening experience” and that is just a technology question that should get solved in a few years.
When this is done, the subscription model will give the digital market, not only for music, new great possibilities.

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