Another debate over music subscriptions
As much as I like music subscription services, I'm not sanguine about their prospects. I've seen too many of them flame out over the years. Even those that are still alive -- Napster, Rhapsody, Zune -- can't seem to grow past 1 million subscribers.
Nevertheless, when David Del Beccaro, CEO of Music Choice, said the subscription model was doomed to failure at the Digital Music Forum West in Hollywood Wednesday afternoon, he was practically shouted down by other panelists at the conference. It was a clash between faith and empirical evidence, and the former had more troops.
Del Beccaro argued that people may be willing to buy "media subscriptions" -- e.g., cable TV bundles -- but won't pay a monthly fee just for music. They're just not interested in managing a bunch of small-dollar services for limited types of content. "This isn't the only digital media business where subscription isn't working. It's just one of them," Del Beccaro said, citing TV shows as another example.
His remarks drew immediate push-back from other panel members. The problem for subscriptions, said Brad Navin, chief executive of The Orchard, is that they had too many consumer-unfriendly features. (I can name a few: they didn't work with the most popular MP3 players, portability was klugey, and the software was frustratingly unreliable.) Those problems are gradually being overcome, so the failures in the past don't necessarily predict what will happen in the future, Navin said.
Ted Mico, an executive vice president within Universal Music Group, agreed, saying that a number of "very legitimate barriers to entry" into the business had only recently been removed. He predicted that
compelling new subscription services would emerge over the next nine months. Unlike the earlier generations of services, though, they'll be aimed at smart phones.
"We're one mile into the marathon," Mico said.
Del Beccaro wasn't persuaded. "There are all kinds of $5 [a month] services available in your cable system today. Almost none of you buy them. None of you.... This dream that the music business is different ... is a pipe dream."
On a subsequent panel, Michael Robertson -- chief executive of MP3tunes and former head of MP3.com -- took up Del Beccaro's banner. "The music subscription business is irrelevant," he said. The problems are that the monthly fee -- a minimum of $10 a month for a service that works on mobile devices -- is way too high for the mass market, and that the services are "dripping with DRM," or digital rights management software, that destroys interoperability.
[Except that the interoperability problem is going away, thanks to mobile devices. Look at MOG, which has an app for iPhones, Android devices and Roku set-tops, with other platforms under development. Whether that allows MOG to break through the 1 million barrier remains to be seen.]
Anyway, Robertson said the industry would be better off charging $3 a month for all-you-can-stream music subscriptions and attracting 25 million customers than charging $10 a month and attracting 1 million. To which Albhy Galuten, vice president of media technology strategy for Sony Network Entertainment, replied, "$75 million a month isn't a lot of money for the music industry."
And it wouldn't be if the $3-a-month subscription services cannibalized all other spending on recorded music. Robertson doesn't believe that they will, but then, that too is a matter of faith.
-- Jon Healey
PHOTOS: A display for Napster service at a Best Buy store in Culver City. Credit: Stefano Paltera/For The Times