Access or ownership? Or both? These questions dog a music industry that wants to leave behind the confusion and uncertainty of the last ten years. Ownership, represented by paid downloads and physical purchases, continue to wane. Access models, represented by cloud-based streaming services, are growing in popularity but have managed to generate little revenue. The industry will soon get to pit a promising access model, Spotify, against a newer generation, the ISP-based subscription services. If access models are to be the way forward, these services will provide some valuable learning opportunities and will act as stepping stones to future models.
A differentiating feature of the access model is how revenue is captured. Ownership models require repeated transactions – although eMusic collects monthly fee from its customers. Access models depend on either advertising or a fee – usually a recurring fee. Whether a service generates a one-time, lump sum fee or a recurring fee, it carries the potential to be bundled with other products and services. In other words, the coming changes in music services will be how subscribers pay, not just what subscribers pay.
A lure of the ISP services is the ability to make a music service a line item on a larger telecom bill. BSkyB will launch Sky Songs, its hybrid download-streaming subscription service, in the U.K. on Monday. A similar subscription service will soon follow by Virgin.
Spotify founder Daniek Ek has been pushing discussion on access models. At a speech in London on Wednesday, he urged the industry to move toward a future with different access points and payment methods. “We think the future of the music industry is about the packaging and access of rights,” Ek told an audience. And how do content owners receive payments when their products are integrated into packaging and access of rights? “The key for us is getting music in to people’s existing billing habits,” he explained. mocoNews has a recording of the speech and a partial transcript:
“If we can transcend (billing habits) so that, maybe you don’t actually have to pay for the music, it’s included in your data plan with your carrier or ISP or cable operator; it might be when you buy a new product, a TV screen, that you get one year of music included ... devices like new Samsung TV screens, where they’ve got Linux built in, which allows you to do software on it - they’ve got YouTube built in, they might have Spotify built in.”
Adopting different approaches to billing will be integral to the future health of the record industry. Individual transactions (all those downloads and tickets Ek wants to sell) alone may not provide enough revenue. So, transcending current billing habits can offer an alternative to the limitations of individual transactions.
That said, great products will be needed, too. Many access models have been attempted but not all of them are working out well. Some, like Spiralfrog, came and went quickly because the core product just wasn’t good enough. Other fine access models are just too niche. Even with a cool, minimalistic design and incredible ease of use, Muxtape was too limited in function to have mainstream appeal.
Look at the case of Nokia’s Comes With Music. Before Spotify appeared on the market, Comes With Music was being held up as the model of the future. In this particular model, the cost of a music subscription is built into each Comes With Music-enabled phone. On paper, Comes With Music looks like a great value proposition: a single price and unlimited access to music. But in reality, the combination of handsets, desktop client and price tag isn’t working. On Thursday, Music Ally posted Comes With Music’s global subscription levels that show weak interest from consumers. As of July 2009, there were only 107,000 active Comes With Music users in nine countries – and only 33,000 in the U.K.
Comes With Music represents a step forward in one way: it changes how the consumer is billed. Rather than collect money through multiple transactions, the consumer pays for access in a single transaction. That price is bundled with the price of the handset. It may not be working – the price of the music service is not exactly hidden – and it may not represent Ek’s vision, but it’s a small step in a positive direction.