Through the years, people have purchased music in myriad physical formats, from LPs to 8-tracks to cassettes to CDs -- a never-ending musical upgrade cycle. Is this a good thing for the consumer? Is i
Gerd Leonhard and Dave Kusek are co-authors of "The Future of Music: Manifesto for the Digital Music Revolution."
Digital music: to own or to rent? Will consumers prefer to own their digital music files -- like owning a CD or vinyl LP? Or is it more likely they will want to rent music like they rent DVDs at Blockbuster or Netflix?
Which is more valuable and essential to the consumer: actual ownership (digital or physical) or unlimited access through a subscription service?
Through the years, people have purchased music in myriad physical formats, from LPs to 8-tracks to cassettes to CDs -- a never-ending musical upgrade cycle. Is this a good thing for the consumer? Is it the best path for the industry to pursue in the digital era?
The fact is that buying music on a per-track basis on iTunes or any of the à la carte digital music services is not the same as owning music. The iTunes store uses Apple's Fairplay digital-rights-management technology that makes sure (or rather, wants to make sure) that users can only do limited things with the music they buy from iTunes. There are DRM-stipulated usage rules that limit the number of burns, the number of listens per day for shared music (MyTunes) and the number of computers a file will work on at a given time.
Admittedly, thanks to Apple's clever marketing and outstanding product design, it does feel to the user like they own the music purchased on iTunes. But the fact is, they do not own it like they own a CD or even an MP3 file. In essence, they are renting it, because as a user they are ultimately not in control of what they can do with the music.
So much for the myth of owning your music if you download a DRM-protected track from any of the music services.
Next-generation services like Napster to Go provide unlimited access to something like 1 million songs for a flat monthly subscription fee -- an all-you-can-eat musical buffet, available anytime, anywhere, at the user's leisure. Users can download and listen to anything they wish, and those songs can be stored on a PC or a portable (and compatible) MP3 player for repeated listening, for as long as the user subscribes to the service.
The catch? If the user stops subscribing, the songs stop playing. In this scenario, access becomes the new value proposition, as opposed to ownership.
What could this approach hold for the music industry?
Let's consider the 12- to 18-year-olds everyone wants to sell music to. They own their iPods, Zen Micros and all types of MP3 players, which they regularly fill up with (mostly) MP3 files. For them, and some of the older crowd as well, the media player is the physical media, period.
By enabling easy-to-use, total access to all, high-quality content for a very low price, the music industry has a powerful opportunity to create an essential service and focus on the core youth market, which has been rapidly slipping away. This will prove to be impossible to do with à la carte services before too long. The 99-cent price is too high, and the current revenue splits don't work for anyone. Ultimately, the per-track model sells hardware, but it does not really sell enough music.
Habits change when disruptive technologies suddenly become commonplace. Think of the Xerox copying machine, the fax, e-mail, the VCR, TiVo, the cell phone and our precious Blackberries. Technologies shape us just like we have shaped them.
It follows that the global availability of low-cost, all-in, no-frills music subscription services will blow away our reservations about paying for music files as intangible, rented goods. Our habits will change when the service and the price are right. It's as simple as that.
Once prices drop, the music licensing issues are resolved, the catalogs are filled with millions of tracks and dozens of inexpensive, compatible and interoperable playback devices flood the market, you will be hard-pressed to find someone who does not subscribe to a music service. Just think about how few people you know who do not have a cell phone.
Subscription services allow for painless and easy discovery of new artists. They are the next-generation radio, and therefore are a perfect way to break new songs and artists. Happy subscribers will always buy more stuff from their trusted vendors: A great basic service at a low price opens the market up for special releases, previews, package deals, tickets, merchandise, videos, books and much more.
Subscriptions can and will be packaged into other offerings: Think Internet access, magazine subscriptions, college tuition, cell phone services, Starbucks coffee cards, frequent-flier programs and so on.
Call it renting, listening or downloading. The bottom line is that customers today demand even more value for an ever lower price, and that is what they are going to eventually get.