Business Matters: Rhapsody Shows Subscription Services Can Cost $5 Per Month

Subscription services don't always have to cost $10 a month for unlimited, mobile music. Case in point: the price of the Rhapsody on-demand music subscription service added to a MetroPCS plan just dropped to $5 from $10 a month.

A Rhapsody spokesperson explained to Billboard.biz that the original MetroPCS-Rhapsody bundle was offered on only on one plan. Now Rhapsody is available as an additional option - as are options such as call forwarding and a ringtone subscription -- with all of MetroPCS's $40, $50 and $60 pay-as-you-go smartphone plans.

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Here's the important part: prices for subscription services are more dynamic than you may realize. People often worry that prices for subscription services are too high. Given the nature of today's services (they're not really ready for the mainstream user, frankly), a $10 price -- the typical price for the mobile tier charged by Spotify, Rdio and others -- is probably more appropriate for the early adopter than the laggard who follows digital trends. Until prices drop, it's imperative subscription services find ways to create more value (e.g. better features, more partners) so more people think the products are worth $10.

But record labels won't necessarily hold firm at the $10 price point for subscription services. They're willing to deal if a company presents them with a good opportunity. In this case, MetroPCS - like Muve Music by Cricket Wireless - presents a large, untapped market of new digital music customers (read: little to no danger of cannibalization). Thus, each new subscriber equals incremental revenue.

Mobile carriers offer a lot of potential for music services. Cricket Wireless, parent company of Muve Music, ended the third quarter with 5.6 million subscribers and over 700,000 subscribers to Muve Music. It now has 1.1 million Muve Music subscribers. MetroPCS ended the third quarter of 2012 with 9 million subscribers.

How important are mobile devices and relationships with mobile carriers to the future of digital music? A few statistics in Rhapsody's press release tell the story: 56% of growth in listening on Rhapsody comes from mobile phones, up from 27% in 2011.