Business Matters: Rdio Unveils Free Listening Option
Business Matters: Rdio Unveils Free Listening Option

As Rdio subscribers found out on Saturday, customers of streaming services will have to deal with the occasional service outage. Listening to MP3 files carries no such uncertainty. But will this get in the way of consumers' adoption of cloud music services?

Rdio, a cloud-based music service, was down for 73 minutes on Saturday. By Sunday, the company had smartly explained what happened (a switch had died). The company's reassuring blog post, "The Background on Saturday's Rdio Outage," was a timely and frank assessment that detailed the steps it needs to take to prevent reoccurrences in the future.

But downloads don't have that uncertainty. Because they are accessed from a hard drive, MP3s don't have outage problems inherent to streaming services. Rdio actually pointed this out in the blog post: "The silver lining is that if you have synced music to your mobile phone, you could still play it."

Saturday's outage is a reminder that cloud-based services are only as good as the cloud is operational. From Gmail to Amazon to Twitter, consumers have become used to a certain amount of service outages -- especially with the less reliable Twitter. Amazon and eBay continue to be powerful ecommerce brands in spite of occasional service disruptions.

For a better point of comparison, consider Netflix. Like Rdio, Netflix is a subscription service that streams entertainment content. Even Netflix, a fast-growing and revolutionary video company, has the occasional outage. One notable service disruption occurred in October immediately following strong Q3 2010 results. And like Rdio, Netflix also had some service issues on Saturday.

But Netflix outages appear not to have negatively impacted either consumer or investor sentiment. The company grew to 20 million subscribers at the end of 2010 from 12.3 million a year earlier and 9.4 million two years earlier. Its stock has increased 197% in the last 12 months and 18.9% year-to-date. So in spite of occasional service disruptions to one of the country's hottest entertainment platforms, Netflix has doubled its number of subscribers in two years and tripled its stock price in one year.

As Netflix and others have shown, customers will accept a certain amount of service disruption. But it can't hurt that Rdio was honest about its failure and kept the outage brief. "Software is hard," the company concluded. "Dead networking gear sucks. Managing worker process starvation and network timeouts is key. Now we know (better). Sorry about that."