Universal and Sony Plan "Free" Music Service

Damon Tog writes "Macworld reports that Universal Music Group has enlisted the help of Sony to join forces in a new music service. The price of the subscription is expected to be built-in to the cost of digital music players, leaving the music 'free' to the consumer. 'The plan is still in flux and faces several hurdles, BusinessWeek notes. Among them is finding a business model that allows the hardware makers to subsidize the cost of the music. In addition, the labels have tried to develop their own online music services before without success.'"

And the reason is you...

[creativeHavoc]

The reason there have been so many failed music stores, especially when they have been built by the root content distributers themselves, is they don't want to take the time (and therefore money) to sit down and develop (not just build) an easy to use, intuitive, open music distribution software. They are marketing driven, and as such, this software it looked at from a marketing stand point. Full of buzzwords and trends, but no strong basis on what people want.

People want music in several formats.
People want music that plays over all devices they own.
People want music in varying quality, and are willing to scale the pay of a song to the quality.
People are not willing to pay more than a song is worth. (This is the biggest issue for the labels)

If a service is build instead of a program, the company will be successful.

/rant

Good Sign

[detain]

This is a sign that more of the labels are starting to realize they need to change with the times and will (hopefully) stop blaiming the lack of interest in buying CDs on piracy alone. With any luck more things like this will start to happen soon as companies start to test the waters of new business models.

This could be a great thing for both consumers and corperations, if they are willing to start trying new business models, it means we as customers could very well wind up with new innovative ways to enjoy media that doesnt leave you feeling like you just got ripped off.

Re:One thing worth knowing

[whoever57]

How is the music from this service going to be tied to the particular player that is paying for it,

It doesn't need to be tied to a particular player, as long as it it tied to a class of players, all of which include the royalty payment as part of the purchase. Thus, all that is required is an encryption or encoding format that is only licensed to those particular players. Additional measures could include proprietary communication formats between the player and the PC (and between the PC and the music store), combined with the requirement that a player is connected to the PC before the PC is allowed to download anything. The real question is: how long will it take DVD Jon to break the encryption?

The most important question is the one that the major labels always forget to ask: what value does this bring to consumers? With Amazon selling MP3s, why pay $100 extra for a player, which is designed to break in 18 months?

Re:One thing worth knowing

[Spasemunki]

... and the other question that immediately presents itself: when the partners involved in this deal lose interest after a couple years of lackluster sales, what will become of that nice device that you paid for- probably paid a lot for, given the "built in" subscription cost? Will you be able to load music onto it from other sources, or will it be bricked once the associated service is shut down?

The sad truth is ...

[kawabago]

The label's business model isn't needed any more. These are their death throes.

"Free" as in "Sony"

[CleverNickName]

So we have:

• Free as in speech (you're free to do what you want with it)
• Free as in beer (you get it for free)
• And now there's free as in Sony (we're free to fuck you after we have your money)

No thanks, Sony and UMG. Fool me once, can't get fooled again.

Better Question

[shmlco]

First, anyone who thinks it's "free" is nuts. Any price "bundled" into the player or phone service will per passed along to the end user.

And as such, here's a better question: What happens to the music when you stop paying the subscription?

Most subscription services of that type cancel all of your music when you're done. Are you going to want to pay two or three years worth of subscription fees and end up with nothing?

Re:Good Sign

[Dachannien]

On the other hand, it's a bad sign because the music industry is just finding new ways (or, perhaps, rediscovering old ways) to exert unnecessary control over their product. Hardware lock-in is bad for the consumer, because it limits consumer choice, but it's good for the music and electronics industries, for the same reason.

Business Model?

[Ed_1024]

What manufacturer would take on an open ended commitment of $60/yr? Even with Apple's legendary profit margins, they would be losing money by absorbing a $60 levy on their low-end iPods ($79 Shuffle, $149 Nano) and that's just in the first year! I can't see the situation being any better for other MP3 player makers.

From TFA, Apple allegedly get $0.29 from every $0.99 iTunes sale, i.e. the record companies get $0.70; I'd bet that $0.29 has to fund the credit card charges and infrastructure costs while the $0.70 is pure profit for emailing one master song copy to Cupertino. Does the music industry not realise what a good deal they have here? Pretty much every attempt at 'going solo' by a major has ended in disaster, indeed the quoted article states that Sony are closing their on-line music stores: how much did they lose there?

I think we're witnessing the beginning of the end of the 'traditional' music company and these sort of suggestions are just spasms from a body that doesn't know it's head has been cut off...

This is actually a great move

[Budenny]

This is a great move, because it will reveal the absurdity of the present locked player situation. Its a classic stage in industry evolution. Stage one is, some company (Apple) comes out with a format for purchased tunes which will only play on its own player.

This creates two incentives. The first is to increase the sale of tunes, since the other players depend on the tunes not the player as their main business. So they want more tunes sold. But as long as there is an Apple monopoly of sold tunes, this isn't going to happen, and there is nothing they can do about it.

The second incentive is to compete with Apple as a retailer.

So, because of the success so far of the Apple strategy, all they can really do is emulate it: come up with another store, another player, a different format, and tunes locked to it. Since they have to overcome an incumbent, they will be reduced to making his attractive by initially lowering the price of the tunes and using a different locked format, to make people use their player. This will be a replay of competing format wars that we have seen with hardware formats in the past.

We will then move to the stage, which we have seen previously in media with different consumer formats, where consumers still refuse to buy the stuff because they hate incompatible formats. After a while of this an unlocked standard will emerge. I don't mean a standard that is not copy protected, but one does not lock purchased tunes to players from one particular vendor, or make them be purchased by one specialised bit of software or currency. It will work just like CDs and DVDs do now: buy your content wherever you want from one of a variety of independent outlets, using whatever payment means you want, and play it on the player of your choice, from one of several manufacturers.

The Apple strategy has worked well for a while, but it has within it, like all DRM based attempts to tie up your use of what you buy, the seeds of its own destruction. It is not a sustainable business model longer term. The present model for music and CDs was. The only thing that is destroying it is overpricing from the content publishers.

Apple is far better placed to deal with the implosion of the business model. Its trivial to take locking off the iPod and iTunes store. And if the money falls out of the tunes market, it hardly affects them. For the content owners, their whole model is falling to bits in well defined stages that we have previously seen in other format wars. It is what is coming towards us.

IDDIIIIIOOOOOTS

[eiapoce]

My reply comes late and will be short. By reading the article you can get clear hints that iTunes is going to be the market leader for a very long time. I summarize them:

• "Sony said recently that it would abandon its proprietary ATRAC copy-protection technology, and add Microsoft's Windows Media ... close its Connect Music Store". Translation - Fucking customers who bought previous players and registered the service.

• "MTV Networks said it would abandon its own digital music service, called Urge, and pool its efforts with RealNetworks' Rhapsody" They fare even better, close the store screwing registered users and then as if this was not enought join forces with the most unsuccessful, worse DRMd and worse marketed player of all times

• "get hardware makers to absorb the cost of a $5 monthly subscription" Selling hardware that works only on a rent basis!!! This is funny, I don't know anyone willing to buy somethin like that.

• "CEO of Universal Music's [says] the share of revenue that Apple collects for each song sold on iTunes is "indecent,"" Labelling competition bad names instead of competing.

• "the labels would like to charge different prices for new and older music" Now in economics this has actually a name. It is called market segmentation and is the most known way of screwing costumers by raping their surplus.

• "nurture the adoption of other music players such as Microsoft's Zune": History teaches us that any business that made deals with microsoft has to face 2 quests. The first is to win the market. The second is avoiding MS to take over using anticompetitive practices and lawyers. By judging how they are dealing to the iTunes quest I guess those idiotic CEOs are deemed to fail both.

The real question is: who put them in charge? Their proposed exit strategy for media distribution sounds as "shoot us in the leg". If I had any stok or option on those companies I would consider selling them now before is too late.

Re:And the reason is you...

[hyfe]

Arg, Parent is so technocratic it hurts.

People want music in several formats.

Of course they don't! The wast majority of people who buy music want to listen it. If formats get in the way, that's bad. If they don't, it's good.

People want music in varying quality, and are willing to scale the pay of a song to the quality.

They do? Most people have no concept whatsoever of file-size, and file-size to quality ratios.. and nor should they have. They want music, they want to listen to it and as long as they don't notice the quality it's good enough. I mean, there's a reason mp3 is so popular. Either way, most mp3-players have shitloads of space, there's little reason to go for anything other than lossless these days (besides mp3 being universally supported).

People are not willing to pay more than a song is worth. (This is the biggest issue for the labels)

A good is worth what a purchaser is willing to pay for it.

Pot, meet Kettle. Kettle, Pot.

[Mike Van Pelt]

This is one of the most hilariously funny parodies of over-the-top hypocrisy I have ever read --

CEO of Universal Music's [says] the share of revenue that Apple collects for each song sold on iTunes is "indecent,"

He's got to be aware of how outrageous it is for a music industry executive to be saying anything like that, doesn't he? Apparently not.

I think most everyone else had best not be drinking anything when they read his plaintive cry, though. Bad for keyboards and monitors...

Unbelievable

[NewYorkCountryLawyer]

1. Have these guys ever heard of antitrust laws?

2. Don't they realize that their antitrust combination to try to defeat Apple would be a flagrant violation of antitrust law?

3. Why are they incapable of just trying to compete with someone in a fair and open way?

4. Who in the US would be stupid enough to patronize their new venture and thus subsidize their RIAA lawsuits against the American people.

5. SONY BMG are the guys who just testified in Capitol v. Thomas [blogspot.com] that it is illegal for people to copy their cd's onto their computers for personal use.

Anyone who would buy anything from these companies is an idiot.