LOS ANGELES — Price cuts and advances in technology appear ready to propel subscription music via the Internet into the mainstream.
Services like Rhapsody International Inc. and Thumbplay Inc. now offer the ability to pick almost any song or album and play it instantly on a mobile device that connects to the Internet over cell-phone networks. The services cost $10 a month.
Given the obvious benefit of being able to listen to millions of songs as if they were in a personal stash, why haven’t services like these been more popular thus far? The answer lies in poor marketing, previously clunky execution and the fact that people are more familiar with compact discs and downloading songs from Apple Inc.’s iTunes music store.
Even now, people who spend less than $120 a year on music likely wouldn’t see the subscription plans as such a great deal.
But the music providers hope they can get more customers by making the services easier to use, taking advantage of increasingly robust cellphone networks to deliver the music. And in general, consumers are getting more comfortable using many kinds of services that rely on files stored on distant computers and accessed remotely, a concept known as “cloud computing.”
The subscription services have come down in price - they generally were $15 a month until recently - and broader adoption could push prices lower still. One big boost could come if Apple begins offering such a service. In December it bought an online music retailer called Lala.com that offers access to songs that users can store in a digital locker. Apple declined to comment on its plans.
The subscription services funnel royalties to recording companies, which are eager for new revenue streams to replace CD sales. That once lucrative business has been declining for years as consumers have shifted to buying individual tracks or pirating music altogether.
“We are very bullish on the prospects of subscriptions over time,” said Michael Nash, executive vice president of digital strategy for Warner Music Group Corp.
One problem is finding the right price for the service and having as many people as possible sign up. If only hardcore music fans subscribe because it lets them reduce their spending, the music industry might end up cannibalizing its other sales.
Right now the median U.S. music buyer spends about $80 a year - not enough to make these new services a revolutionary deal, according to Sonal Gandhi, a Forrester Research media analyst. More than half of consumers don’t spend anything at all.
She predicts the number of U.S. subscribers for such plans will rise from 2.1 million now to 5 million by 2014. Why not more? Among other things, “not everyone wants to be tied to a monthly bill,” she said. One solution could be for wireless carriers to bundle a music subscription with their monthly services. Nearly 450,000 Vodafone customers in Europe signed up for unlimited access to 2 million songs last year when the plan was added to a wireless data package for about $4 a month.
Previous music subscription plans had another problem: They made consumers download songs to their computers and transfer them to approved mobile devices - and none included the iPhone or iPod.
That’s changing. A $10 monthly plan from MOG Inc. will let people stream music instantly on iPhones and devices that run Google Inc.’s Android software, beginning in May.
Users can make unlimited downloads to the device so they have access to music on a plane or in other settings without wireless coverage. MOG’s service also has an intelligent shuffle function that lets people control whether randomly selected songs come from just one artist or many similar sounding ones.
David Hyman, MOG’s chief executive officer and founder, predicts such services will prove so popular that they’ll replace CDs and downloads eventually.
“If you’re the kind of consumer that spends $6 to $10 a month on music, this just blows everything else away,” Hyman said.
Another new service, Thumbplay, works on several BlackBerry models, and there are plans to launch it on Android devices and iPhones soon, also for $10 a month. To ease iTunes users into the service, the application can copy iTunes playlists immediately over the air, saving potential converts the trouble of remaking them.
“The first thing that we want to do is just accept that probably 100 million people out there are using iTunes and make it easy for them to make the transition,” CEO Evan Schwartz said.
Each of these services has a huge catalog that includes songs from all the major recording companies and many independents. MOG has 7 million tracks. Thumbplay boasts 8 million, and Rhapsody claims 9.5 million. None, however, has access to bands that have chosen to remain away from digital outlets, such as the Beatles.
There are other ways to listen to music from the cloud, of course. But subscription plans are needed if the consumer wants to pick exact songs or albums.
For instance, free services like Pandora’s Internet radio allows people to select tunes by genre or theme and hear them on portable devices, but they can’t choose the precise song or artist they want. Online music services such as MySpace Music allow people to select specific songs or albums - for free, with the site supported by advertising - but they can listen to the tracks only on acomputer.
No distributor has been able to combine the elements of Pandora and MySpace Music and launch a free, on-demand, mobile music service. Advertisers aren’t yet willing to pay enough to cover the higher royalties that recording companies charge for mobile song streams.
That leaves many people in the music business hoping that the marriage of subscription plans to better mobility will be the spark that helps reverse the industry’s decline.
“The Holy Grail is going to be cross-platform, meaning that one subscription lets me hear it on my connected device, on my home computer, on my stereo, in my car,” said Donald Passman, a music business lawyer in Los Angeles and author of All You Need to Know About the Music Business.
Business, Pages 19 on 04/19/2010