David RD Gratton

Why Music Subscription Models Fail

April 27, 2005

This interesting post by Tom Coates is touching on the question I posed earlier and is quite an insightful read if a bit long. However, it touches on what I consider the biggest misconception about why subscription models are failing. The pro-subscription crowd keeps trying to address the wrong question.

The common train of thought goes...
as per Steve Jobs:

"These [music subscription] services that are out there now are going to fail. Music Net's gonna fail, Press Play's gonna fail. Here's why: People don't want to buy their music as a subscription. They bought 45's; then they bought LP's; then they bought cassettes; then they bought 8-tracks; then they bought CD's. They're going to want to buy downloads. People want to own their music. You don't want to rent your music -- and then, one day, if you stop paying, all your music goes away."

And Pro-subscription pundits countered with:
Subscription models will eventually succeed once the consumer is educated (retrained) to understand that a subscription will enable them to have over a million songs at their finger tips, and if they ever stop paying and lose the songs they can get all 1 million songs back by re-subscribing. They will have more access to music than iTunes or similar service could ever offer.

And they would be right. If Steve Jobs was right. But Steve is wrong.

Subscription are failing for the same reason most businesses fail. Simple economics. Subscriptions based models are selling an unrealistic dream...

As I commented on Tom Coat's post:
Having Real or Napster or anyone tell me I have 1 million songs at my finger tips for $9.95/month is irrelevant. I will never listen to a million or even 100 thousand different songs in my life time. And I only have the capacity IF I am lucky to discover 100 new songs that I like and will listen to more than once this year.

So a subscription model will cost me about 120 dollars during that year for those 100 NEW songs. And I have to pay again for them next year unless I discover another 100 NEW songs I like. So as a rational person, I would rather pay for the 100 NEW songs once for a total cost of about 100 dollars.

Now if the subscription model was less than 100 dollars you have me interested, but forget about my wife as a customer. She discovers about 3 new songs a year that she likes, so the subscription for her better be under 3 bucks.

Tags:

Why Music Subscription Models Fail

Submitted by David on Sat, 08/10/2005 - 18:15.
Hi Joe, You make an interesting point. It actually is closely aligned with some of the research we have done. One of the biggest issues with subscription is that potential customers don't FEEL the value. They feel they lose the content once they stop paying. It's like rent versus a mortgage.

Why Music Subscription Models Fail

Submitted by Online Joe (not verified) on Fri, 07/10/2005 - 16:21.
if they ever stop paying and lose the songs they can get all 1 million songs back by re-subscribing. (good point!) consider they might be able to keep customers if they offer a service such as: you can pay a small maintenance fee of $1 so you can keep using the music you downloaded but you are not eligible for new downloads. Joe http://www.forcd.com

Why Music Subscription Models Fail

Submitted by David on Tue, 14/06/2005 - 18:09.
Hi Matt, Thanks for your comments. You bring up some interesting points. How would you value (relatively) the songs you only hear once every few years, which are in your library if you had to buy them on their own? Are they worth the same to you as the songs you listen to more often? Or the songs you listen to at one point in your life over and over then never want to hear again. (I have lots of those!) When you bought your CDs/Albums was it for the selection of songs or just one or two you heard on the radio (or other means)?

Why Music Subscription Models Fail

Submitted by Matt Schinckel (not verified) on Tue, 14/06/2005 - 04:31.
My iTunes collection is over 5500 songs (over 16 days of continuous listening), and many of them are songs I have not heard - particularly tracks from albums my partner brought to our relationship. I have no 'favourite' playlist, but I am making a concerted effort to listen to every track in my library, and rate them. Granted, it's not 'new' music in one sense that I(we) already own the music on CD, but I would probably not have put the CD in the player to listen to it. It's a little hard to say how many tracks I listen to that I haven't heard - often I come across tracks I haven't heard for a long time, and am glad I have in my library. I'm not sure that I'd want a subscription model - I'd rather just preview tracks and then purchase, if I liked them. Of course, it's all academic since iTunes Australia doesn't work yet...

Why Music Subscription Models Fail

Submitted by David on Thu, 26/05/2005 - 23:27.
Hi Indomidable, At 25 you are on the cusp of an age group that will see its music consumption (on average) begin to collapse as it moves into the 25-45 age range. However even within the 15-25 age group you are on the high side of music consumers. So calling yourself an enthusiast is certainly accurate and even a bit modest. However, as you point out you have a favorite list is 145 songs, which you hear more than once. The fact that you listen to this play list on a number of occasions takes away your opportunity to hear NEW music. This is not a bad thing BTW, we all have our favorites. In fact, I'm sure you hear your favorite songs dozens of times in a month. If you look at your MP3 juke box look at how often songs are repeated (assuming it supports that feature) everytime you hear a song again you are not hearing NEW music. This is the basis to my arguement. The cost of music via subscription needs to compared to how often you choose to add NEW music to your favorites list. For example, if you listen to your 145 songs every day how often will they be turned over for new music. In other words when will you replace one of your OLD favorites with a NEW song. The economics of a subsicription model is the quantity of NEW songs being added to your Play list on a monthly basis. I might do an informal survey via the Net where I can post the raw results to everyone, to help illustrate my point.

Why Music Subscription Models Fail

Submitted by Indomidable (not verified) on Thu, 26/05/2005 - 19:49.
I'm going to have to disagree with the poll ;) I'd say that as a music enthusist you'd Fahave to listen to music at least 3 hours a day. Adverage song on my play list is 3 min.. around 60 songs... I personally listen to at least 6 hours of music a day. I prefer songs not to repeat on a given day. My favorite songs of all time is a list of 145 songs (10 hrs 19 min)and I have heard repeats in a single day... I am 26 and consider myself a music enthusist. In my Highscool Days I listened to music at least 12 hours a day, unlike others who sleep to TV. I sleep to music.

Why Music Subscription Models Fail

Submitted by David on Wed, 18/05/2005 - 18:35.
That's the spirit Joe! Well you are indeed an exception (even exceptional?). Unfortunately, your numbers are on the extreme for most people. Having done a 'bit' of research in this area. This is what I have found: People we've polled (25-45) "say" on average that they listen to about 70 minutes of music per day. Most of that music is heard while commuting to and from work (20 minutes each way). However, as these are rush hour commutes the the quantity of music on the average radio station is 3-4 songs each way in that time. The rest of the time is taken with "news" , traffic reports and morning show antics. Other consumption comes from dinner music, parties, while shopping, getting coffee at Starbucks, but mostly while working out: jogging or the gym. Unfortunately most of this music is already "known/OLD" music. For the 15-25 year old group we have some more interesting data, which I must keep with me, but alas they will also eventually hit 25-45. So although I applaud your 200,000 song library. You are a few standard deviations off to really matter as a market. And when I say 100 new songs, I mean 100 new song a person would 'buy' not simply hear by happenstance.

Why Music Subscription Models Fail

Submitted by Crosbie Fitch (not verified) on Wed, 18/05/2005 - 16:02.
My question to you Joe is this: If you had all the world's music published prior to 2005 available on your computer for free, what would you consider paying for? Or do you believe that given that catalogue, you'd never pay for music ever again?

Why Music Subscription Models Fail

Submitted by joe (not verified) on Wed, 18/05/2005 - 15:56.
you are all a bunch of moronic asshats if you only listen to 100 songs in year that you hadnt previously listened to, than why are you even bothering with a computer? you arent a music listener, and you have no need for any service of any sort, just keep listening to the same 5 songs and stay away from me... as someone who actually listens to music, of varying generes to great extent i can say that having a lot of music at your fingertips could be incredibly invaluable. i work coding software 8-10 hours a day.. I listen to music while I code, and you can imagine I have to vary it a bit so I dont get tired of things.. In an average day that is 8 albums worth of material (@ 70 mins an album) That is almost 100 songs in a day, if you add in the commute time it is 100 per day. multiply by 1 year and you are at 36,500... so much for 200,00 being unattainable in a life time, try 6 years...

Why Music Subscription Models Fail

Submitted by David on Tue, 17/05/2005 - 22:08.
Hi Crosbie, Now that is the true question of today's music economy. You have hit it right on the head. If labels have abdicated their roles in artist development and music production and are now focused solely on distribution and marketing, do they deserve over 50-70% of the revenue from music sales? After you add the retailer's take average artists are lucky to get 20%! Of course they have to deduct studio and production costs, and touring loans before they even see a penny.

Why Music Subscription Models Fail

Submitted by Crosbie Fitch (not verified) on Tue, 17/05/2005 - 16:37.
What I want to know is this: Do we want to pay the creator of the music for the enjoyment they have given us, or do we want to pay a supplier for providing us with access to a catalogue?

Why Music Subscription Models Fail

Submitted by David on Tue, 17/05/2005 - 09:25.
Hi Hashim, Thanks for your comments. I think you misunderstood me. New and Old have nothing to do with when the song was released. Hearing OLD songs for the first time is NEW. But it is actually the choice to add music to 'your collection' which signifies the song as new. As such I still stand by the statement that 100 songs a year added to ones collection is a lot. However, you make a good point that I had not considered. There are a few songs that hold us for only 2 or three listens. However, for me there are very few of those songs I actively seek to listen to once or twice. For me that's what's radio is for. Either way you have given me something to think about there... Cheers.

Why Music Subscription Models Fail

Submitted by Hashim (not verified) on Tue, 17/05/2005 - 08:51.
this week I've been trying out Napster and Yahoo Music Engine. I've found that I use it to discover OLD music much more than new ones. I'm 25 and I started to really get into music when I became a teen (isn't it that way for everyone?). So I've been digging back into 10+ years of music history. This is a wonderful experience and has sparked many memeories of years past. So i disagree, it's not just about those few new songs you like each year. I discovered another thing- many of the songs I only want to listen to once or twice. I was listening to a playlist of Billboard hiphop/r&b singles from 1994. Most of the tracks only had value to me amongst the other songs in the playlist, but definately not by themselves. I would never want to pay for those songs, though I enjoyed listening to them in that moment. That's where renting comes in. One last thing I discovered- I don't want to rent OR buy, I want to rent AND buy. I rent songs that don't have much replay value for me. I buy songs that do. I do the same with movies.