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.