PressPLay / MusicNet 2.0?

Mark Mulligan | October 15, 2007, 04:10 AM

Business Week reports that Universal are teaming up with SonyBMG and negotiating with Warner to launch a music subscription service called Total Music. What makes this verge on the radical is that it would be free to consumers and handset manufacturers and mobile operators would absorb the $5 monthly fee. A couple of quick observations:

• Labels are good at discovering, nurturing and marketing artists. They are not retailers. The major labels tried and failed to become digital music retailers at the turn of the century with PressPlay and MusicNet. Even if they managed to get EMI on board they’d still be missing 20% of the market (i.e. the indies) and these days the indies are more organized digitally than ever (cf Merlin) and unlikely to partner with a major dominated initiative. It will be interesting to see whether the unity would stand the test of a ‘divide and rule’ approach (e.g. offering the bigger indies good terms).
• Subscription services were meant to bring everyone up to a steady average spend. In practice they risk pulling the average spend of many of the crucial high spenders right down. The industry needs to tread carefully with whom they target.
• The idea of getting Apple et al to subsidize the cost of the service is a massive distance from, for example, getting them to subsidize a set number of downloads. Let’s say an average MP3 costs $200, with a two year life span, that is just over $8 a month. If you take any sizeable chunk of the $5 for the subscription out of that it doesn’t leave much left over. Unless other variables are layered in (e.g. only subsidizing a few months of each year, making the cost tier by retail price of device etc.) the subsidy could end up making the devices loss making, which of course is just not feasible.

The idea of working with device manufacturers to get revenue directly for music is not actually that crazy an idea. In fact, we’re working on a report which incorporates that exact theme. We’re still working on the numbers, but based on the scant (rumoured) details we have on Total Music, I think the approach we’re suggesting is more workable for all parties. If you’re a Jupiter client and would like to talk to us about the working hypothesis then please get in touch with your client services manager to arrange a call. Otherwise, the report will be ready some time later this year.