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May 20, 2005
Subs & Label Agreements
This Business Week piece runs
down the usual background about subscription vs. a-la-carte music services. Interestingly, the article reveals a couple
of basic details about the economics of providing music subscriptions. These companies must pay the labels about six
dollars per subscriber per month. In the cases of Rhapsody, Napster, and Yahoo! Music Unlimited, that provision fee
furnishes unlimited music streaming and downloading to the desktop to the customer. For portable downloads transferred
to a player, the labels charge providers eight dollars per month per subscriber. This is why Rhapsody and Napster both
offer a second, higher subscription tier for portable downloads.
Yahoo!’s refusal to adhere to this artificial value structure is a blow to labels on behalf of consumers. Why should there be a surcharge on portability? Such an extra charge is unprecedented in music retailing. I have been pounding this message since the launch of Napster To Go, and I’m happy to see Yahoo! implicitly agreeing by offering one subscription rate whether or not the user carries the music around. the labels are still getting their money, of course, but are not happy with Yahoo!’s devaluation of music on the consumer’s behalf. And Yahoo! might not stay happy with the non-profit revenue level. I hope that if YMU eventually raises its price, it will continue to refuse the surcharge model.
Posted by roymond at May 20, 2005 11:16 AM