Rhapsody launched the first high-profile subscription music service in December 2001, in the middle of a revolution. The first iPod had just hit the shelves, streaming Web radio sites like Live365.com were in full bloom, and the masses were just warming to the idea that they could preview and discover music online. A service like Rhapsody, which promised subscribers unlimited access to its growing music catalog, made music junkies salivate. It also pointed the way to a brave new world where people no longer needed physical or virtual media.
The future didn't go quite as planned, however. Because the illegal-but-free P2P world offered the most music, when Apple finally added an online store to their iTunes music software, Rhapsody's subscription music revolution--which has since included Yahoo Music Unlimited, MTV's Urge, Napster, Zune Marketplace--had started to lose momentum.
Today, the only remaining outlets for subscription music are Rhapsody, Napster, and the Zune Marketplace. iTunes, in contrast, is now the No. 2 music retailer in the nation. Many factors contributed to the subscription music stall, not the least of which is the fact that the most popular MP3 player in the world is deliberately incompatible. Can the model survive?
At the 2008 Macworld expo in January, Steve Jobs quieted iTunes subscription service rumors by proclaiming that people don't want to rent music, they want to own it (unlike movies, which they should rent through iTunes, of course). Jobs' logic is that because people listen to a favorite song hundreds of times throughout their life, a file that might expire doesn't make sense. For companies like Rhapsody and Napster, the million dollar question is, "Is he right?" The answer is more complicated than you'd think. I would never be so bold as to call Mr. Jobs a liar, but I think his Macworld statement is misleading.
The subscription vs. purchased music debate presents a false choice--a black and white view of a world without accounting for all the mess in between. While it's true that most music consumers do just fine purchasing music a la carte through iTunes, Amazon, or eMusic, the idea of a coexisting "celestial jukebox" isn't any less potent. It's like saying the iPod and FM radio can't coexist. The concept of DRM protection for purchased music is clearly dumb (and still practiced by iTunes, by the way), but the real reason iTunes will be the last service to adopt a subscription music model is because it doesn't have to. Apple's existing music retail store is already enjoying a charmed existence without a subscription music option rocking the boat. Why the hell would Apple open up an all-you-can-eat buffet in a restaurant already raking it in on overpriced entrees?
What will the playing field of digital music look like five, 10, or 20 years down the line? The only predictive statement I'm willing to make is that the people of tomorrow, like the people of today, will want choice--choice about what music they want to hear, where they want to hear it, what devices they want to hear it from, and how much they want to pay for it.
So now you know my position. In the second part of Subscription Music's Future, I'll outline areas for subscription music's growth, talk with Rob Williams, SVP of music software for Rhapsody, and go under the hood of Microsoft's marketing logic for Zune Marketplace.