Is Netflix's model a blueprint for digital music?

Can Netflix's successful business strategy teach the music sector about how to get music consumers excited about joining subscription music services?

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Greg Sandoval
3 min read

Ethan Kaplan, a former music exec, says he doesn't think it's wise to assume Netflix's model will work for music. Rachel Kaplan

Netflix's subscription business model is an online video powerhouse, but would it work for music?

There's a sharp difference of opinion in the music sector about that right now. Billboard magazine started the debate Tuesday when veteran writer Glenn Peoples suggested that the major record labels might do well to emulate some of Netflix's practices. Ethan Kaplan, a former digital exec at Warner Music Group, later that day wrote on his blog, Blackrimglasses.com, that he's highly skeptical.

The discussion was sparked by Google and Apple's recent efforts to launch cloud music services. Both would enable users to store their music libraries on the companies' servers and then stream songs to users' Internet-connected devices. Google has talked to the labels about charging a fee for the service, according to previous reports. CNET reported on Monday that Apple has told the labels it too will charge.

These companies and the major labels are betting on subscription. They're doing this though the services that have attempted to prove the model in the past have a spotty record. Rhapsody, Yahoo Music, and the recycled Napster all failed to draw large audiences. Most players in the sector dream of having 1 million paying subscribers. Compare that with Netflix, which saw 3 million movie fans sign up for its service in the year's first three months. The company's U.S. subscribers now number 22.8 million, the same amount as Comcast. Helping to fuel that growth was Netflix's offer of $8 a month for unlimited streaming access to movies and TV shows.

"With Netflix consumers have proven they will rent content--even re-run(s)--and stream it from the cloud," Peoples wrote in Billboard. "They will pay for digital content they could get for free through illegal means. They will pay if the service allows streaming through multiple devices."

Peoples wrote that Netflix's low-cost, easy-to-use Web site, and nearly ubiquitous presence on Internet-enabled devices is a worthy blueprint for the music industry. But Kaplan said that Peoples' premise is flawed at its core.

"People feel comfortable applying strategies applicable to one modality of media to all others," Kaplan wrote. "Because the modes are similar, so must be the means of monetization. Wrong."

"People feel comfortable applying strategies applicable to one modality of media to all others--because the modes are similar so must be the means of monetization. Wrong."
--Ethan Kaplan

One obvious difference between music and movies is that people don't typically watch a film more than once or twice, but they listen to favorite songs maybe hundreds of times. Kaplan argues that people value the media differently. He wrote there's less value in music because movies require more of the viewer's attention than music does for the listener.

(Music's) ubiquity lessens its value as it does not monopolize the senses," Kaplan wrote, "and thereby requires less investment in order to enjoy it. Requiring less investment demands less return and hence, lower value...chasing business models in one media with business models of fundamentally different media is a recipe for disaster."

Kaplan is no doubt correct in arguing that thinking one-size-fits-all is unrealistic. But the fact that there's even a debate about subscription services, which I and others once dismissed outright as insignificant, says something.

For the past decade, most of the music-buying public has ignored them. But the landscape for music consumption appears to be changing. CD sales are in a free fall. Download sales have leveled off. And what happens if the big labels succeed in making illegal file sharing less attractive? For the past 11 years we've lived in a world where pirating music was a cinch and in this world paying monthly fees for the opportunity to rent songs seemed silly to some. To others, paying at all was a joke.

So, how would subscription services fare in a world where bandwidth providers block subscribers' access to pirate sites or possibly shut off service to accused illegal file sharers? Or both? Pirating media will always be with us but what happens if downloading unauthorized songs turns into a big hassle? That's what the Recording Industry Association of America is trying to make happen right now.

If the RIAA succeeds, how will these all-you-can-eat services look then?