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Unlimited music iPods: Acknowledging reality

According to a report in the Financial Times, Apple is negotiating with the big record labels to ship premium-priced iPods bundled with unlimited music.

Just like Apple launched a video iPod after Steve Jobs dismissed the idea of a portable video device, the company is now reportedly considering new business models for selling music, including subscriptions, despite Jobs' assertion that downloads make more sense.

According to a report in the Financial Times, Apple is talking with the major labels about letting consumers pay a premium for new iPods, then receive the right to download and listen to as much music as they want for a certain time period, along with the right to keep 40 to 50 songs permanently. Negotiations are apparently underway to determine the exact amount of the premium, with Apple holding out for $20 and the labels believing that consumers will pay $100. Apple may also be considering a straight subscription-based music service, but only for iPhone users, who already receive monthly bills from their cellular carriers.

The model sounds very similar to Nokia's Comes With Music model and Omnifone's MusicStation Max, both of which are slated to launch later this year.

This type of model acknowledges the way that serious music fans have chosen music for the last few years now: by sampling a wide range of compressed digital files for free (usually via file-trading services or from friends), then buying a select few albums in a higher-quality physical format (usually CD, sometimes vinyl). Consumers win by no longer having to sift through spoofed and low-quality files, although the real benefit will depend very much on specifics--how much Apple charges, and how long users are allowed to keep how many songs. The original FT report suggested there'd be no time limit, but CNET's Greg Sandoval has apparently heard that a subscription would be required after six months or a year in order to continue listening to files downloaded under the program.

Apple would helps the record companies earn some money from their normal behavior, rather than alienating customers (and facing increasing legal risks and expenses) by suing them. And Apple makes far more money from iPod sales than iTunes downloads, so using this technique to boost sales would more than make up for any loss of download revenue.

My fellow blogger, Don Reisinger, thinks the labels will only agree to a service if it's so crippled as to be worthless. I wouldn't be so sure--their strategy of ignore, delay, and sue clearly isn't working, and they all want a piece of the iPod phenomenon.