Universal Music firstin 2007 as a way to give customers an alternative to free MP3s available on file-trading networks and anonymous Internet sites.
At that time, the business model called for hardware manufacturers to pay some extra amount--perhaps $5 per month--and optionally pass this cost along to consumers. In return, consumers would get the right to download as much music as they wanted, for free, during a certain time period.
Blame the economy if you want, but the real reason for the failure of these services--and every other record industry effort to capitalize on the Internet for distribution--is revealed in two places in this blog post by Total Music's vice president of product management, Jason Herskowitz.
First, he built a mashup service called Friendp3, which takes his friends' Last.fm feeds, searches the Internet for the same song posted somewhere as a free MP3 file, and creates a playable playlist of those songs. On demand. Like the excellent Songerize service--which lets you enter a song name and hear it on demand--it uses the Seeqpod playable search engine on the back end. Very cool.
But the technology's not the point. Did you see what just happened there? There is free music on the Internet! Available with no advertising and no restrictions. That means that any new music service, industry-sponsored or otherwise, is not only competing with iTunes, or Pandora, or Last.fm, or MySpace, or the latest ad-supported-service-of-the-week. It's competing with millions of MP3s uploaded by users and easily findable, thanks to the rapid advances in Internet search technology.
Hold that thought for a second as we come to the end of his blog post:
But wouldn't it be cool if there was a way to do this on a platform that plays nice with everyone? And compensates those that deserve compensation? And somehow can magically cover the costs associated with all of the above (hint: this is the kicker)?
Yes! Yes, it would be cool! I would like a free pony and no more dental appointments as well. And a mint-condition low-mileage black 1997 Mercedes E Series. With tinted windows.
Not to be too flip, but this sentence gets right to the nut of the problem with industry-sponsored online services. Their primary concern is getting paid and making sure that everybody else in the traditional value chain gets paid. That's a laudable and perfectly understandable goal. But that's how they miss the point, again and again and again. In order to create a service in which everybody gets paid, somebody's going to have to be paying.
The only way you will get customers to pay more than zero when there's so much zero-cost unrestricted content out there is by offering them a compelling benefit they can't get anywhere else. This is why iTunes is successful--it offers customers the easiest way to find and buy new music to load on their iPod.
What did Ruckus offer? DRM-encrusted downloads that couldn't be transferred to a Zune, much less an iPod. What did Total Music offer? We don't know because it never launched, but I'm willing to bet it didn't have a clear and compelling customer benefit.
I don't know what the magic formula is. Forget advertising--the ads are so ignorable, and CPMs so low on these kinds of services, that they'll never cover the cost of the content, and users will absolutely reject more intrusive advertising like an audio ad every 10 songs. (Remember: you're competing with free.) So you have to get users to pay.
What are they willing to pay for? A bigger back catalog? Some sort of online storage locker for downloads, which would then let you play them from any Internet-connected device? The ability to share songs with a friend in a seamless electronic way--the equivalent of playing the record you just bought for them, only, you know, with computers and Internets and stuff?
The sad thing is that many of these things have been tried, and industry players have done everything in their power to stymie them with lawsuits (the original MP3.com, file-sharing networks), copyright fees (the battle over online radio), and unreasonable DRM restrictions (take the original Zune's "three plays, three days" restriction on device-to-device sharing, which killed what could have been an interesting feature). But perhaps it's not too late to try again.