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Commentary: RealOne a good step

The RealNetworks service gets things off to an interesting start. Still, consumer behavior patterns don't change overnight.

By P.J. McNealy, Gartner Analyst

With the launch Tuesday of RealOne Music from RealNetworks, the first of the anticipated music services backed by some of the Big Five music labels has met its self-pronounced deadline for a U.S. launch.

See news story:
RealNetworks plugs in MusicNet

The challenge for this service--as well as for Listen.com's Rhapsody service and for the upcoming service from PressPlay--is to meet consumer needs at a reasonable price while protecting the copyrights of the music labels and sustaining their business models.

Unfortunately, until the music services are on the same page as the portable device and disk drive manufacturers in respect to digital rights management standards, consumer needs will likely not be met. The market for these music services will also grow slowly until antitrust scrutiny has passed and the ability to cross-license services arrives so that consumers can go to one site to fulfill all of their music needs.

The RealOne Music service is interesting; it allows consumers to seamlessly integrate their current digital music collections with songs downloaded from the service. It also allows consumers to search for music easily, to discover new music and rediscover old favorites. The requisite ancillary services, such as artist information and liner notes, are also included.

At $9.95 per month for 100 downloads and 100 streams, the service is reasonably priced, but the key word is "service." The music industry is fundamentally trying to change the way music fans consume music. The music industry wants to change that pattern from consumers buying music as a product to buying it as a service. Consumers must change their concept of ownership with music--that they don't buy a song or whole album but repurchase it every month. And, despite the hype around these new music services, the fundamental issue is that changing consumer behavior patterns doesn't happen overnight.

One other fundamental issue is the question of how easy, reliable, affordable and convenient consumers will find it to subscribe to a music service, and how that compares to going to a local retailer to browse and buy a CD. If the average consumer today buys six CDs a year at a cost of approximately $90, will that consumer then spend $10 per month ($120 per year) for a music service that does not have music from all five of the major record labels?

Gartner expects that some consumers will try the service and that some will subscribe for the convenience, but most will likely wait until there is a service with content from all the labels that offers portability and is reasonably priced. They probably won't get one until 2002 or 2003.

RealOne Music takes a step in the right direction, and it has discussed wanting to offer content from all five majors and expects to offer portability in the future. Until then, consumers will likely judge RealOne Music to be a nice-to-have service, not a need-to-have service.

(For a related commentary on standardizing protection for digital content, see Gartner.com.)

Entire contents, Copyright ? 2001 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.