Labels' Subpar Subscription Plans

What does it take to pierce the brain of record label executives who keep insisting that subscription models will save the music business?

Last week, SonyBMG jumped aboard the Titanic for another try at offering an unlimited iPod-compatible library of its music for between $9-12 a month.

The plan is likely to sink in Europe before it arrives by lifeboat to this country.

Just what young people want -- one label's music library.

Even if the labels could agree to contribute all their music to a consortium and offer it for the same money, every indication I have is that it will fail.

Cut the price -- and it will still fail.

The next generation doesn't want more monthly expenses. They've got their most important monthly bill dedicated to their cell phones (with a text messaging subscription likely added on for an additional $20). They can't live without that.

Music -- well, it's free. Cell phone service -- not so easy. The cellular companies still control the delivery system. The record business does not.

And young people have to eat and pay bloated ticket prices to go to live concerts. They have other expenses, too. Even if you argue that many young folks get subsidized by their parents, I will argue that it's hard to beat free -- which is how so many of them get their music now.

I don't feel sorry for the record labels.

They have helped to devalue music. There are many strategic mistakes that have contributed to this situation including overcharging for CDs, killing off singles to force album sales, letting their "needle" stick on hip-hop with no new music genre in sight as a potential blockbuster.

The labels want to believe monthly subscriptions are the only way to make the digital revolution that they have botched so badly work for them. They believe it as much as Joan Rivers believes Botox will make her look young again.

The SonyBMG initiative is tantamount to -- damn the torpedoes and full speed ahead.

AOL Music failed.

Rhapsody's subscription model has never lit the world on fire.

No matter what the marketplace wants or doesn't want, the big four labels are going to give them subscription models anyway -- even if they are destined to fail (which they are).

To pay a monthly fee, you have to want a benefit real badly.

Apple users pay for Pro Care because they value it.

Young people pay for text messaging bundled into their cellular bill because they have learned how addicted they are to text messaging on an a la carte basis. It's hard to find a young person that hasn't run their cell bill up through text abuse. No wonder a $20 a month texting charge seems like such a bargain.

The labels haven't made their case to the public.

When you ask students if 99 cents is the price point for a song, many quickly remind you that you are 99 cents too high.

When DRM (digital rights management) was such a hot issue (as witnessed by the pissing match between Apple's Steve Jobs and the big four labels), Gen Y said, "what digital rights management". You see, they steal it or copy it from someone elses CD. Where there is a record label, there is way around them.

The labels are falsely encouraged by what's going on outside the U.S. right now.

France is imposing a settlement that will force ISPs to charge customers a monthly fee for all-access to music. In the U.K. legislators are threatening to take action if the ISPs and labels do not resolve the piracy problem. In Japan, where things are done a little differently, the sides are being asked to deal with the monthly fee concept.

Even if it works overseas (and I'm not sure it will), it won't work here.

My friend and record industry observer Steve Meyer (publisher of Disc & DAT) has summed it up so brilliantly with these five points that you get the feeling he knows the liabilities of the labels but they aren't aware of the pitfalls he outlines:

1. People want to own their own music and that's why iTunes has already sold
over four billion songs. Add up all the sales from other online stores
(, et al) and the number of songs sold goes upward dramatically.

2. Given the choice between buying and owning their music versus renting it
(which in essence, is what you are doing if you choose a subscription
service), the consumers will buy it. If they wanted to "rent" their music,
the subscription services would be wildly successful. That isn't the case.

3. Once DRM-free music was made available from the labels (because the
consumers demanded it), allowing more flexibility in transfer and use,
online sales increased while subscription services saw no spikes and

4. Every effort by the labels to try and navigate consumers to purchasing
something they really don't want, will result in more P2P file-sharing.
Translation: If you don't give them what they want, they'll get it for FREE
despite the useless lawsuits the RIAA files against people who download.

5. The anticipated increase in the future of advertising supported models
might let consumers have access to music for free. They will have to sit
through some online ads to get that access, but it won't cost them any money
to get their music. Of course, if the labels decide they won't release their
music libraries to any such models, this possibility never becomes a

I'm not sure the ad supported models will work, either.

Zero is the new 99 cents.

When zero is your price point, it's time for the record labels to start thinking of getting into another business.

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