Subscription Music Services Heat Up

Continued from page 1

By Eric Hellweg

April 16, 2003

Busy Days

These are busy days for the major-label-backed services. In late February America Online launched its version of MusicNet, version 2.0. Late last year, Pressplay signed an agreement with Warner Music, thereby offering music from all five major labels. Apple Computer is preparing its own version of a music subscription service, and according to the Wall Street Journal, it will launch in the coming weeks with music from all five major labels. FullAudio's MusicNow just announced it had finally signed on all the five major labels as content partners.

Despite their gains, both the Pressplay- and MusicNet-powered services-and the myriad services they license to-are saddled with burdensome restrictions. Consumers much choose from a confusing array of options that require their deciding whether they want just downloads or downloads and streams. The right to burn songs to a CD costs extra. "These services are generally not successful because the usage rules are restrictive," says Phil Leigh, an analyst with Raymond James and Associates.

On the basis of their selections and ease of use, two services rise above the fray. The first, Emusic, which has been around since 1998, was purchased in 2001 by Vivendi Universal. For $9.95 per month, users may download as many MP3-formatted songs as they want, and they may do whatever they want with the songs-burn them onto CDs, move them onto portable players, whatever. Most other services charge extra for these options. In addition, users who cancel their subscriptions may hold onto their downloaded files. Downloaded files from other services disappear when subscriptions are cancelled.

The problem with Emusic is its sparse selection of songs. To allow such unrestricted interaction with the music, the company had to steer away from major-label content. This site is not likely to satisfy fans devoted to top-40 bands. But for those whose tastes run to independent-label music, blues, or jazz, Emusic is the place to go. The company has signed up 950 music labels and offers more than 250,000 songs. "We don't target mainstream fans," says Emusic's general manager, Steve Grady. "We look for people who are passionate about music. People with collector's mentality. Those are consumers that major labels don't serve very well."

The second offering worth checking out is Listen.com's Rhapsody service. Rhapsody is a stream-only service-it doesn't allow downloading per se. Upon realizing that its customers were clamoring for portability for their music, the company recently instituted a CD burning program and allows consumers to burn a CD with songs from its service for 99 cents per song. Unlike the other major label services, which allow "tethered" downloads that disappear if your subscription payment lapses, Listen.com's burning service skips the download and goes directly to the burner. Of course, users can later rip the songs from the CD and turn them into unrestricted MP3 files.

The company has deals with all the major labels and a number of independent companies, and it's gambling that in a broadband environment, users don't need to download songs: with high-speed connections that are always on, the broadband service acts almost like a radio with deep station selection.

Despite the slim catalogs of the major-label subscription services-decidedly meager compared with the scores of peer-to-peer offerings-Internet jukeboxes could still prove a successful enterprise. "The music labels are too apprehensive right now," says Leigh, noting that the industry's number one concern is stemming the losses in their CD divisions. "After this transition period though, the labels will look back and realize the celestial jukebox will have been their salvation."