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Gunning for iTunes

On the eve of a major technology rollout, subscription music services grapple with marketing strategies.
January 25, 2005

Don’t look now, but the world of digital music is about to get rocked.

This quarter, leading online music services that offer consumers monthly subscriptions and individual song downloads will try to gain ground on Apple’s iTunes by introducing the ability to move subscription-based songs onto a plethora of MP3 players, thereby answering one of the biggest criticisms leveled against the services.

When the subscription services become portable, the effect should be nothing short of revolutionary – immediately leveling, if not reversing, the current iTunes-dominated digital music market.

Digital music subscription services such as Napster, Yahoo’s MusicMatch, Virgin Digital, and Real Networks’ Rhapsody allow consumers the ability to stream more than 800,000 songs to the PC for roughly $10 per month.

Up until now, though, there’s been a catch: subscribers can’t take the music with them.

Burning songs onto CDs costs more, and if a user wants to download an individual track, in many cases that costs more as well. And since the music is streamed over the Internet, subscribers couldn’t move any songs onto MP3 players.

“No one wants to lug their laptop into their car and hook it up to their car stereo,” says Zack Zalon, president of Virgin Digital. Consumers are using streaming subscription services right now “in the short period of time at home or office. [Subscribers] are very interested in portability. It’s the biggest issue.”

To make those song portable, the services have turned to Microsoft’s Janus technology.

Introduced late last year, Janus uses software and hardware hooks to make sure a song’s usage licenses are up-to-date. Using Janus, subscribers will be able to drag and drop songs from their streaming music service onto certified portable music players.

The technology is part of Microsoft’s “Plays For Sure” initiative, a sweeping marketing effort aimed at helping consumers understand what services and content can play on what devices. A Plays For Sure logo on a portable digital player, for example, means that it will play music from any service that also features a logo.

In terms of storage, consumers will be limited only by the capacity of their players, provided they maintain their monthly subscription and dock the device at least once a month to update the licenses.

So for $15 per month (the portability-enhanced subscription costs a premium), consumers will be able to fill their MP3 players with thousands of songs. Doing so on an iPod through Apple’s iTunes would cost tens if not hundreds of thousands of dollars.

It’s pretty compelling.

But there’s a problem.

Consumers who have signed up for subscription services generally love them and sing their praises. (Full disclosure: I’m one.) However, the services have yet to craft a marketing message that breaks past the early adopters and into the mainstream.

Apple’s iTunes, for example, announced it has sold 250,000 million songs since the store went online, and the iPod – which only works with the iTunes software interface – holds more than 90 percent of the portable music player market, according to NPD Group. All told, the leading providers have less than two million subscribers among them.

In part, this popularity gap is because signing up for a subscription service requires a completely different relationship with the content. Subscription services allow consumers to rent music, as opposed to own it. Introducing portability on top of an already foreign idea will require a significant expenditure of marketing and advertising dollars – something some services aren’t willing to do.

“We’re not going to advertise this feature,” said one representative of a leading service. “It’s something that will take time for consumers to grasp.”

And the software partners providing support for these services isn’t likely to help in the promotion either. Microsoft, which provides the Janus technology that makes the portability possible, is more focused on promoting its Plays for Sure initiative, which leaves online retailers on their own.

Ellie Hirschhorn, executive vice president and chief operating officer at MusicNet, the backend provider for several subscription services, agrees that crafting a simple and powerful marketing message will make a big difference in consumer adoption of portability.

“Marketing is the key,” Hirschhorn says. “The technology aspect needs to be stripped out of the equation. People need to understand that they can take their music with them, they can take it on the bus.”

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