MP3 Insider

Correction: The Microsoft Zune HD will not be available outside of the United States. The Zune Video Marketplace for Xbox, however, will be available for select countries beyond the U.S., including Australia, Austria, Belgium, Denmark, Finland, Netherlands, New Zealand, Norway, Sweden and Switzerland.

Donald and Jasmine give the newly official Zune HD its deserved time in the spotlight as they both gush about the player's design and HD features as well as speculate about pricing and other possible Wi-Fi-related additions. Also this week, the Insiders discuss rumblings about a potential Sirius XM App for the iPhone. Then, Jasmine brings up some of the tiniest MP3 players to ever be reviewed by CNET, while Donald goes off on a tangent about audiobooks. And we musn't forget to give props to the entity that gave this whole digital music thing a violent shove into the mainstream consciousness: Napster, which celebrates its 10-year anniversary this week.

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And so does Jasmine. Tune in to hear Jasmine (and Donald, to a lesser extent) gush about the upcoming Sony X-Series Walkman, a sweet-looking touch-screen MP3 player that has us hooked with its integrated Slacker capability, tactile playback buttons, and fun and innovative interface. Also, we manage to drag ourselves out of our Walkman infatuation long enough to discuss some upcoming Creative headphones, as well as give some tips on how you can move an iTunes library to an external hard drive. Finally, find out where you can find plenty of free (and legal) MP3s all over the Web. They may not be good songs, but free counts for something, right?

On the evening of May 18, the online music service Napster (a subsidiary of Best Buy) intends to drop the price of its least-expensive subscription music plan from $12.95 down to $5. The low-cost subscription plan allows users unrestricted streaming from a catalog of over 7 million songs, as well as a new offering of five DRM-free MP3 downloads per month. Although Napster's music service has an international reach, the new subscription plan is currently available only to U.S. customers.

Napster will continue to offer a $14.95 premium plan for users who wish to take subscription content with them on portable devices (although, the service is still not supported on iPods). It is unclear, at this point, whether premium subscribers will also have access to the five free MP3 downloads offered with the $5 plan.

Microsoft's Zune Pass music service adopted a similar subscription model in November of 2008, offering unlimited subscription tracks and 10 free MP3 downloads for a monthly fee of $15. Rhapsody, the most significant subscription music competitor of both Zune and Napster, has yet to announce any tweaks to its pricing model (a $13 basic plan, $15 for portable device support). Time will tell if the demand for Napster's low-cost subscription plan will pressure both Microsoft and Rhapsody into repackaging their subscription plans, as well.

Listening to Rhapsody channels on the Haier Ibiza Wi-Fi MP3 player lets you explore and download an all-you-can-eat buffet of music without ever connecting to a computer. The Ibiza won't outsell the iPod anytime soon, but it proves that subscription music discovery and downloads can work on portable, wireless device.

(Credit: Jasmine France)

Yesterday, I spoke about the history of the subscription music model, its roadblocks, and the major players committed to its success. In part 2 of this feature, I'm going to outline some areas of growth for subscription music, share some comments from Rob Williams of Rhapsody, and take a closer look at Microsoft's approach with their Zune Marketplace.

So far, we're seeing three music device trends that will shape digital music in coming months and years: digital audio on more device types (cell phones, MP3 players, UMPCs, in-car GPS, car stereos, home stereos, laptops, Squeezeboxes, boomboxes, Chumbys, and even sneakers); greater adoption of wireless technologies including Wi-Fi and Bluetooth; and cheaper, high-capacity flash memory replacing hard drives. Services such as Napster and Rhapsody are betting that while Apple may dominate the MP3 player space for a while, there's plenty of room for subscription music on all the many connected devices in your life that aren't iPods.

The Sony Ericsson 580 is proof that someone other than Apple can create a good music phone. Built-in Napster Mobile software lets users preview and purchase tracks on the go.

(Credit: Corinne Schulze/CNET Networks)

In a conversation I had with Rob Williams, senior vice president of music software for Rhapsody, Williams agreed that while wireless internet penetration needs to improve to fulfill the potential of the "celestial jukebox" concept, there are still plenty of opportunities for wireless music delivery. In our conversation, Williams said, "We want to assist people in getting music on devices, on their phone, at home, in their car, and across the Internet. We think that's something users actually want." At the moment, using Rhapsody to discover music while on the subway or in the car is a tricky proposition. A new partnership with Verizon could speed acceptance of on-demand music downloads and streaming radio (presumably using Bluetooth to broadcast to your car). However, despite the popularity of the iPhone, it remains to be seen whether consumers will broadly embrace music phones.

Putting subscription music everywhere the iPod isn't sounds like a tidy divide-and-conquer recipe for long-term success, but will it be enough? Are there other, more human factors contributing to the slow adoption of subscription music services?

Without a doubt--I think Steve Jobs was right on with this--there is an instinctual resistance to subscription music pounded into us by decades of consuming music as a physical medium. Rhapsody's Williams agrees: "There's definitely a hurdle with subscription because it's not an exact replica of the model people are used to in the physical world."

However, as a generation grows up trusting the Internet's infinite shelf space, we may become less concerned about owning an MP3 file. As a former record store employee, I can't tell you how revolutionary it still feels to know that music will never again go "out of print." Just five years ago, I played grief counselor to customers who optimistically walked into my record store asking for the long-out-of-print Travelling Wilburys album, only to walk out empty handed (the album finally saw a revival in 2007). As a reaction to repeat disappointments, many of us still stockpile MP3 files as we do CDs or LPs. It make take a while for the new reality of the Web's infinitely deep catalog to sink in, but when it does, purchasing music files a la carte may seem as quaint as buying VHS movies at Blockbuster--especially for casual music listeners who would enjoy a passive stream of music and risk-free on-demand downloads of whatever Top 40 music they might be enjoying on the radio.

But how does a Rhapsody hook these customers? Attempts to lure them with Rhapsody-branded MP3 players have met with mixed success, but nothing on the scale of the iPod and iTunes. In-home streaming jukeboxes such as the Sonos music system and Logitech Squeezebox, both preconfigured for use with Rhapsody and bundled with a trial subscription, have made some inroads. As Rob Williams stated in my interview, "Anything that has an IP address is a natural place for a subscription service."

Are home-based music systems such as Sonos the next battlefront for subscription music services?

(Credit: Sonos)

The other, perhaps more promising hook for Napster and Rhapsody is subscription music content on mobile phones. Personally, I can't stomach the idea of using my phone as an MP3 player, but there's a little gadget out there called the iPhone which is apparently doing quite well, and from a business point of view, an on-demand music service on a mobile phone makes sense. After all, not everybody will buy an MP3 player and even fewer will buy a product such as the Squeezebox, but nearly everyone has a cell phone. With more than 3 billion mobile phone service subscribers worldwide, the market is so huge that luring a mere fraction of customers to Rhapsody or Napster on their handsets could make a real difference for these music providers. If subscription services could tack their charges on the already skillfully obscure cell phone billing statements, their customer base would probably hardly blink. It's a crazy world in which we pay $80 a month in phone charges, but would rather steal a song than pay 99 cents for it, but I think Rhapsody and Napster are smart to take advantage of that particular market quirk.

Microsoft's Zune Marketplace doesn't cast a wide net for users, but instead chases a younger, more savvy demographic.

(Credit: Microsoft)

But there's an interesting third approach to the future of subscription music, too. Unlike Rhapsody and Napster, which strive work with a wide swath of consumer electronics, the Microsoft Zune Marketplace subscription music service is a vertical solution intended only for the Zune MP3 player. In an attempt to position the Zune as a hip, more youthful alternative to Apple's now mainstream iPod and iTunes universe, Microsoft has positioned the Zune and its integrated $14.99/mo Zune Marketplace subscription music service toward a smaller, younger, more musically devout demographic. Judging from their well-funded marketing campaign complete with 20-year-olds making deep psychedelic connections to The Shins while riding the subway--they just might get away with it, too.

Historically, the niche interests and voracious appetites of young, money-strapped, die-hard music fans could only be met by the deep, free, and unrestricted catalog of music available illegally through peer-to-peer services. Today, however, as labels of all sizes and genres are increasingly opting for inclusion on subscription music sites (often motivated by marketing and exposure, rather than direct financial gain), the all-you-can-eat buffet of subscription music is considerably better than it was only a few years ago. If properly dressed and curated, there's no reason the more than 3.5 million tracks available on a service such as the Zune Marketplace couldn't satisfy (or at least compliment) the appetites of highly demanding users. However, it's a tough audience to cater to, but Microsoft holds an advantage not shared by Napster or Rhapsody (aside from deep pockets), which is owning a closed vertical system of both the software and the hardware. It may come as no surprise that the Zune MP3 player is not compatible with any other subscription music service beyond the Zune Marketplace, nor is the Zune Marketplace compatible with any other MP3 player (with some rare exceptions).

So what's it all mean? Well the one-sentence conclusion for those of you smart enough to skip to the very end of my rant, is that subscription music service providers are likely to grow stronger over the next five years because of the consolidation of providers, the increasing amount of portable, networked devices, the breakthrough of the mobile music phone, and the generational shift of young music consumers with huge appetites and no hang-ups about owning music because of fears of scarcity. Apple's iPod and iTunes store have stood as the biggest roadblocks to the adoption of subscription music these past 5 years, but they have unwittingly set the stage for subscription music's increased viability as consumer's expectations for deep catalogs of affordable, on-demand music spill over into the areas of mobile phones, home stereos, and worthy iPod alternatives.

Will Apple ever adopt a subscription music model for iTunes?

(Credit: Corinne Schulze/CNET Networks)

Rhapsody launched the first high-profile subscription music service in December 2001, in the middle of a revolution. The first iPod had just hit the shelves, streaming Web radio sites like Live365.com were in full bloom, and the masses were just warming to the idea that they could preview and discover music online. A service like Rhapsody, which promised subscribers unlimited access to its growing music catalog, made music junkies salivate. It also pointed the way to a brave new world where people no longer needed physical or virtual media.

The future didn't go quite as planned, however. Because the illegal-but-free P2P world offered the most music, when Apple finally added an online store to their iTunes music software, Rhapsody's subscription music revolution--which has since included Yahoo Music Unlimited, MTV's Urge, Napster, Zune Marketplace--had started to lose momentum.

Rhapsody is the current king of the hill for subscription music, but without iPod support, where can it thrive?

(Credit: Real Networks)

Today, the only remaining outlets for subscription music are Rhapsody, Napster, and the Zune Marketplace. iTunes, in contrast, is now the No. 2 music retailer in the nation. Many factors contributed to the subscription music stall, not the least of which is the fact that the most popular MP3 player in the world is deliberately incompatible. Can the model survive?

At the 2008 Macworld expo in January, Steve Jobs quieted iTunes subscription service rumors by proclaiming that people don't want to rent music, they want to own it (unlike movies, which they should rent through iTunes, of course). Jobs' logic is that because people listen to a favorite song hundreds of times throughout their life, a file that might expire doesn't make sense. For companies like Rhapsody and Napster, the million dollar question is, "Is he right?" The answer is more complicated than you'd think. I would never be so bold as to call Mr. Jobs a liar, but I think his Macworld statement is misleading.

The subscription vs. purchased music debate presents a false choice--a black and white view of a world without accounting for all the mess in between. While it's true that most music consumers do just fine purchasing music a la carte through iTunes, Amazon, or eMusic, the idea of a coexisting "celestial jukebox" isn't any less potent. It's like saying the iPod and FM radio can't coexist. The concept of DRM protection for purchased music is clearly dumb (and still practiced by iTunes, by the way), but the real reason iTunes will be the last service to adopt a subscription music model is because it doesn't have to. Apple's existing music retail store is already enjoying a charmed existence without a subscription music option rocking the boat. Why the hell would Apple open up an all-you-can-eat buffet in a restaurant already raking it in on overpriced entrees?

What will the playing field of digital music look like five, 10, or 20 years down the line? The only predictive statement I'm willing to make is that the people of tomorrow, like the people of today, will want choice--choice about what music they want to hear, where they want to hear it, what devices they want to hear it from, and how much they want to pay for it.

So now you know my position. In the second part of Subscription Music's Future, I'll outline areas for subscription music's growth, talk with Rob Williams, SVP of music software for Rhapsody, and go under the hood of Microsoft's marketing logic for Zune Marketplace.

Continue to part 2 of Subscription music's future.