iTunes vs Everyone Reprised
Boring biz stuff ahead.
So analysts think iTunes should offer subscriptions because Apple's share fell 5 percent after Napster raised its revenue forecast and they expect a subscription will be the way to go:
Jupiter Research analyst David Card expects by 2009 that subscriptions will outpace downloads, generating $890 million in revenues versus $800 million for download sales...
"We're looking at 100 percent growth rates for the next three or four years in digital music sales and in digital music players," said Phil Leigh, analyst with Inside Digital Media.
Leigh expects Apple's dominance will be challenged. "Apple sold 8 million iPods in 2004, or 70 percent of the market. They will probably lose some market share over the next few years, but if they offer subscriptions, I think that loss of market share will be less," he said.
Hmm. Maybe, but Dan Frakes of Playlist isn't so sure.
The problem is that, right now, the market is speaking, and it's saying rather loudly that people want to own their music, not rent it%97at least some of it. (Note to self: subscription service proponents really hate it when people call it "renting," despite the fact that it's exactly that.)
[Ted Cohen, Senior VP for Digital Distribution and Delivery for EMI Recorded Music] claims that the reason for this is that "consumers have been seduced by the idea that everything costs $.99-they don't understand subscriptions." Neil Smith from AOL echoed these sentiments, noting that the industry "hasn't done enough to inform consumers." But what's to understand? With iTunes, you pay $.99 and you can do pretty much whatever you want with the song. (OK, except play it on a non-iPod portable; that takes some effort.) With a subscription service, you generally can't burn to CD, you can only play on a few devices, and to keep listening, you have to pay every month. I think it's pretty clear, and I don't think these guys give the average consumer enough credit.
I've talked about the subject of pay-per-song vs subscription, and as I've said before, I have nothing against subscriptions. But it also seems to me that Napster, Real et al are trying too hard to be iTunes-killers, which diminishes the value of their products and underestimates the consumer's intelligence.