Subscriptions or Charge by the Track?

In an effort to move their businesses into cyberspace, record labels and audio content distributors are still experimenting with their online formulas. Key to the new economic models for selling music over the Net is this question: Would you rather pay a monthly subscription fee to download music, or pay for music track by track? According to market researcher Gartner Group, sites that plan to sell music via the subscription model should seriously reconsider.

Gartner's P.J. McNealy says that "One of the things that Napster has shown is that a majority of people aren't downloading albums, they are only listening to a couple of songs from an album, so charging them for what they really listen to makes sense." Industry analysts point to struggling subscription services currently available from MP3.com and EMusic.com as examples of why charging a fixed monthly fee ($9.99 in these examples) isn't working. McNealy adds that "subscriptions face too much competition from free content available on file-sharing programs such as Napster. Because of that, charging per month just does not make sense."

The answer, according to the Gartner report, is that "record labels need to first figure out digital-rights management and then create portals where consumers can sample music and then buy tracks." McNealy claims that charging between 99¢ to $1.99 per track is the future of online music.

Interestingly, analysis from Jupiter Communications indicates that labels will thrive once they move to a subscription model for licensing their catalogs of tunes. Jupiter claims that, based on the subscription model, the online market could well hit $5.4 billion by 2005.

Regardless, some major labels, such as EMI, have put their toes into the online waters by offering individual tracks from selected artists. Each week finds more music being prepared for digital download; Musicmaker.com (40% owned by EMI) recently announced the addition of selections from the EMI Classics and Blue Note catalogs. Jazz artists available for streaming will include Thelonious Monk, Art Blakey, Wayne Shorter, Sonny Rollins, and Herbie Hancock, with operas and arias available from Maria Callas, José Carreras, and Plácido Domingo, among others.

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