Prix Fixe or à la Carte?

With new music download services, including the move to higher resolutions, one vital question still remains for the music business: Will the majority of consumers prefer to continue purchasing music à la carte, one track or album at a time, or will they prefer to subscribe to an unlimited library?

It's an important distinction, and one that goes to the heart of the music industry's future business model. Companies that guess correctly will tap into the music-buying mind successfully, and continue to develop their online businesses. And there's always the possibility that both methods for serving music will find equal favor. One thing is for certain: Online music sales continue to grow.

Apple's iTunes is the dominant example of an à la carte music service. Customers can buy one track at a time, or groups of tracks at special prices. These tracks do have some digital rights management restrictions, but once you buy them, they are yours as long as your portable or music-server hard drive continues to hold up.

At the other end of the market is Napster, re-launched earlier this year as a subscription download service. You can download as much as you like from an assortment of one million tracks for a single monthly fee, but when you stop paying for the subscription, you no longer have use of your library.

But it would seem that we're still a planet of hunter/collectors who like to keep what we buy when it comes to music. Recent research from Ipsos-Insight suggests that Napster and similar services may require substantial incentives to encourage broad consumer adoption.

In the most recent quarterly study from Ipsos, US downloaders aged 12 and older were presented with "simulated digital music acquisition environments" consisting of various options for obtaining online music. One of these simulated environments included an online peer-to-peer (P2P) file-sharing network, an on-demand streaming computer-tethered subscription-based service, and an à la carte pay-per-download service.

No matter how you slice it, the à la carte services win when it comes to purchasing listening rights to music online. The results show that 19% of the respondents preferred to pay per file, compared to 5% preferring a subscription service. As to the others, 64% said they would continue to use P2P file sharing and 12% didn't want downloads at all.

When the option to use P2P sharing was removed, most respondents moved to the other music options, while 44% said they would not download anything that required payment. Under this scenario, à la carte was the big winner, with 39% preferring the method and 17% preferring some form of subscription service.