Wednesday, March 19, 2008

Is Steve Jobs doing a 180 about iTunes subscriptions?

Just under a year ago I wrote this article about Realplayer Rhapsody's subscription model which allows customers to listen to an unlimited number of tracks in the Rhapsody library for a low monthly fee. In the article I discussed how Steve Jobs shrugged off that model, saying it was not something that "consumers wanted", even though a cost-per-track evaluation shows it would be a lot cheaper for consumers who listened to more than just five or ten songs a month.

So it was surprising to read this article from today which suggests that Apple is attempting to negotiate a subscription model with major music labels. The plan would charge a premium for the music players (much in the same way a Rhapsody-equipped Sansa MP3 player costs quite a bit more than an identical Sansa player that cannot play Rhapsody songs) but allow customers to pay a low monthly fee to listen to unlimited songs, or pay an even heftier charge for the device up front but get unlimited songs for the life of the device (this is a model being used by TiVo for their DVR consoles).

What struck me the most was this statement in the article:

"Detailed market research has shown strong appetite among consumers for deals bundling music in with the cost of the device, or in exchange for a monthly subscription, executives said."

Maybe this is Jobs' "duh" moment, because it seemed evident even a year ago that there was consumer demand for these things even though Jobs said otherwise. Either that, or Jobs thought the iPod's "hip" factor would fend off less-hip competitors (like RealPlayer) and simply miscalculated.

It will be interesting to see how this plays out. One thing is for sure though. I titled last year's article on RealPlayer Rhapsody "The iPod Killer?". If Jobs does take iTunes to a subscription model, that might well make the service the Rhapsody killer, as Realplayer would have a very hard time competing against Apple if both were offering the same service model.

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