This is a significant edit of an earlier post. I made this edit because I realized I'd missed the real reason Apple isn't supporting subscriptions.
Another important new feature expected in the Microsoft music software will be the ability to play music on portable devices based upon a monthly subscription fee rather than on simpler pay-for-download basis like Apple does. For a monthly fee, subscribers will be able to listen to music available from the Microsoft store not only on their PCs, but on portable music players, selecting what they want, and changing the music they put on their players regularly....
Apple Computer has generally dismissed the music subscription model. Chief Executive Steve Jobs has often been heard to say that "people want to own their music," likening the sale of per-song downloads--what the music industry often calls "a la carte"--to traditional sales of music CDs and records. Its iPod player doesn't support files encoded in Microsoft's Windows Media format. [Forbes]
Usually I tend to agree with Steve Jobs, but this is a case where I think he is wrong. In fact, I think it is fairly likely that he doesn't even mean what he's saying in this case, but rather is saying it for tactical reasons. Apple doesn't yet have technology equivalent to Microsoft's ability to transfer music to portable players in such a way that it will only play while a subscription is paid for. (For good reasons, as we will see...)
Here are some reasons a subscription model is superior:
- With a subscription, you don't end up finding out you don't like something only after you buy it. You can try anything you want, and delete it from your player if you don't like it.
- With a subscription you don't have to worry about technology issues destroying the value in one's collection. For instance, the tracks I've purchased from the iTunes Music Store would become worthless to me if I stopped using an iPod, because those tracks don't work on other players. That's one reason why I mostly still buy music on CD.
- Downloaded tracks don't have the sound quality of CD's because of bandwidth issues. But the sound quality of downloaded tracks can be expected to steadily increase over time. So that a major reason why tracks I buy now will be of less value later; I'll want to download tracks with better quality when they are available. With a subscription, both of these issues disappear, because I just get the tracks I want at the time I want them, in whatever form is most convenient and sounds best at the time.
- This is more important than it may seem at first: with a subscription model, no mental energy need be expended expended deciding what to buy and not to buy. You can focus on enjoying music, without that "tax" on the experience.
- Finally, a subscription service that makes most of the world's recorded music available (something that will happen) makes the consumer's experience virtually identical to the situation where his personal collection includes most of the world's recorded music, although he doesn't have to pay for more than the equivalent of a tiny fraction of that amount of music.
My personal first guess about the reason Apple is sticking to the item-by-item model was that the major labels are so used to selling music on a item-by-item basis that at the time the iTunes Music Store started, Apple couldn't get the broad range of music it wanted unless it made music available on that basis. So it sells music item-by-item.
But the real reason is the simple fact that, if Apple embraced a subscription model, then iPod users could switch to another brand at any time, drop their iTunes subscription, sign up for a Microsoft-compatible subscription, buy a player that supports Microsoft DRM, and go merrily on their way. Whereas with the current item-by-item FairPlay model, combined with a licensing strategy where FairPlay sales are iPod sales, the customer is locked into Apple's line. If iTunes Music Store users buy a portable player other than an iPod, they lose their investment in downloaded music.
Microsoft does not sell music playing hardware, so they can be agnostic about hardware brands. It doesn't matter to them if a consumer switches brands. And, as seen above, the subscription model is inherently superior and gives a fundamental advantage over item-by-item-only solutions. So, it's in Microsoft's interests to support subscriptions, as that gives people more reason to buy hardware that supports Microsoft's DRM, and for which Microsoft is paid.
And there we have it. A perfect explanation for the difference in approaches. It isn't that "people want to own their music," it's that Apple wants to promote customer lock-in.
And, by the way, this view is also consistent with the obvious explanation of why Apple won't allow non-FairPlay DRM'd music to play on the iPod. If it did, smart consumers would buy Microsoft- (or perhaps even Real-) DRM'd music so that they would have a choice in hardware, and avoid the lock-in described above. So it would would be totally against Apple's strategy to allow competing DRM software to work on iPods.
Now, in reality, Apple's approach seems unlikely to win in the long run. The advantages of subscriptions are large enough, and there are enough people who are not heavily invested in iTunes Music Store music collections, that the advantages of Microsoft's approach has a very strong chance of eroding Apple's customer base to the point that Apple will have to give up and support subscriptions.
However, Apple can start supporting subscriptions at any point that it suits them. It doesn't suit them now. At this point, they have 92.1% of the hard-drive-based portable player market. The more locked-in those customers are, the more money they will make on hardware sales.
And, no doubt, they have a hope that they will maintain that lead, analogously to Microsoft's lock on the OS market.
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