Do the math

Napster today introduced a portable version of its digital music subscription service, backed by a $30 million print and broadcast ad campaign that takes aim at Apple's iPod and iTunes Music Store. Napster's promotion will include a Super Bowl ad, called "Do the Math," that argues it would cost up to $10,000 to fill up an iPod, while it would only be $14.95 a month to load up an alternative player through the new Napster To Go service. The ad campaign also includes strategic alliances with companies that make rival players to the iPod--Creative, Dell and iRiver...

Apple CEO Steve Jobs said he does not believe that there is a significant number of music fans willing to pay $180 a year to subscribe to a collection of tracks that they do not permanently own. "When you rent stuff, in the end you're left with nothing," Jobs said. [iPodLounge]

When you pay for cable TV for a month, you're left with nothing if you stop paying too. But that doesn't stop people from paying for cable TV.

Lemme see... to spend as much on Napster To Go as it would take to full up an iPod, you'd have to subscribe for, oh, about 55 years. So let's just say subscribing to Napster To Go for life is about equal in cost to filling up an iPod. But if you fill up an iPod, you only have those 10,000 songs. With Napster To Go you've got every song in the world that has been deemed significant enough to add to the database. Virtually song you want to hear at any time, you'll be able to hear. No limits. (Due mostly to contractual issues, there are real limits to what can be found in subscriptions services today, but the size of such collections will asymptotically increase toward completeness over time. And hey, you still can't get the Beatles through iTMS.)

Right now, though, the one-at-a-time sales route makes more business sense for Apple, because if you have hundreds or thousands of purchased iTunes songs, you're going to think twice before buying an incompatible portable music player. From their point of view, it's worth a shot as a strategy. whether it will work depends on the success of Napster To Go and other such services.

I also think it might be worth quoting an exchange I had in the comments section of an earlier post I did on subscriptions, where I said the subscription model was clearly superior:

And here's one reason it isn't superior: when I stop paying all the music goes away

Posted by: Steve Jobs at October 12, 2004 08:33 PM

But, unless you were planning to stop buying music piece-by-piece, you'll be spending money in the future on music anyway. And I, for one, have no such plans. So, I don't see how the "when I stop paying all the music goes away" has much merit in the real world. But the other arguments I list in my post do have merit in the real world.

Posted by: Gary Robinson at October 13, 2004 06:16 AM

Comments

[Hans Fugal]

I, for one, bought a lot of music in my late teens and early twenties, and now I am content to listen to my collection, the radio, and the occasional purchase. Some people do buy music in a fairly regular way throughout their lives, but judging by the actions of the studios, they at least believe that many people spend like me.

[Jeremy Bowers]

The "subscription is best" argument only fully holds true in the case that if I drop one subscription service, I can pick up another and have all the same music available to me.

At the moment, I doubt that is true, but as you say, it should converge on that over time.

Until then, there is still room to rationally want to own the songs such that you can't be orphaned by your subscription service. How important this is is a function of your own priorities (in particular, you may desire to be independent of the service so they can't yank you around with pricing), and how many subscription services carry the music you like.

At the moment, I would disagree that either is a clear winner. Both have advantages and disadvantages. At the moment, personally I would still prefer to buy music because of my priorities and how many times I've been burned by letting a company have too much control over what I supposedly "own" when in fact they do. But other people will legitimately go the other way.

[jdb]

You wrote:

"And hey, you still can't get the Beatles through iTMS"

And neither can you get the Beatles from Napster nor any online service (legal anyway).

[paul]

i have CDs that I still listen to that are ten years old. do you honestly think the napster subscription service will still be around in 10 years?

[Gary Robinson]

It doesn't matter whether Napster's subscription service will be around in 10 years. SOME subscription service certainly will. It doesn't matter at all whether it's the same one or another one, as long as it lets you hear what you want to hear, when you want to hear it.

[John C. Welch]

The sub model only holds up if you:

1) Download music a lot.

2) Don't mind paying even if you aren't downloading.

3) Don't mind that you don't have anything in the end.

if even one of those aren't true, then subs don't hold up. I will, and have gone literally months without downloading new music. With the iTMS model, I paid nothing. Nor did I have to "re-validate" my iPod.

For those months, 3 out of the last 14, I would have had to pay Napster for the priviledge of listening to what I already had. Actually, looking at the last 14 months, (as far back as iTMS stats go for me), I would have saved:

$5.10US.

That's just over a third of Napster's cost for one month. So the ROI on napster is not there for me, and I bet i'm not alone.

As well, Napster is a single platform service: Windows. Napster would like you to believe that it's apple's fault. This of course is crap. There's nothing stopping Napster from running under OS X except for Microsoft, who refuses to allow Windows Media Player 10 and its DRM run under anything but Windows.

So, for me to use Napster, would carry a significant premium, in that I'd have to buy a windows box, and deal with all that maintenenance, just so I could use a Sub service that isn't offering me anything new. No new music. No better service. No simpler DRM. Just the same thing, paying in perpetuity.

Sorry, but the economics just don't work out.

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