Subscriptions vs. Purchase

Om Malik has an interesting opinion on Yahoo's subscription based music service where he suggests that it will not dethrone Apple's (purchase based) iTunes. I tend to agree with this view because I still don't understand why people would choose the subscription model. I guess I like to own things, but the question is will more consumers go for a subscription or a purchase model.

When I got my TiVO, I looked at the $9.95 per month subscription price against the $249 lifetime price and quickly calculated that if I were to own my TiVO for more than 2 years, I do better to get the lifetime service. That was 5 years ago, and my TiVO is still going strong. Others I talked to at the time had gone with the monthly subscription because they intended to get rid of their TiVO within 2 years and get something new. I don't know if they actually did but I would assume they are paying a monthly fee for digital cable these days. Maybe this is better, maybe not.

In music these days, iTunes is the purchase model and Yahoo's Unlimited Music service is the pay as you go subscription. Day one, you are doing better with Yahoo because you can listen to just about anything as much as you like. But over the years, unless you consume music at the voracious pace you did in the beginning, you start to loose out on the model. It's because of how this conflicts with my desire to be efficient that makes it so unpalatable to me.

I don't understand the popularity of satellite radio either. Are people just looking for tons of music with no ads and they don't have any other options like an iPod in-dash stereo from Apple? Or is it the sporting events and talkshows that you can't listen to live on an iPod? Either way, I can't say I understand what is fueling the fire behind satellite radio adoption.

So I tend to agree with Om. I think the subscription model has its market but it won't dethrone Apple unless they do something really stupid. He also suggests that nothing is stopping Apple from launching a subscription based service. I don't think the subscription model will have the staying power because people will eventually get tired of paying all the bills. The subscription services that tend to work, say TV and Internet, are the ones that can't be replaced with a purchase once product.

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Comments (4)

G from 15 feet away

Even though I tend to agree with you, I have to disagree here. There are a number of good reasons that the subscription model will and should eventually overtake the purchase model for music.

As long as the subscription model is cheap enough, it has the opportunity to provide much more music to the customer immediately and over the long term. Whereas a customer may buy a number of songs and albums from ITunes or one of the other several purchase model options, when they sign up with a subscription model option, they have the ability to immediately have access to a much larger selection of music. Immediate gratification. In addition, this selection of music probably continues to grow faster than the customer would buy it on their own through the purchase model. More is better when it comes to music selection.

When a customer is funding the subscription model, they are funding the artists that truly deserve the compensation for their art. When some kid gets marketed the latest pop artist he is likely to go out and buy it from ITunes. But is he likely to buy and listen to some unknown artist that wasn’t marketed to him? Probably not. However if he has a subscription music service, there is no financial penalty involved for listening to the second artist. Then he decides he likes the second unknown artist much better than the pop artist, and he listens to that artist more, therefore the subscription service can fund that artist more through more listening, through more albums, and indirectly through outside sales. This compounded over a great number of listeners, ends up boosting the best artists to the top.

Anders from RTP

Gary makes an excellent point. I would agree that the subscription model can be made to more accuratly compensate artists, but that won't make it win in the end. Perhapse all of us old "own the music" people need to die off before the subscription model makes significant inroads, or maybe subscriptions won't take off until there is a service that has absolutly everything ever recorded.

Andy Collins from USA

Yahoo offers subscription and a la carte downloads. Apple offers only the latter. Yahoo subscribers get them at 79 cents each, Apple 99 cents.

How much of the music you own do you continue to listen to at least once a month? What's the value in paying a premium to own music if you aren't listening to it over and over? I think the longevity of most music I experience is less than a year, and the few CDs/tracks that are worth keeping around beyond that, I can pay 79 cents extra to buy. With iTunes you have to pay 99 cents even if you want to listen to a song only 1 time. Most songs aren't worth that. Yahoo makes the music feel free and unlimited. iTunes makes it feel like a toll road every time I want to hear a song. Subscription will win because it more closely models how people value music (most casually, few over and over).

Anders from RTP

OK, that's interesting. Sort of the "both - and" approach. More expensive though. But why would you ever purchase a track unless you intended to stop paying the monthly fee at some point?

I would say that I activly listen to the average track for more than one year so I guess you wouldn't call me a casual listener. Maybe that's the differience and I'm just not the subscription type, but there are people who are.

I am fairly big into lectures and books in audio format. I can see your point when I listen to a book that I don't intend to ever go through again, but in the case of some more ageless lectures that I intend to go through more than once, I want to own them. A good example of this is Professor Bob Brier's History of Ancient Egypt lecture series that he did for the Teaching Company. It is simply excellent and I do refrence it over the years so I want to own it. I liken it to a good book. You just have it on the shelf because you know you will look through it again in the future.