In the flood of press articles on Microsoft’s recent Zune announcement, I happened to take special note of one that appeared in The Register, titled “The iPod’s Achilles Heel? It’s er. . . Reader’s Digest.” The logic of the article appears to be as follows:

  1. Apple doesn’t offer a subscription service for the iPod.
  2. eMusic has built a successful digital music business on a subscription model.
  3. Microsoft will offer a subscription service for Zune.
  4. Therefore Zune will have a competitive advantage against the iPod.

Unfortunately the article’s logic breaks down when you look at it closely. Let’s start with the confusion about what the eMusic subscription model actually entails, especially compared to other subscription-based services like Napster To Go. The article refers to eMusic’s “‘Reader’s Digest’ subscription model,” but doesn’t really explain the reference; I’m assuming that the article is using the phrase “‘Reader’s Digest’ subscription model” as shorthand for any model where people pay fixed amounts at set periods for content of some sort (magazines, music, whatever). However an eMusic subscription is very different than a Napster To Go subscription:

  • In the eMusic model the customer pays a set amount per month for the privilege of downloading and listening to a fixed number of DRM-free tracks (e.g., $9.99 per month for 40 tracks); once downloaded the customer can listen to the tracks forever, whether they continue to subscribe to eMusic or not. One analogy is to traditional “book of the month” clubs: The customer is paying for a fixed number of books per month, whether or not they actually read them, and any books bought are theirs to keep forever.
  • In the Napster To Go model the customer pays a set amount per month for the privilege of downloading and listening to an unlimited number of DRM-protected tracks; however the tracks “disappear” once the subscription ends. One analogy is to having a library card: You can check out and read as many books as you wish, but you don’t own the books and have to return them at some point, in particular when you give up your card.

These models are very different, and right now it’s not clear which model Zune will be using (though we can guess, as noted below); thus the article’s name-checking eMusic in the context of Zune is premature at best.

The article also confuses what appeals to the music business (and in particular to major music labels) with what appeals to music consumers. For example, the article states:

Now every company wants to be in [the] subscriptions business—it means costs and revenue are predictable, and while the cost of acquiring a punter is higher, this can be amortized over a very long time period—possibly a lifetime. (And if you’re really lucky, you can keep billing them after they’ve died). But labels love subscriptions more than most, because it gives them a chance to monetize their dormant back catalogs. They’ve wanted to do this long before the idea acquired its most recent buzzword, “Long Tail,” and eMusic has become the model for low volume aggregation.

It goes without saying that any business would love to have customers send it a fixed amount of money every month without fail, especially if (like eMusic) the customers are sending that money even if they’re not actually making use of the service. But just because businesses love the subscription model doesn’t mean that customers love it as well. eMusic’s appeal to customers has very little to do with the subscription model per se; rather people are attracted to eMusic because:

  • eMusic sells music that’s playable on iPods (unlike every other major music service other than the iTunes store).
  • eMusic sells music that’s cheap (four or more times less expensive than Apple on a per-track basis).
  • eMusic sells music that doesn’t go away if you cancel the service (unlike Napster To Go and others).
  • eMusic sells music that isn’t hobbled by technical restrictions on what you can do with it (unlike all other major music services).

eMusic customers accept eMusic’s subscription model simply as part of the price of getting the above advantages. If there were another service that offered everything that eMusic does now, but on a pure a la carte basis, eMusic customers would no doubt rapidly abandon eMusic in favor of such a competitor.

Back to Zune: Will the Zune subscription service be more like eMusic, or more like Napster To Go? While Microsoft hasn’t provided complete information, it has provided some hints; in particular we know that Zune will use some sort of DRM and that Zune will offer an “all you can eat” unlimited download subscription service (as noted in the press release, “You can . . . buy a Zune Pass subscription to download as many songs as you want for a flat fee”). My bet is therefore that Zune Pass will simply be Microsoft’s version of Napster To Go: as much music as you want, but only as long as your Zune Pass subscription is active.

If this is the case, the logic of the article fails: the Zune Pass subscription service will be nothing like eMusic, and you can’t extrapolate from eMusic’s success to that of Zune. On the contrary, unless Microsoft’s marketing prowess can make a difference and/or Zune turns out to have truly compelling features (whether the WiFi sharing or something else as yet unannounced) we’d expect Zune’s subscription service to be about as successful as Napster To Go and similar services, which is to say not very successful at all.

musicmoggy (pmillsom@aol.com) - 2006-09-17 04:10

Entirely agree with everything you wrote above. Another perspective to add is the iTunes customer is younger than eMusics. Given that the older generation are [generally] a little slower on the take up of technology adoption (you and I are leaders but sadly most of our peers are laggers) then a bow wave user adoption is close behind us (5 to 10 years). Thus eMusic will enjoy this significant growth. Looking around the at comments on the web it is suggested that mircosoft new DRM solution for zune will even apply if you were to share unprotected music with a friend. So Microsoft becomes the criminal by virtue of breaking Creative Commons licenses. A class action looks certain or a last minute change of design. Also of interest.. “Microsoft’s Zune will not play protected Windows Media Audio and Video purchased or “rented” from Napster 2.0, Rhapsody, Yahoo! Unlimited, Movielink, Cinemanow, or any other online media service.” This will really put the Commercial user’s of PlayforSure in a spin. If new generations of DRM are incompatible chaos ensues. But don’t blame Microsoft. Microsoft wants DRM. It’s a great revenue opportunity to licence out DRM software in all shapes and forms. Micrsoft is simply reacting to the music industry demands and for the large wads of dollars. It is the mainstream music industry that is pushing this ‘innovation’. The overpaid guys at the top have lost touch with reality and have no foresight. The next couple of years will be very interesting. Sit back and watch the entertainment and the massive consumer backlog. And the winnder out of all of this will be… eMusic for one.

Frank Hecker - 2006-09-17 05:09

I agree with your comments as well, especially about the major labels losing touch with reality. I’ve seen other comments suggesting that Microsoft, Apple, and other DRM providers are the labels’ dream come true: a new way to force people to continually re-purchase their music libraries as newer and cooler devices come to market, each with its own unique and proprietary DRM scheme – basically replicating past format changes from vinyl to cassette to CD, etc. Frankly I think this is idiocy. People, especially, of the iPod generation, know perfectly well that a) DRM adds no value in terms of increased fidelity, convenience, etc. (as for example CDs did relative to vinyl), and b) they can get perfectly good MP3 files from a variety of source, legal or otherwise. All the labels are doing is giving more momentum to P2P networks and DRM-cracking software.

Evan (reykjavik@gmail.com) - 2006-09-17 14:34

You forgot to mention the niche aspect of eMusic. People subscribe because its their only reliable source of indie music. Its not the other way around. Brittany Spears fans aren’t using eMusic because they like the subscription based model better then outright ownership of iTunes. You’re getting people who don’t have much of an option AND the 4 reasons posted above. American ethic, law and culture is all about property ownership. Are more cars leased per year or bought? The answer to that question will always be the same answer to the mp3 question.

Frank Hecker - 2006-09-17 15:46

You’re right, I forgot to mention the indie focus in this answer. (I did address it in my previous post “Off with its head: eMusic and the Long Tail”.) Your point reinforces my point, namely that music consumers are selecting online music services based on other attributes than whether they’re subscription-based or not.

ex libris » libraries, music, tech » Blog Archive » zune? - 2006-09-22 18:13

[…] Interesting article in the Register on Friday ostensibly about Microsoft’s Zune DAP and Itunes’ market weaknesses. A significant amount of space on page 2 is devoted to Emusic’s subscription model. The writer even echoes thoughts I expressed previously regarding Emusic, Itunes and the Long Tail:In his desire to make the “Long Tail” a one-shape-fits-all buzzword/religious cult, author Chris Anderson wrongly lumps iTunes and eMusic together as examples of “Long Tail”, although one is, and one emphatically isn’t.For such a short article, it flies all over the place like a child that lost its ritalin. Still, well worth a read. Hecker has also posted an excellent commentary on the article over on Swindleeeee. […]