Subscribing to confusion: The Register on eMusic, Zune, and the iPod

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.