Making Money from Content

Years ago when Napster went legit in its pay a flat fee for all-you-can-eat music, many believed that they hit upon something huge. People have already proven that they don’t like their consumption metered. Phone service and Internet service went in that direction. Later, DVDs-by-mail providers Netflix and Blockbuster did as well. Flat-fee monthly pricing seemed an obviously successful business model for music. But it still hasn’t worked nearly as successfully as iTunes’ $.99 per song own-it-forever model. Why?

People don’t want to pay an ongoing fee for the music they love

You can give people all the music they want for a comically low price (MOG offers a $5/month subscription and Rhapsody just lowered its price to a $10/month subscription) but it’s still not enough. Because once people have the music they love, they don’t want to part with it. And on the onset, these services are saying, to keep the music you love you have to pay us a fee every month to keep it. It’s a concept that rubs a lot of people the wrong way. Still both services allow you to download and purchase the music. But many people think that’s paying double for their music.

If so many agree it’s a great service model, then why aren’t there more subscribers?

I believe there are many issues here.

• The model only leans towards true music enthusiasts who enjoy the experience of discovering music. That doesn’t define the average music consumer.
• People who test the subscription service end up gravitating towards music and artists they already own. They don’t explore and therefore they never see the value of the application.
• Users can’t take the music with them. This will soon change as MOG will be offering a service for iPhone and Android users that allows them to travel with their music library (Watch my video interview with the CEO of MOG on the subject).

Paid-for music more intrinsic to the desktop experience

I suggest that paid-for music could do better if it were more intrinsic to the desktop experience. Apple has successfully made iTunes a necessary desktop application. It’s grown in importance as they’ve add capabilities, content, and features. We’ve all witnessed it go from just handling music, to selling music, to handling video, to video, to selling applications and then managing them (funny how applications took the opposite path).

itiBiti, the white-labeled desktop communications application is going through a similar growth pattern. It offers first and foremost communications, but then it can handle any kind of content. But like iTunes, it’s starting small and growing. With itiBiti’s first release, the NBC Communicator, NBC is offering clips of NBC shows through the application. This is valuable to NBC because it’s giving them a desktop presence. It’s a location play they simply didn’t have before.

Similarly, the music industry could experience the same benefits but in a way they didn’t before. Since itiBiti is advertiser and ecommerce supported, the music industry could subsidize the monthly cost of its paid-for service through itiBiti. It’s a great opportunity for the music industry. Think about the opportunities. Your label is about to release a new album. On the day of release, the desktop application is completely reskinned with your album’s cover and the suggested songs for the day are pushed to that album as well. It’s the first thing people see before they launch their browser.

Just a modest suggestion for the music industry whether paid for or not. What do you think?

Photo credit: Creative Commons attribution to Tony J Case, Great Beyond.

Tags: MOG, Music, Rhapsody