Wednesday, June 23, 2004

How to sell music online

As I mentioned in my first post, Apple recently launched the iTunes Music Store in Europe, an addition to iTunes that I have been awaiting impatiently ever since I got my iPod last year. Apple have just announced that they sold over 800,000 songs in the first week of operation.

Now Apple were by no means the first to offer music downloads in Europe: that distinction belongs to a company known as OD2, which provides a download service through a variety of ISPs and high-street music sellers. After three months of operation OD2 managed to sell a total of... 1 million songs.

Now why would that be? Why would a download service launched by a niche computer manufacturer almost beat in one week the sales of an established operator with multiple, high-profile distribution paths?

In a word: iPod. Not just the world's best-looking, easiest-to-use portable music player, iPod is a seamless part of Apple's iTunes, software which makes listening to music on your computer (and now, with AirPort, on your hifi too!)the easiest, most pleasant experience imaginable. The iTunes Music Store is an integral part of iTunes; you just click on the icon and the Music Store is there, tracks displayed as if they were already on your PC, previewable for 30 seconds with one click.

Another click buys the song, downloading it instantly to your music library, from where it will automatically end up on your iPod when you next dock it. Like any other song in your library, it can be burned to CD, listened to on another computer running iTunes (Mac or PC), and even copied permanently to up to two other computers. Songs cost just 79p each.

So if you love music enough to have an iPod, the iTunes Music Store is already there, in the application that manages and plays your music for you. Contrast that with buying music through OD2. I just went to one of their partners, the major high-street music retailer HMV. Their website hardly goes out of its way to advertise the download service: there's one tiny button on the very busy front page.

Clicking that takes you to the download page, where there isn't much music to be seen: there's a blurb about 50 songs for £4.99 (which sounds promising) and how, to get started, you need to register. Now why should I bother to register if they haven't yet shown me what they have? Further inspection shows that the aforementioned £4.99 is in fact a monthly subscription.

Let me outta here! I haven't seen any music yet and already they want to lock me into five quid a month! Run away!

Quelling my panic, I discover that you can actually browse a couple of tracks without registering. Immediately a confusing wealth of options materialises. I can stream the music for 1 credit, get it temporarily for 10 credits, get it permanently for 100 credits, or (aha!) buy it for 99p. A little math shows that the aforementioned 50 songs for my five quid must only be the temporary version. What exactly does all this mean?

Clicking the "Rights and information" fine print reveals that a temporary copy cannot be transferred to a player, cannot be burned to a CD, and can only be listened to on my PC (oh, forgot to tell you, Macs need not apply) as long as I am subscribed. So I buy the music, but need to continue paying five quid a month for the privilege of listening to it on my PC, and only on my PC. What a deal.

OK, so I'll get it permanently, or just buy it (to hell with this subscription model). What can I do then?

Apparently I get three transfers to portable players, and one CD burn. Scratch the CD, tough titty. Oh, and more fine print reveals that not all portable players are acceptable: some older players don't support the digital rights management (DRM) software that controls the number of transfers etc, so can't be used at all. Gee, thanks. And here I was, stupidly thinking you were going to help me buy and listen to my music more easily.

But wait! There's more! Everything, from the range of options available, to the number of devices and burns allowed, changes from label to label. Add to that the 99p price per song (when individual songs are available) and complete-album prices that are HIGHER than buying the CD, and you have a very un-compelling buying experience. Small wonder customers are staying away in droves.

Inject the iTunes Music Store into this reality, like the proverbial breath of fresh air, and it's little wonder that pent-up demand drives downloads through the roof. But of course that's what Apple is all about: providing what the user wants.

Now for some thoughts on pricing: Apple is said to have set a very challenging price bar at 79p, and certainly OD2 haven't matched it, spurious "temporary download" comparisons notwithstanding. The reason is that Apple don't want to make money on the music, they want to sell more iPods, which do cost, let's face it, a lot more than other players. But OD2 and the rest don't have a hardware agenda: the music is all they're going to make (or lose) money on. This looks like a problem for them.

Napster have an even bigger problem: they've started giving players away to subscribers! Their model is so screwed up, they think there's enough profit in the music to subsidize the hardware! They probably have that old "we lose money on every sale, but make it up on volume" canard in their Powerpoints. But how many subscribers realise that a subscription doesn't let them burn CDs or transfer music to a portable: you still have to buy the music, subscription or no subscription. Hello? Anybody home? Why on earth would anyone subscribe? At ten quid a month? You must be joking.


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