With paid music downloads falling far short of offsetting the impact of declining CD sales, next generation subscription services need to succeed if recorded music sales are ever going to come out of their nose dive. There is certainly lots of supply side activity, with services launched or announced in the last year from, Nokia, Spotify, TDC, Sky, Virgin Media to name but a few. And the incumbents have been busy reworking their offerings (cf Napster’s new 50%-price-cut-with-MP3s play).
Music subscription services have a lot of history but not a huge amount of success, so what gives the current new crop any chance of survival, let alone success? The key will be hiding some or more of the cost to the consumer and adding real value. The bottom line is that many consumers are simply unwilling to pay for music and even fewer are interested in paying a monthly fee for it. So success lies in making the services free or ‘feel like free’ to the end user, subsidizing the costs through savings to, or increased revenue from other core products. TDC, the Danish telco, has pioneered this approach with its free-to-consumer service that is available only to its customers. (A cynic might argue that Spotify is doing the same, subsidizing its free offering with VC funding!)
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