Earlier this evening I was surveying Wordpress.com & came across this little gem regarding Napster, iTunes & the potential failure of Napsters model.
I couldn’t be more in objection to a number of the points….
A year ago the company spent $8.5 million on sales and marketing, and this quarter that number had shrunk to $5 million. The results: six months ago the subscription music service had 830,000 subs, three months ago it had 770,000, and now it has 750,000. The company says that last drop was expected, because kids stop using the service during the summer. But it’s not as if those numbers will swell this fall: NAPS projects only a 4% revenue increase for next quarter.
Source: Alley Insider
The original poster of the article goes on to conclude that Napster is in fact failing due to their business model. On the other hand, their revenue is poised to increase by 4% (They currently dredge in about $7 million per month, quite liquid!) for the next quarter. While that may seem like a fairly minimal amount they’re at least remaining on an even keel.
Yet Napster’s failure indicates that customers would rather own and control their own music. Why? Restating part of the focus group data from the Rubin article:
“The Big Red focus groups were both depressing and informative, and they confirmed what I — and Rick — already knew,” DiDia told me afterward. “The kids all said that a) no one listens to the radio anymore, b) they mostly steal music, but they don’t consider it stealing, and c) they get most of their music from iTunes on their iPod…and the biggest thing in their life is word of mouth. That’s how they hear about music, bands, everything.”
The subscription model is similar to Youtube in that you can view/listen to whatever’s in the library whenever you want, but you never actually possession the media. Yet we get Youtube for free, and it’s video. Why then would people pay for an audio-only version, even if it had a much larger library?
Also, no one has figured out how to make the subscription model portable like iPod. The best you could do now is use your cell phone and burn bandwidth. The subscription model needs a low-cost portable device that lets customers access their library from anywhere, as part of the subscription fee.
First of all, Napster isn’t failing. Napster has an exceptional brand that they’re poised to wield. Quite frankly, Napster has the best shot of offering a ’subscription’ based service where users can “lease” the files. An example would be a service similar to Netflix (minus any actual physical distribution).
They could technically offer ‘distribution’ through their application & team up with providers of hardware like they’ve done with the Microsoft PlayForSure program. With a proper DRM implementation they could limit users to a set amount of music that, size-wise or x amount of songs at a time. When a user decides they want more music than their subscription currently allocates to them they either delete some (tracked by the application responsible for downloading / uploading / relaying to the hardware) or increase their subscription size.
The limitation here is that it would only be compatible with devices that work in conjunction with Napster’s software on Windows based machines. There’s no reason why no one should be able to offer a subscription based model that also allows users to tote around the files at their own will.
Quite frankly, with Microsofts latest beast the Zune & other partners that are already in bed (e.g. Creative, Rio & more) there is absolutely no reason that there shouldn’t be a singular, open model for ’syncing’ files to the hardware so that DRM can be implemented in a responsible, standard manner.
Just my two cents. Go get ‘em, Napster!
(I’m just a fan of their logo)
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