A New Rival for iTunes Napster to Launch Service
That Makes Music Portable;
Monthly Fee vs. 99-Cent Songs
By NICK WINGFIELD
Staff Reporter of THE WALL STREET JOURNAL
February 3, 2005
Apple Computer proved people will pay 99 cents on the Internet to buy songs one-by-one and own them. Now, a rival company is about to find out how many are willing to pay a flat fee to rent music -- if they can take it with them.
Napster Inc. today officially introduced Napster To Go, a service that is the musical equivalent of a smorgasbord, charging subscribers about $15 a month for access to all the music they care to listen to. Subscription music services like these have been around the Net for years: You pay a fee for the ability to listen to the songs you want, although you can't make permanent copies. However, these services have lagged behind Apple's popular iTunes and similar sites because they have been more restrictive -- for instance, preventing users from transferring songs into increasingly popular portable players.
Napster To Go adds that critical element: portability. Previous subscription services (including Napster's) restricted users to listening only on their PCs for a simple reason: lack of software that could prevent subscribers from storing permanent copies of their rented songs on portable players, then canceling their subscriptions. Last year, Microsoft Corp. introduced a new version of its copy-protection software that allows subscription services to transfer music to mobile devices, while at the same time preventing subscribers from making permanent copies.
Other companies are planning to follow with similar services, including RealNetworks Inc. and Virgin Group Ltd.'s Virgin Digital; Trans World Entertainment Corp.'s FYE.com recently launched its own $15-a-month portable subscription service through a relationship with MusicNet. If successful, the new options for buying and renting music online could challenge Apple's approach to selling music, which has garnered it upward of 70% of the music-download market.
Of course, the biggest competition for Napster is free pirated music, not 99-cent songs. Despite the rise of commercial online music retailers, music piracy remains rampant on the Internet through free file-sharing programs.
Indeed, it appears Internet piracy is bigger than ever by some measures. Average monthly users of all file-sharing programs grew 35% to 7.6 million in December from 5.6 million a year earlier, according to research firm BigChampagne LLC. While the strong growth of iTunes has raised high hopes within the industry about the promise of online music, the total Internet music market is still only 1% to 2% of the global music business.
A key advance: The new service lets users load 'rented' songs, by artists like Joss Stone, into their portable music players.
The recording industry counters that lawsuits aimed at big song-swappers and other efforts to combat piracy are showing some signs of success. A recent report from the International Federation of the Phonographic Industry said the number of users on FastTrack, a popular file-sharing system used by Kazaa and other programs that let users share music freely over the Net, fell to 2.3 million last month from 3.2 million a year before. However, the report also pointed out that use of other file-sharing programs was increasing.
Napster Inc. itself carries the brand name of the now-defunct file-sharing service that helped spur online music piracy years ago. Formerly known as Roxio Inc., Napster is now banking heavily on the new subscription service to help its unprofitable music business show profits.
New services like Napster To Go may face considerable obstacles with buyers. First they have to explain to consumers how the new services work -- no easy task because most consumers are used to buying, not subscribing to, music.
Also, the service is initially compatible with only a few music players, including devices from Samsung, iRiver and others that have incorporated Microsoft copy-protection technology; more products are expected in coming months. Napster To Go doesn't work with Apple's iPod, the most popular player, because Apple doesn't support Microsoft's music technologies.
Napster is kicking off a $30 million print and broadcast advertising campaign with a television commercial during this weekend's Super Bowl. The central theme of the campaign, called "Do the Math," is to argue that it theoretically could cost as much as $10,000 to fully load up some models of Apple's iPod with 99-cent songs, if purchased one by one. Putting the same number of songs on a portable music player through Napster To Go costs $15 a month, the ads say.
In an interview, Apple's chief executive, Steve Jobs, said he doesn't believe there's a meaningful market willing to pay $180 a year to subscribe to music that users don't permanently own. "When you rent stuff, in the end you're left with nothing," Mr. Jobs said.
Advocates of services like Napster To Go say subscription music businesses have a better chance of luring users from piracy in the long run than sites like iTunes. That is because members of subscription services can listen to the entire Rolling Stones or Eminem canons without worrying about running up a huge tab, an experience that comes closer to the free-for-all of file-sharing than do sites like iTunes. (These days, almost all major artists are available on all the commercial-download sites, though there is one glaring omission: The Beatles.)
In the new Napster service, subscribers will be able to download music onto their PCs, then transfer it to their portable music devices, as they do with iTunes. Users will be able to fill their music players up with as many songs as the players will hold -- but it is necessary to plug the devices into their PCs at least once every 30 days, so Napster can verify over the Internet that users are still paid-up members. Stop paying the monthly fee, and the songs become unplayable.
For now, the appeal of subscription services appears to be small. In an Internet poll late last year of more than 300 owners of portable music players, research firm Parks Associates asked how many would be willing to pay $10 a month for a music service that included portability. A mere 8% said they would be likely users.
The music industry itself hasn't decided how enthusiastic it is about portable subscription services, with some executives worrying that subscriptions will cannibalize CD purchases by heavy spenders. Some Internet industry executives say music companies are demanding high licensing fees from companies that want to support portable players, potentially forcing the cost of such services to $20 or more a month.
Write to Nick Wingfield at nick.wingfield@wsj.com |
