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http://www.macnn.com/articles/05/03/07/itunes.subscription/

Analysts: Apple may be forced to offer subscription

updated 09:00 am EST, Mon March 7, 2005

iTunes subscription

Online subscription services from Napster and others are beginning to put , reports Reuters. "The only reason they have iTunes is to sell iPods. If it turns out subscription services are important to sell iPods, they'll probably get into that business," said Jupiter Research analyst David Card. Card expects by 2009 that subscriptions will outpace downloads, generating $890 million in revenues versus $800 million for download sales. "We think many millions of people will be buying 5 to 15 downloads per year versus fewer, a few million, who will spend 10 to 15 dollars a month for subscriptions." Shares of Apple fell 5 percent or $2.33 a share after Napster raised its current quarter revenue forecast to $15 million from $14 million. Napster said demand for players compatible with its service from iRiver, Creative, and Dell was strong.

by MacNN Staff

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macimmortal
Fresh-Faced Recruit

Joined: Aug 2001

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03/07, 09:16am | report spam | close Reply |
Give me a freakin break:

Let's look at these numbers:
A $1,000,000 increase for the current three month period EQUALS ROUGHLY:

23,000 NEW subsribers AFTER a MULTIMILLION DOLLAR AD CAMPAIGN.

How many NEW iPod's are sold in 3 months? 4.5 MILLION!!!! That's 4.5 MILLION potential "subcribers" to the iTunes music service.

Now tell me again how in holy h*ll Napster's numbers are even going to make a TINY dent in Apple's business model?

slider
Mac Elite

Joined: Oct 1999

0

03/07, 09:17am | report spam | close Reply |
Time will tell

We'll see how these model works out in the long run. Once people start to realize that the music suddenly disappears from their MP3 players, their eyes will begin to open. Personally I would prefer to own what I buy, but that's me. If it turns out that subscriptions are a big part of the digital music pie, then I don't see it as a problem for Apple to offer it. As far as the stocks go, these aren't really good indicators anyways.

NetworkShadow
Mac Elite

Joined: Nov 2002

0

03/07, 09:22am | report spam | close Reply |
Analysts annoy me.

Analysts annoy me... I hate subscriptions, don't we have enough bills as it is? I find it hard to believe Apple would change the iTMS strategy like that now that iTMS is so well established with it's current model.

I think this guy doesn't know enough about Apple, or he ran out of other things to talk bs about.

csimmons
Fresh-Faced Recruit

Joined: Jun 2004

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03/07, 09:25am | report spam | close Reply |
Let me get this straight.

Napster makes in a quarter what Apple makes in a week, and some analysts are worried about Apple's future?

Give me a break.

Needless to say, I bought some more Apple stock this morning. ;-))

ticedric
Fresh-Faced Recruit

Joined: Oct 2003

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03/07, 09:25am | report spam | close Reply |
renting music?

How in the world can someone project anything in 2009? 4 years in the tech world is light years away...by then technology will change the way we store music one again...until then apple has plenty of time to intergrate the Ipod into more products...cars, home audio, video, bluetooth...to make it even more popular...

And after a few million people crack the security on the subscription songs and get 10,000 for 15$....the entire music industry will stear clear of this model.

beeble
Fresh-Faced Recruit

Joined: Mar 2004

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03/07, 09:29am | report spam | close Reply |
What the ....

Look at Apple's accelerating sales. They will probably hit 500mil sales this year (almost $500mil). That's more than half of the 2009 prediction for the entire online purchase industry. Napster's sales are growing, but no where near the rate or Apple's. For every step forward Napster are taking, Apple is moving another mile ahead.

Only people who purchase copious quantities of music will want $15 a month. The overwhelming majority of people don't spend anywhere near that a month on music so Apple will always have more users, and because they will have iPod's and Napster doesn't support iPods, they will always be customers of Apple's store, not some other online purchase service.

By not opening up the iPod, Apple have ensured that they can't be copied. Anyone can copy Napster because anyone can use the same players they use. No one can copy Apple.

Business Rule 478: Competition is great thing between two other people.

velocitychannel
Dedicated MacNNer

Joined: Sep 2000

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03/07, 09:34am | report spam | close Reply |
Fools

MS is pushing for the subscription model, and we all know who has major influence over these "analysts". The subscription model is good for business, but bad for the consumer. Given time, more and more consumers will see past the false advertising of these services and realize this is not what they want.

In the long run, buying music is good for the consumer and good for the recording industry. Like ticedric said, "And after a few million people crack the security on the subscription songs and get 10,000 for 15$....the entire music industry will stear clear of this model." I couldn't agree more.

horvatic
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Joined: Apr 2002

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03/07, 09:41am | report spam | close Reply |
I don't want to rent!

What is the big deal with this renting garbage? I don't want to rent my music. Why are these analysts getting all excited about nothing. Apple made in a week what Napster says is a big quarterly jump. Big fricken deal! I want to own my music and if you look at the numbers by renting for $15 dollars a month after a while your paying a whole lot more for your music then if you just bought it out right. Not to mention you pay every month for the music that you already got from them. And if you stop guess what. All your music goes AWAY! How many in this forum want to rent there music and keep paying forever for it?

eldarkus
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Joined: Feb 2004

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03/07, 09:51am | report spam | close Reply |
Analysts

Analysts are fortune tellers. They are nothing more than walking 8 Balls.. shake em up, turn em over and they spew some data that is, by nature, 100% unpredictable.

boomer0127
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Joined: Jan 2004

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03/07, 09:59am | report spam | close Reply |
This story from...

... the same person who wrote the story "Users Bypass Napster Copy Protection" here: http://www.xtramsn.co.nz/entertainment/0,,3901-4118410,00.html

Hey Lady, do you read what you write?

BlueDjinn01
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Joined: Aug 2001

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03/07, 10:05am | report spam | close Reply |
Napster Numbers Breakdown

(I'm repeating below what I posted on a similar story over at The Mac Observer last week...kinda long, sorry!):

First, to be fair, this *could* be the start of a serious competitor to the iTMS--but it's not necessarily a *threat* to them, since the markets are pretty different. Those who want an iPod (just about everyone) will continue to use the iTMS; those who don't will use Napster. I see this as more of a threat to the *other* players (Real, MusicMatch, BuyMusic, etc) than to the iTMS.

Second, the *revenue* is meaningless without having some idea of the *profitability*, either direct or indirect. In the case of iTMS, it's generally known that they make a "small profit" ($0.10/track?) on it, but make a TON of money on the iPod sales. In the case of Napster, does anyone have the slightest clue how much they're actually making in profit (if at all)? They don't sell their own players, so where's the profit coming from? We "know" that about 65% of the iTMS sales go to the labels, is the same true of the $15/month subscription?

Third, let's break that revenue down--$15 million over 3 months = about $5 million per month. Assuming that 10% (?) of that is from the extra-99�/song CD burning fee, that means about 300,000 subscribers total (300k x $15/month = $4.5 million). How many did they have before the new Napster2Go service, and how much are they sinking into the marketing? What about operational costs?

Fourth, while I'm sure they're getting an initial spike in subscriptions from the launch of the new service (SuperBowl ads, etc), the bigger question is how many pissed-off customers (and cancellations, and bad word-of-mouth) are they gonna have once people start reading the fine print about the music disappearing if you a) miss a payment or b) don't sync up your system every month?

According to Yahoo's Financial company info, Napster (under Roxio) lost a whopping $49 million last year, losing $26 million, $6.5 million, $2.6 million and $15 million in each quarter respectively, on gross revenues of $18.7 million, $33.6 million, $29.9 million and $27.4 million ($110 million for the year).

At the moment, they have around $140 million in cash and $15 million in debt.

Now, I know that dumping all of the Roxio software and switching over to Napster exclusively completely changes their entire business model, but does someone want to explain to me how they expect to generate a profit, ever, with the subscription model? They're expecting $15 million gross revenue this quarter--what's the labels' cut? If it's the same 65% that everyone seems to agree is what iTMS pays, that leaves them with $5 million in *gross* rev for their entire company, before *any* other costs.

If they lose the same $12 million/quarter average that they did last year, that leaves them with exactly 3 years to live, with *no* other source of re

bobolicious
Junior Member

Joined: Aug 2002

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03/07, 10:05am | report spam | close Reply |
I'm still buying CDs...

...better sound, better useablility...

The money men 'dumbed down' records to CD's... Hopefully the suits won't denigrate audio quality any further by coercing us into the limitations of MPEG 4 or worse, MP3...

budster101
Baninated

Joined: Dec 2004

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03/07, 10:26am | report spam | close Reply |
Statistics and Analysts.

Anal-ysts.

Statistics generally are made up on the spot. :D

redwood
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Joined: Oct 2003

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03/07, 10:56am | report spam | close Reply |
Rhaphsody rocks

I love Real Rhaphsody and I love itunes music store as well. The beauty of subscription is I can listen to anything I want, eight hours a day while I'm at work. I wish I could rent music though, and download it to my ipod, maybe someone will figure that out soon.

The beauty of subscription is the amazing power of having everything at your fingertips. A friend told me about handsome boy modeling school last week, I listened to the whole album on thursday and bought tickets to the show in town here then next day. I will probably buy the CD at the show.

To the person who says "who needs another bill..." I spent hundreds and hundreds of dollars on itunes last year. By far the most I've spent in a year on music in the last 10 years and a lot of it goes unlistened to, even though it's nice to "own" it, whatver that means, it's just bits on a computer. Frankly, I feel I overspent on itunes just for impulse buys or to listen to an album once.

The subscription idea is not perfect and it has a long way to go to be "perfect" in my opinion but once you get used to it for a while, it's really fun and addictive and cheaper in many ways.

MacnTX
Fresh-Faced Recruit

Joined: Apr 2004

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03/07, 11:05am | report spam | close Reply |
Huh?!?

Call us once Napster is even doing 10% of the business that the iTMS is currently doing and then we'll talk. That is if they don't go belly up first anyway. These anal-ysts are a total joke...

climacs
Fresh-Faced Recruit

Joined: Sep 2001

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03/07, 11:06am | report spam | close Reply |
not so fast

I wouldn't be so quick to piss all over the subscription model, as redwood points out it's great for those who buy a lot of music anyway.

If subscription becomes a viable business model, so what? I am sure Apple already has a plan in their back pocket to offer subscriptions. Then what will Napster do? Buh bye Napster!

Me personally, I have rather eclectic musical tastes. I like Euro-house and also I have resistance to paying for compressed audio files. My music comes either from streaming DJ mixes which I record with Wiretap and then compress to AAC for my iPod, plus burned to CD for storage; and also import CDs that are hard to find. I don't think either ITMS or Napster offers mixes by Italian DJs like Gabry Ponte and Fargetta!

But, I'm a geek so I'm a unique case...

Jonathan-Tanya
Fresh-Faced Recruit

Joined: Oct 2004

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03/07, 11:10am | report spam | close Reply |
subscriptions

well I don't believe for a moment that apple only wants to sell iPods.
If selling music is profitable, they'd like to do that too.

still, it could be the a subscription model will take hold and could be an additional
option at iTunes someday. Why not, it's another choice.

I know that in the movie business, people buy a subscription to HBO, cause then they won't
have to rent anymore, but then they still rent, and then they still buy movies too.

I don't want a subscription, because even if iTunes has a billion songs, they don't have enough.
I can tell you right now, when I want an ethnic song, like say a russian top 40, they don't have it.

If I want someone to read me an instructional tutorial on repairing a fawcet, they don't have it.
I guess what I'm saying is, the internet is bigger than iTunes alone, and I prefer the buying model, so I can buy from iTunes, when they have it, and I can buy an MP3 from somewhere else, when they have what I want.

Buying a subscription would mean paying $15 bucks a month to rent some of the music I like, and still having to buy music (or an audio file) from the other stores too....that's really expensive.

JeffHarris
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Joined: Oct 1999

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03/07, 11:30am | report spam | close Reply |
Offer Both?

Both methods will appeal to different people or groups. I would prefer to pay-per-track, but what if Apple suddenly started offering Loss-less tracks? I'd want those. I'm sure others would, too.

Apple could simply hedge their bets and offer both the current pay-per-track scheme or some kind of subscription services.

Sabon
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Joined: Mar 2005

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03/07, 11:47am | report spam | close Reply |
No interest in subscripti

I've got zero interest in subscription music services. Subscriptions are ok for TV (since I have TiVo) but for music? Not interested. I've already got lots of ways to find out what music I like (radio - iTunes preview) and I _rarely_ listen to the radio since I don't like most of what they play.

As for buying from iTunes or CDs. It depends on how many of the songs on the CD (album) that I like. If I like enough songs and the price of the CD is definitely less than what it costs me on iTunes, then I buy the CD. Otherwise I buy just the songs on the CD I like or the whole album from iTunes.

As for the audio quality of music on iTunes. I 44 years old when went through vinyl records and cassette tapes and downloads from iTunes is much better than that and I wasn't "suffering" from listening from vinyl. Besides, there is enough ambient noise in my Jeep Grand Cherokee and on my motorcycle (yes I have a radio and headset on my Honda GoldWing which I pipe my iPod through) that the difference in sound quality is barely noticable. Besides, AAC is better quality than radio too.

As for subscriptions. There is a reason why I own my house instead of renting it. I have the same reasons with my music. If I like it I'll want to play it for years so I want to own it. Even if I end up buying a better version (audio quality) later on.

scotty321
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Joined: Nov 1999

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03/07, 12:08pm | report spam | close Reply |
Analysts are idiots

Next to casting directors in the entertainment industry, analysts are the most worthless professions of all. I have talked to DOZENS of non-computer-savvy people that have no idea what iTunes or Napster is, and all of them have completely balked at the idea of "renting" their music. The iTunes business model is the only way to go, and the numbers prove it.

bsaxton
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Joined: Jan 2000

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03/07, 12:15pm | report spam | close Reply |
Good luck.

Apple is never forced to do anything.

redwood
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Joined: Oct 2003

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03/07, 12:43pm | report spam | close Reply |
another thought on owning

The analogy of buying versus renting your home falls flat for me. You can't lose your house if your hard drive gets erased.

If you haven't backed up all your music store purchases in a good way and you lose your drive, bye bye songs, apple will not let you re-download.

crawlingparanoia
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Joined: Aug 2001

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03/07, 12:59pm | report spam | close Reply |
The 1 month subscription

If Apple does ever offer a subscription model, I'd be the first to subscribe. I'd also be the first to cancel after I download and copy all of the songs I'd ever want.

testudo
Forum Regular

Joined: Aug 2001

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03/07, 01:31pm | report spam | close Reply |
Wow

All that analysis for an expected extra $1 million. Just imagine how badly apple would tank if Napster said revenue would be $20 million.

BTW, remember that this is REVENUE, not PROFIT. They'll need two quarters like this just to pay for their advertising campaign.

testudo
Forum Regular

Joined: Aug 2001

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03/07, 01:45pm | report spam | close Reply |
Owning, renting, etc

First off, you don't 'own' what you purchase from iTunes. You 'kind of' own it. That means Apple kind of rules where you can play it and on what. You can't re-sell it (legally at least). You can burn a CD and then you are DRM free, but you technically just have a copy of music Apple controls.

Second off, you all need to learn a bit about Napster. It only costs $10 a month. Its $15 if you want to stick the music on a portable player, but who's going to spend money on a Dell DJ?

Third, my only problem with a subscription system is, if I let the subscription drop, and then re-up it, I don't want to be forced to go find all the music I had before. Lose the music, fine. But keep the playlists and links to the music so I don't have to go digging around for it all.

Fourth, OK, I lied, I have two problems with subscriptions. The second is that I'd want the service(s) to offer a set of radio-like stations. Something like XM would be nice, but even MORE variety. Add some 'celebrity' DJs (because you know how people are, they could care less what I like about music, but stick Brad Pitt's name on my playlist and everyone wants to listen to it) and put some people to work on the lists (not so important about the order, but at least the music that's played). This way, if I feel in the mood for some Bluegrass, I can listen to a bluegrass stream, and as songs start piquing my interest, I can mark them for download. This way the user doesn't have to work themselves on trying to find something good all the time.

Finally, that Napster crack no longer works. Reportedly MS cancelled the WM certificate for the versions of Audion (or whatever it was that you used) that allowed the crack, thus the software just stopped working (gotta love that, right - MS just disabled a good hunk of your functionality in your working, paid for, software).

ronjamin
Baninated

Joined: May 2002

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03/07, 02:25pm | report spam | close Reply |
Bull-Shite

The vampires in Hollywood want nothing more than to charge a rental fee for the music we have historically bought. How draconian. Music for sale is the only real deal. Apple has hit it on the head and the ringing of their bells continues to confound them.

These music execs should all be fired by their boards. They are clueless and are detrimental to the busisness they manage.

budster101
Baninated

Joined: Dec 2004

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03/07, 04:18pm | report spam | close Reply |
re-download

I have a friend who bought a ton of iTunes music and lost all of it. Is it true you cannot re-download what they have a record of you already owning??? That really bites.

addisonx
Fresh-Faced Recruit

Joined: Nov 2002

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03/07, 05:05pm | report spam | close Reply |
Re: re-download

"I have a friend who bought a ton of iTunes music and lost all of it. Is it true you cannot re-download what they have a record of you already owning??? That really bites."

Just like if you buy a CD, then someone sits on it. You wouldn't get a new copy from the store would you? It is your responsibility to take care of the CD, and it is your responsibility to keep a backup of downloaded music.

kw99
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Joined: Nov 2001

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03/07, 07:02pm | report spam | close Reply |
If renting music...

online was going to be so popular, there would have been an "analog" version of the business (as in not involving downloads) that was previously successful. I don't see any stores that let "subscribers" rent any CD in the store for as long as you want as long as you pay us $15 per month. That's because people like to OWN music. A good song is "used" hundreds of times.

However, there are successful businesses that use the same subscription model for DVD's, such as NetFlix and BlockBusters. If Apple ever uses the subscription model, it will be when they open the iTunes Video Store. That's because people like to RENT videos. A movie (even a good one) is usually watched once (so why own it).

Apple is smart; some of these "analysts" are apparently idiots.

mjtomlin
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Joined: Oct 1999

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03/07, 10:48pm | report spam | close Reply |
For Christ's Sake

Have people gone stupid!? The subscription model was around before iTunes. It did miserably. The ONLY reason these morons are attempting to try it again is because they cannot compete against iTunes in the a la cart model. iTunes+iPod is a better experience. Not from being tied together, but from being well thought out. It does help that Apple does provide an end-to-end solution that so far no one else has been able to duplicate. Not that there haven't been attempts; Sony tried and failed, Napster has/had a rebranded Creative player and well, not really sure how that is doing.

Their argument that there is more choice with WMP compatible players is lame at best ... they ALL offer the exact same thing. Ditto with the music online services, same content, same restrictions, same price. There's only more brands to confuse people. Does this work with this?

Apple makes it clear and simple: iTunes+iPod. No confusion.

ronjamin
Baninated

Joined: May 2002

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03/08, 08:54am | report spam | close Reply |
Actually......

If I wanted the "subscription" model of the Analog type, I would just go to the local library, borrow the CD I wanted, rip it, and return it. Simple.

kw99
Fresh-Faced Recruit

Joined: Nov 2001

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03/08, 05:58pm | report spam | close Reply |
Re: Actually......

First, libraries do not have to turn a profit. Subscription (in this context) implies you are paying a recurring fee.

But there is an interesting point here. Libraries also offer a "subscription" model for renting (or borrowing) DVDs. Yet despite this free competition paid for by taxes, NetFlix and Blockbusters are successful with their one-monthly-fee rent-anything services. Obviously, there is demand for such a service. There are no equivalent services for renting music CDs, because is no demand.

blind chessman
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Joined: Mar 2005

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03/10, 01:06am | report spam | close Reply |
Errr

Something that bugs me about the subscription model, is that the artists are going to get screwed over even more than normal. How do they determine how much each artist gets? And how much could it really be? If you base it on percentages of downloads, a less well known artist gets the shaft, at least with the pay-per-song model, they get something. If it's a fixed rate though, there'll be a lot of even more unhappy musicians out there.

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Analysts: Apple may be forced to offer subscription

updated 09:00 am EST, Mon March 7, 2005

iTunes subscription

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