Online music subscription services should be left to small startups focused on the space, or so says this article from Reuters. It cites the demise of AOL Music Now and Virgin Digital as well as the reportedly poor results of the subscription efforts of Yahoo and MTV’s Urge. RealNetwork’s Rhapsody is the only subscription service to reach one million subscribers, the figure quoted as that necessary to “reach critical mass and become self-sustaining”. Napster has around 900,000 subscribers after the additions of Virgin Digital and AOL Music Now. While services can be profitable with less customers, there is a lower return on investment and it’s a difficult business to run.
The contention: basically, the big brands entered because they thought their brand recognition and marketing prowess would result in an easy win, but they found “a complex market that to this day is defined by technology, device and supply problems far out of their control.” And it’s exacerbated by the music industry’s lack of desire to see the subscription model succeed. This last bit is from an anonymous former music subscription service executive, who added: “(Labels) love the idea of reoccurring revenue but they know it’s replacement revenue. They recognize that unlimited access to content wherever you are whenever you want equals no CD sales.”