September 26, 2007They're killing my baby!
In the wake of the Virgin Megastores MBO, Virgin is also shutting down its digital music store and subscription service. I spent 5 months managing the development and delivery of the site, so I'm sorry to see it go.
Sadly, despite having a stunning user interface, a catalogue of 2.5 million tracks and the Virgin brand behind it, it was never going to work for a number of reasons.
First, the margin available after the record companies and musicnet have taken their share is tiny - pennies per track. So the only way to make money is to sell large volumes of tracks.
This needs investment, which Virgin has been unable to provide. It's hard enough supporting a retail chain in a declining market, let alone sinking money into an online service with less than 1% market share, that will take years to become profitable - if it ever does.
Then there's Apple, which of course, dominates the download market. It's somewhat easier for Apple to operate in this market since its real objective is to sell iPods, not music. The only way to take on iTunes is to compete on one or more of catalogue, convenience or price and it seemed to me that there was a lack of flexibility and interest from the record companies in supporting attempts to do so. Virgin wasn't able to.
Amazon might, though - its new download store is offering higher quality (256Kbps) tracks at 89 cents (10 cents less than iTunes) with the benefit of Amazon's one-click buying. There's also an MP3 Downloader application that automatically adds purchased tracks to iTunes or Windows Media Player libraries. It's been a long time coming, but hopefully Amazon will provide the real competition that the market needs.
September 17, 2007Universal Pondering ISP License for Unlimited Music Downloads
This is significant. I've believed for a long time that we'll eventually get to 'all-you-can-eat' music services that are bundled with monthly broadband access, and Universal seems to be taking steps towards this model. It looks like the twist is that the services would be peer-to-peer, which makes sense.
Universal Music Group is experimenting with a service called TotalMusic, where customers of Internet service providers or mobile carriers would pay a blanket monthly fee for the rights to freely trade unlimited music downloads on the network.
There are some issues with forcing ISPs to opt-in, and also with the administration of royalties, but this is an important initiative that could pave the way for a new form of bundled music service.
September 7, 2007Argument over 99c TV downloads: when will they learn?
According to this report in Variety, Apple wants to reduce the price of TV episode downloads from $1.99 to 99c. It seems, however, that the studios aren't too keen on the idea - one argument being that downloads would then be cheaper than DVDs and may impact on DVD sales.
Sometimes it seems we lurch from exciting new initiatives to reactionary fear of anything that shakes up the existing models. When, oh when, will content owners realise that:
1. Consumers can get anything for free anyway, so to compete with free you have to work on a low price/high volume model.
2. Consumers aren't stupid. They know that the costs of servicing a download transaction are far less than the costs of producing a DVD, packaging it, shipping it to retail outlets and absorbing unsold stock.
3. It's better to develop a wider customer base, perhaps spending less on the initial product but becoming lifetime customers of a franchise and potentially customers of related products and services including merchandising, than stake everything on them buying the DVD box set. Anyway, that's why there are extras and special packaging in box sets.
4. One of the great things that the internet allows is market testing, with the opportunity to produce and analyse different approaches based on the huge amount of measurable data available. Try it on a limited basis, and see how it pans out.
Apple, of course, while being right on this point, is being mischevious as usual. It wants to pull the strings but is inflexible itself when it comes to differential pricing. As I've said before, the single price approach was right when the market needed simplicity and clarity to encourage new customers, but now a more sophisticated approach is needed.
Sort yourselves out, all of you...