While iTunes and its sales model still dominate digital music, the record labels appear to be serious about moving to subscription services. Nokia this week announced that some of its phones will access a new subscription service that will be free for a year and that consumers can download all the music they want. And it appears to be the first example of a new business model pushed by execs at Universal Music, a leading record label.
The music industry hopes subscriptions will prove more profitable than downloads as it adjusts to a digital world. Subscriptions remain just a slice of the money spent on digital music—maybe a fifth of the $1 billion being spent this year getting tunes over the Internet. Most of the subscription share has come from monthly fees paid by consumers to services like Rhapsody.
In the deal with Nokia, Universal Music is apparently getting a hefty fee upfront, which presumably will be reflected in the cost of the phones. Consumers in turn get all-you-can-eat music. That's the approach advocated by Universal execs in talks with other record labels. And from comments coming from other music studios, you can expect some of them to sign on with Nokia.
Users can even keep the music they've downloaded on their Nokia phones or PCs. But it can't be loaded onto other music players, at least not yet. Under Universal's plan, the makers of those music players would first need to pay a fee to the labels.
Apple CEO Steve Jobs has so far resisted the music industry's pressure to start a subscriptionlike service for iTunes, preferring to allow consumers to pick and choose which songs they want to buy. But Universal's pitch may catch on with other music players trying to find a new way to compete with iPods. If it does, it'll be interesting to see if Apple eventually dances to the labels' new tune.