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Napster and Rhapsody compete for headlines

I am a music glutton, so I have no trouble seeing how insanely great it is to get unlimited access to an online jukebox with millions of songs for $10 a month. And as I said in the last post, this kind of subscription service makes even more sense when you're always connected to the Internet. But most people still seem to share Steve Jobs' don't-rent-when-you-can-buy viewpoint, which obsesses on what happens when you stop subscribing (i.e., you have no music to play) and ignores how much you're entertained in the meantime. That attitude has made subscriptions a tough sell, and consequently they've have been much slower to take off than a la carte offerings like the iTunes Store.
Gfc_napster_logo This week, two subscription services made announcements that are mixed, at best, for the cause of subscription services. First, the potentially bad but not terribly surprising news: Napster said it had hired UBS to help find a buyer. The company has lost millions on its slick, feature-rich subscription service, and has stayed alive by selling more and more shares. But it's not starved for cash yet, and remains healthy enough to field the market's boldest customer-acquisition strategy: a free but lower-fidelity, non-portable version of its service. Here's hoping that Napster finds a way to stick this strategy for a while longer because an advertiser-supported online music service is a compelling proposition for music fans. The catch is, it may not be compelling for advertisers until Napster attracts a larger audience.
The other announcement was from RealNetworks, and it addresses the portability issue. The early versions of Real's Rhapsody service, like Napster and competing offerings, didn't let you move the songs you rent off of a computer. In other words, it didn't work in the car, in the gym, on the train, or any other place frequented by people with white iPod earbuds. That changed in 2004, when a new version of Microsoft's security software -- branded "PlaysForSure" by Redmond -- enabled subscription tracks to be moved to portable devices on a temporary basis. If the user stopped paying the monthly subscription fees, the tracks would stop playing. Naturally, the labels demanded higher royalties for this service, so Rhapsody et al charged a higher price for it (typically, $15 a month, although Yahoo charges about $10). But PlaysForSure didn't live up to its moniker, and the portable services were plagued by glitches. Songs wouldn't transfer, players would freeze, tracks would stop playing inexplicably, software would have to be uninstalled and reinstalled repeatedly -- stuff like that. Critics said it was just too difficult for Microsoft's software to work with so many different services and players.
Rw_header_logo_beta So Real is attempting the kind of hardware-software integration that helped make Apple so dominant in digital music. On Monday, Real said SanDisk is optimizing one of its Sansa portable music players to work with Real's Rhapsody subscription service, using security software from Real instead of Microsoft. That means Real will control the software both on the PC and inside the Sansa, a la Apple's iTunes and iPod. Microsoft is taking a similar approach with its new Zune players, which don't use PlaysForSure, either.
Making portability work the way it's supposed to is important, but I don't think that will persuade the masses to embrace subscription services or abandon iPods. Sony has been controlling both hardware and software for some time, and yet giant Sony's MP3 players can't outsell (comparatively) tiny SanDisk's. I think there are two problems here. One is that people are daunted by the compatibility problems caused by the various flavors of security software. If your downloads are wrapped in Microsoft's DRM, for example, you can't transfer them to an iPod or a Sony MP3 player. The latest announcements about Rhapsody and Zune threaten to exacerbate those problems and increase consumer confusion. That leads rational consumers either to stay on the sidelines or to follow the largest pack, which would be Apple's. And second, even if you get past the compatibility hurdle, you still have to persuade people to shift from collecting music (that is, buying tracks) to experiencing it (buying access to a jukebox).
That, to me, is a marketing issue, and none of the services has been able or willing to market subscriptions the way Apple markets iTunes. But I give Real credit for doing some things with SanDisk that will help make the sale. The players will come filled with rented tracks, which with some luck will be chosen by the tuneful people who write Rhapsody's blog. That's one way to get the point across immediately about the value of subscriptions: look at all the songs you get, and you don't have to pay 99 cents per track! (As long as you pay $15 a month.) More important, IMHO, is that Rhapsody will automatically load new music onto the player based on the subscriber's preferences. This capability could trump one of iTunes' best features, which is to load iPods automatically with an assortment of songs from your collection. Imagine if your collection was unlimited, stretching from the week's new releases in your favorite genres to chestnuts buried deep in the labels' vaults? Doesn't that make you want to ditch the iPod for a Sansa? Now if only the tracks play for sure....

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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