One Has The Brains, One Has The Money, But Will Americans Buy Into It?

Over at Coolfer, my other blog, I posted a few times about the new joint venture between RealNetworks and Viacom's MTV. Rhapsody America will be a PC- and mobile-based music service that will use RealNetworks' Rhapsody subscription music service. The mobile part of the service will team with Verizon Wireless's V-Cast.

Rhapsody is the brains of the two. The subscription service is the best in its peer group and has succeeded while MTV's URGE has failed. But subscription services are a game of scale, and Rhapsody drastically needs to increase its numbers of subscribers. Enter MTV. The company has the money and the marketing muscle. MTV will provide a five-year, $230 million note to the joint venture. (In return, RealNetworks has agreed to buy $230 million of advertising on MTV cable channels over the next five years.)

Is America ready for a subscription service like Rhapsody America? It depends on a lot of things. Mainly it depends on Americans' willingness to rent music. Thus far the idea of renting music -- streaming it and/or downloading protected music files to compatible, non-iPod music players -- has not taken off. Subscription services are a niche in this country of downloaders. The word "rent" is fine for movies, but it's been a non-starter for music.

All the research I've seen recently has pointed to a slow adoption of subscription for both PC and mobile. Unless Rhapsody America raises the bar in user experience and technological superiority, I believe adoption will be slow to moderate. One problem has to do with platforms. Apple devices are not compatible with the protected file formats used in subscription services. That leaves a hoard of runner-up devices by Microsoft, Sansa, Creative and Samsung. Another problem is that Americans seem to be happy sideloading to their mobile devices. Over-the-air download sales are miniscule. While some feel we can look to Asia for the potential in the subscription market, I see Asia and think of how cultural differences can make one technology popular in one country and very unpopular in another country. Example: Cash cards are more popular in Asia than in the U.S. (outside of college students who get their parents to load up the card with money). We are happy with our debit and credit cards.

Six years ago, analysts thought subscriptions would soon overtake downloads. In this 2002 PC World article, said Jupiter Media Metrix expected subscription services to generate $1 billion in 2006 while downloads would account for only $600 million. What happened in 2006? According to RIAA figures, subscriptions accounted for $206 million (that would be PC-based subscriptions, not mobile-based) while digital downloads totaled $857 million.

What's the point? Predicting whether or not Americans will adopt new technologies and services is ultimately a guessing game. Some will subscribe to Rhapsody America, no doubt, but will the joint efforts of two major players figure out a way to move subscription services into mainstream America?

Success, if it comes, will take a few years. By 2010, we'll see if the subscription model can successfully be jammed down consumers' throats after a decade of failure. As much as I'd like it to succeed, and without seeing the product and details on pricing and plans, I will guess it will not break into the mainstream and properly tap into what many believe is a gold mine of a latent mobile music market.

Comments

[Kevin]

Subscription services will never move into the mainstream as long as they are tied to the PC. Incompatibility with the iPod extinguishes the possibility that this will happen in the next 2 to 3 years. I applaud what Rhapsody has been trying to do in the mobile market but the service providers and hardware are just not up to the challenge. Rhapsody is an amazing service, but I can't see this gaining ground until people that just bought a new iPod in the last year have outgrown it and are willing to look to new products. I'd say 3-4 years until that is a reality...Will this venture still be pumping marketing muscle into Rhapsody America then?

I hope so, but doubt it.

nice job on this new blog Glen

[richard everett]

I am a 1 month long subscriber to Rhapsody with album and cd collections that are truly ponderous. I am 53 yrs old and fairly well-off, yet I never ever could afford 1/10 the music I loved. Rhapsody is the best thing that ever happened to me and my only fear is it may be too good to be true. Anyway I am not tied to my PC as the writer says above. Check out sonos.com for a system which uses your home network link whether your computer is hot or cold. Super hi quality music, Expensive but miraculous.
Richard