Apple's Steve Jobs on Subscription Music: 'Customers Don't Seem Interested'

According to Digital Music News, Apple (AAPL) CEP Steve Jobs has little interest in offering subscription-based music . "Never say never, but customers don't seem to be interested in it," Jobs told Reuters. "The subscription model has failed so far."

The comments come just ahead of licensing and contractual deadlines with the major labels, a group that is searching for avenues to improve online music sales. Theoretically, subscription-based approaches have the potential to generate stronger revenue streams, though market performance has been lukewarm. The space currently corals less than two million subscribers, in part because of a consumer preference for track ownership, instead of rental. "People want to own their music," Jobs said.

The Jobs comments answer some questions, though the issue is far from closed. The Apple chief executive is notorious for sending misleading smoke signals on upcoming products, a tendency that erodes credibility in discussions like these. Still, the emphasis for Jobs may lie elsewhere, specifically in transitioning the iTunes Store into a DRM-free zone. "We've said by the end of this year, over half of the songs we offer on iTunes we believe will be in DRM-free versions," Jobs said. "I think we're going to achieve that." That push, coupled with an expected, MP3-based push from Amazon (AMZN), will intensify pressure on heavyweights like Universal Music Group to shift away from protected content. Also adding pressure is a groundbreaking shift by EMI away from DRM, though the others majors seem locked in a wait-and-see. In recent comments, RIAA chief executive Mitch Bainwol called for a "prudent, rational judgment on how to proceed on DRM," an assessment that leaves the door slightly ajar.

I would like to see a subscription music service combined with MP3s for sale. AAPL will have difficulty entering the subscription business because none of its iPods have an internal clock necessary for subscription music.

Henry Blodget comments:

The comments sound to me like a negotiating tactic: One can safely assume that anything Jobs ever says to the press is designed to accomplish something. Also, a subscription would not have to be about music "rental." Consumers could pay, say, $9.95 a month, to download (and own), say, 25 songs. This model would be great for consumers, who hate to get hit on every purchase. It probably would not be so good for Apple, however (unless the company could negotiate a sweetheart backlist/volume deal with the labels)

Comments

[Tom B:]

"The comments sound to me like a negotiating tactic: One can safely assume that anything Jobs ever says to the press is designed to accomplish something" I would agree with you on that.

For my part, I believe Jobs knows more about the music biz than I do, and it does strike me that none of the subscription services seem to be able to turn out a profit. I am confident that if that fact changes, so can AAPL's iPod business model, in response.

2007 Apr 30 09:03 AM