UMG's intention to knock down Apple from the top of the music download hill has played out very publicly this year. Contentious negotiations with Apple that led to a month-to-month contract replacing the extension of a longer agreement sought by Apple. Morris is unhappy with Apple's control over online pricing, and the mobile media player market.
His plan for the service, dubbed Total Music, would be to charge portable media player manufacturers a $5 monthly subscription fee for each unit sold that supports the service, giving consumers "free" access to music from different labels. So far they've enlisted Sony BMG as a potential partner and are in talks with Warner Music Group.
Although player manufacturers who have yet to successfully compete with Apple's iPod for market share would certainly be interested in a model that puts them on equal footing, a bigger question at this point is whether enough sales can be sustained to pay for the ongoing license fees.
While some industry estimates show a lifetime cost of $90 per device, figuring that the owner will upgrade every 18 months. There are some obvious problems with this estimate, which really only takes into account the buying patterns of current mobile players under current (per download) licensing as the dominant delivery method. Arguably, the transparent, one-time licensing fee the consumer has already paid when purchasing the device would increase its useful life and resale value.
Since device manufacturers would be responsible for the up-front financial risk of essentially collecting a private levy from consumers for music labels it seems more logical that the long term risk of player life vs. royalty payments should be the responsibility of the music labels. Instead of monthly payments, a single payment equal to royalties over the expected lifetime of the player could be collected for the labels to subsidize the cost of creating new content.
Source: BusinessWeek
Written by: Rich Fiscus @ 12 Oct 2007 9:41
