15 February 02005

Napster, iTunes and Xdrive: multiple music models

Shortly after the launch of the Napster To Go music service, The Register published an article predicting it would flop. This was based on a comparison of the costs over three years of paying for an MP3 player and online music to put on it, comparing with Napster To Go with the iPod and iTunes Music Store.

The article attracted a lot of comment arguing it was wrong-headed, including these letters and this rejoinder from Gerd Leonhard. I'll come back to those later. First let's have a look at the comparisons.

In The Register, Ashlee Vance calculates the cost of buying a Napster-compatible 20 GB player and the Napster To Go service for three years, allowing access to up to a million tracks, as $788. The same amount of money would buy a 20 GB iPod and 489 tracks — the difference being that you own the tracks 'permanently' in this case, whereas you only retain access to the Napster tracks as long as you keep paying the monthly subscription.

Now let's throw in a third, somewhat different comparison — one that sells mobile access to your existing digital music collection. This press release for the new Xdrive music service describes how, assuming you already have a suitable mobile phone or PDA, you don't need to buy an MP3 player. Instead you hire storage on a server, where you can manage your playlists, and then stream the music from there to your portable device. However, the monthly fees are higher: $19.90 per month for 10 GB of storage (compared with the 20 GB MP3 players). The press release says, "There is no additional fee to use the Xdrive music service", so presumably you don't need to pay a telco for streaming the music to your player. With the Xdrive music service, then, your subscription costs for three years come to $716.40, leaving only enough out of the $788 budget money to buy 72 tracks at the same price as assumed for Napster and iTunes Music Store.

So that's not a very compelling argument if you make similar assumptions to Ashlee Vance's article. Which possibly explains partly why the Xdrive offering hasn't got as much attention as Napster or iTunes (the bigger reasons are related to the massive recent marketing spends of the latter two, and their better brand awareness).

But, as much of the feedback on the original article pointed out, the assumptions are open to question and will vary from person to person. Many of the letters to The Register give testament to people preferring to be able to dip into a (relatively) large catalogue as offered by Napster. Alternatively, if you already had a large collection of CDs that you were willing to rip into digital format and then mount on an Xdrive, and if you'd just shelled out for a fancy PDA without major storage, then you might find their offering attractive.

Personally, the attraction of the promised mobile 'phone-based music services (see news of the new Sony Walkman phone, for example) is lost on me — higher prices and less storage than the online offerings — but I imagine there will be some takers for it. (Will they be people who don't care about having large collections? Not many repeat purchases then, unless they throw out the old stuff.)

Lots of pundits are trading predictions on which of these models is going to 'win' or at least dominate the market in the long term. As PaidContent.org puts it, pointing to the proliferation of recent articles, this "makes for more interesting coverage".

But there's no firm reason to assume that the service model element will deliver a winner-takes-all result like the old VHS/Betamax battle (though some increase in interoperability of file formats will be necessary to reach mass market volumes). As Gerd Leonhard's article argues, consumers may choose to select more than one option, both buying music 'for keeps' and 'renting' access to larger collections.

We may live for many years with these different models co-existing with each other, with people buying into each to differing degrees according to their interests. What will really distinguish innovative models in the long term is sheer volume: people want ways to access larger collections of music than they could ever afford at $1 per track. And as it stands, Napster To Go's catalogue of nearly a million tracks isn't nearly big enough. Most people will only actually be interested in a few thousand of these, and many of us already have collections of thousands of songs (I have tens of thousands, but I know I'm odd). Make it ten million tracks and it might be interesting.

Xdrive's maximum storage of 10 GB must similarly be seen as only a 'starter' option. When they offer 100 GB and upwards for the same price they will be on the verge of ushering in new ways of discovering, collecting and listening to music, with the real value of your collection on a remote server and the portable player being a small, cheap and almost disposable accessory.

Until then, my advice would be to avoid investing very much exclusively digital music in the next three years. By then it may be a little clearer how the formats are going to improve in quality (MP3 isn't that great), the Digital Rights Management may start to be shaken off by market pressure, and interoperability should be advancing (formats like FLAC point the way on most of these criteria, except the last one). Spend about £200 of your $788 on a smart digital radio to listen to music for free, and keep the rest for going out to gigs and hearing music live.

Posted by David Jennings in section(s) Future of Music, Music and Multimedia on 15 February 02005 | TrackBack
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