Thursday, August 25, 2005

Parks Associates: Lower Prices for Music Subscription Services Needed

Parks Associates announced an upcoming report, "Digital Music and Portable MP3", that predicts "portable music subscription services will have to drop below $10 per month to attract a significant number of MP3 player owners."

According to a global study Parks Associates commisioned, MP3 owners were asked how much they would spend for a music subscription. At comparable costs to US$10 presented in local currencies, Parks found the following number of MP3 device owners were not willing to exceed this amount:

  • 41 percent in the U.S.
  • 62% in the U.K.
  • 49% in France
  • 52% in Germany
  • 56% in China
In additon, one-third believed music services should be free. Parks concluded that the "entry of low-cost services such as Yahoo! Music could reshape the marketplace" especially since services like Napster or Rhapsody currently cost $14.95 per month.

Harry Wang at Parks Associates said, "Companies like Yahoo! can afford to keep the price low because they have other revenue streams to subsidize their music services. Pure-plays like Napster may not be able to lower their prices, but to counter low-cost competition, they can ally with telecom service providers or other broadband carriers to make their music services part of a bundled package. Napster’s recent partnership with Bell South is a positive move in this direction."

A lower cost makes a lot of sense in my book and would fuel adoption, exploration and hopefully purchases. I wouldn't mind paying something like $4.99 a month which is also the same amount I pay for Tivo with my DirecTV service. After using Tivo, my whole family finds the service indispensible and maybe the same would hold true for a music subscription service. However, as I commented on an earlier post, it would require more policing of iTunes so my kid's don't listen to songs they are not supposed to...