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View Full Version : Jobs Says No One Wants a Subscription


David Tucker
04-27-2007, 05:24 AM
<p><em>&quot;Never say never, but customers don't seem to be interested in it,&quot; Jobs told Reuters in an interview after Apple reported blow-out quarterly results. &quot;The subscription model has failed so far.&quot;</em></p><p>Statements like that take me back to the heady days right at the turn of the new millennium.<span style="mso-spacerun: yes">&nbsp; </span>There was a company called Palm that made all sorts of claims about what the customers did and did not want.<span style="mso-spacerun: yes">&nbsp; </span>The customers amazingly never wanted what the company didn't offer.<span style="mso-spacerun: yes">&nbsp; </span>I see a parallel here.<span style="mso-spacerun: yes">&nbsp; </span>Everyone says Microsoft can't beat Apple at this game and Apple is invincible.<span style="mso-spacerun: yes">&nbsp; </span>No, they're not.</p><p class="MsoNormal">Two of the largest services, <a href="http://www.geek.com/news/geeknews/2007Apr/gee20070405004034.htm">Napster</a> and <a href="http://www.realnetworks.com/company/press/releases/2006/q405results_8r16Js.html">Rhapsody</a>, lay claim to nearly 2.3 million subscribers.<span style="mso-spacerun: yes">&nbsp; </span>Yahoo doesn't release their numbers and I could find no information about what the Zune subsciber base is.<span style="mso-spacerun: yes">&nbsp; </span>The estimated number of people who own an MP3 player in the United States is about <a href="http://www.ipsos-na.com/news/pressrelease.cfm?id=3124">60 million</a>.<span style="mso-spacerun: yes">&nbsp; </span>About <a href="http://www.roughlydrafted.com/RD/RDM.Tech.Q1.07/FFE4A8E2-9816-4344-9FB0-61BED246674C.html">45 million</a> people own an iPod.<span style="mso-spacerun: yes">&nbsp; </span>That leaves us with a mere 15 million people who own something else.<span style="mso-spacerun: yes">&nbsp; </span>For the time being, I'm going to pretend that only Napster and Rhapsody exist since I have no other numbers.<span style="mso-spacerun: yes">&nbsp; </span>That means that at least 15% of non-iPod owners have a subscription service.</p><p class="MsoNormal">I wouldn't be surprised if the actual number was closer to 20%.<span style="mso-spacerun: yes">&nbsp; </span>So does no one want a subscription service?<span style="mso-spacerun: yes">&nbsp; </span>Hardly.<span style="mso-spacerun: yes">&nbsp; </span>I think so many people have bought into the &quot;me-too&quot; craze of owning an iPod that they've totally missed out on subscriptions simply because they don't have it available.</p>

Alber1690
04-27-2007, 06:16 AM
Your last sentence says it all.

tbird
04-27-2007, 06:53 AM
I will second that!

DesertLarry
04-27-2007, 02:25 PM
I have no idea how I could live without my subscription. I have discovered so much music that I never would have listened to before. Also, in the first 3 months of my marketplace subscription I have bought more cd's than I normally buy in a year.

Vincent M Ferrari
04-27-2007, 03:16 PM
Okay whoa, back up.

You don't get to hold 80% of any market by being some "craze" which implies some flash-in-the-pan unexplainable success that's motivated by only peer pressure.

That being said, I think Steve doesn't realize one thing, and that's that his argument is a chicken and egg one. Maybe the reason subscription services like Rhapsody, Napster, and Yahoo! Music haven't taken off is because 80% of the population who owns a portable music player doesn't own one that's compatible.

In other words, if Steve threw down a subscription service tomorrow, you could bet your bottom dollar that they'd be instantly more appealing and a much bigger source of revenue.

David Tucker
04-27-2007, 03:27 PM
Okay whoa, back up.

You don't get to hold 80% of any market by being some "craze" which implies some flash-in-the-pan unexplainable success that's motivated by only peer pressure.

Not saying the iPod is a bad product. Its a great MP3 player. It is missing things that prevented me from buying one. If Apple offered subscription music then we wouldn't be having this conversation because I'd have purchased a Nano when it came out.

FM is another feature that is a must have for me. If you do any working out in a gym (such as my mom), that's often important so you can listen to the stations they have going in there.

At this point though? Yes, it is a craze. A huge portion of the market is driven by kids who want the iPod because everyone else has them. I read editorials on it all the time. The kids simply have to have an iPod or they're not cool. Ironically I think its that same segment of the market that would benefit the most from subscription music. Its that same group who I think does the most P2P music pirating and cares little for HOW they get their music. If my parents are paying for something, I'm not inclined to care about subscription music.

That being said, I think Steve doesn't realize one thing, and that's that his argument is a chicken and egg one. Maybe the reason subscription services like Rhapsody, Napster, and Yahoo! Music haven't taken off is because 80% of the population who owns a portable music player doesn't own one that's compatible.

In other words, if Steve threw down a subscription service tomorrow, you could bet your bottom dollar that they'd be instantly more appealing and a much bigger source of revenue.

That was my argument ;)

Damion Chaplin
04-27-2007, 05:13 PM
Fantastic analysis, David. I agree 100%: subscriptions would be far more popular if the popular player could access them...

David Tucker
04-27-2007, 08:33 PM
Thanks :)

As a side note...I had lunch with my roommate today who has an iPod (it was given to him) and he said that if he were to buy an MP3 player today, he'd get a Zune. Why? Subscription music.

dp
04-27-2007, 08:36 PM
"Fantastic analysis, David. I agree 100%: subscriptions would be far more popular if the popular player could access them..."

The analysis is completely suspect. Apple has sold 100 million ipods. There are at least another 20 million music players. It is estimately that there are more than 2 but less than 3 million music subscribers. Meaning that of all people that can access them, only around 10% have them. Yes, if Apple added 10 million more subscribers that would be a lot to the subscriptions, but it wouldn't be a lot to Apple, it would still be 10%.

Apple can add subscriptions relatively easily whenever they want. When 25-50% of the 20% that don't own iPods subscribe or Apple's iPod market share starts decreasing, then they can do something.

Proclaiming they are missing out on something at this point, when it universally loses money, is silly.

David Tucker
04-27-2007, 09:22 PM
Proclaiming they are missing out on something at this point, when it universally loses money, is silly.

Where is your research proving that it loses money? Napster & Rhapsody claim a profit and have the majority of the subscribers. Follow the links...they back up everything I say.

Or don't...I don't care. I have 2+ million tracks I can listen to every day. More than you'll ever have.

***quote trimmed by mod JD***

Macguy59
04-28-2007, 04:32 AM
Or don't...I don't care. I have 2+ million tracks I can listen to every day. More than you'll ever have.

Uh right. Get back to us when you accomplish that feat . . . that is as long as you continue to pay that monthly fee.

David Tucker
04-28-2007, 08:44 AM
Uh right. Get back to us when you accomplish that feat . . . that is as long as you continue to pay that monthly fee.

Do yo pay for cable? The internet? Your cellphone? Guess what...those are only as good as long as you keep paying too. I could list many other things.

So what's your real problem with subscription? That you don't own the music? I couldn't care less if I owned it.

dp
04-28-2007, 03:18 PM
"I have 2+ million tracks I can listen to every day"

Ha, ha!! That's funny. You do not have a computer that could hold 2 million tracks, you definitely don't have a portable player that can, and that would take you more than 11 years without doing anything else: no sleep, no stepping away from your computer with its attached multi-terabyte NAS, doing nothing but listening for 11 years... Have fun pretending that this is really what you are paying for.

Minutes per year (60 * 24 * 365 = 525,600)
Minutes of Music ( 3 (estimate) * 2,000,000 = 6,000,000)
Years to listen to Music (6,000,000 / 525,6000 = 11.4)

If you took just 2 seconds to select all of those songs, that's 4,000,000 seconds or 1111 hours or 46.3 days or 1.5 months!!

(Estimate) 3 MB per song * 2,000,000 = 6,000,000 MB or
5859.375 GBs or 5.7 terabytes

But this is what you do every day, right?


Napster is definitely not and has never been profitable.

http://finance.yahoo.com/q?d=t&s=NAPS

In five years, they've burned more than 800 million dollars.

Real is profitable but they got a ton of cash from MS and also offer server products, encoding products, services, and premium radio streams which do not count the same as Rhapsody. Rhapsody is 100% not a profitable venture yet. (By the way, your subscriber numbers from Real include RealPass subscribers... Napster says they have more subscribers than Real in the 800,000+ range... Combined they have less than 2 million.

Apple isn't missing anything as long as subscriptions are not profitable and/or they are not more popular than 10-15% of the music player population.

dp
04-28-2007, 03:38 PM
And, David, get legitimate sources. Don't claim you are backed up by your sources when they can't even rehash a damn PR. The Geek "article" claims 28 million profit that Napster claims is 28 million revenue. Learn the difference.

Jason Dunn
04-30-2007, 06:20 PM
"I have 2+ million tracks I can listen to every day"

Ha, ha!! That's funny. You do not have a computer that could hold 2 million tracks, you definitely don't have a portable player that can, and that would take you more than 11 years without doing anything else...

Oh come on, you knew he meant he had ACCESS to 2 million tracks - you're just being a mouthy jerk. :rolleyes:

You might have had a point about whether or not Apple doesn't need to offer subscriptions, but you clouded it up with your flaming trollness. Relax a bit, be friendly, and you'll find more people are open to what you have to say.

Jason Dunn
04-30-2007, 06:24 PM
So what's your real problem with subscription? That you don't own the music? I couldn't care less if I owned it.

I think that's ultimately where some people have a problem with this: they're used to owning music, and they can't accept NOT owning music that they're paying for. Paying for cable TV is a decent analogy, although it breaks down a little because when I pay for cable I can also record the content and keep it for later, burn it to a DVD, share it with a friend, etc. Not so with subscription music - you can listen to it, yes, but it's still very much locked to your player.

Although, on the other hand, this week for the first time ever I saw my Windows Media Center PC refuse to record a movie because it had a broadcast flag set that said no recording...so that may be the beginning of the "free ride" that we've had with cable TV. :(

mrozema
04-30-2007, 06:37 PM
I think that's ultimately where some people have a problem with this: they're used to owning music, and they can't accept NOT owning music that they're paying for. Paying for cable TV is a decent analogy, although it breaks down a little because when I pay for cable I can also record the content and keep it for later, burn it to a DVD, share it with a friend, etc. Not so with subscription music - you can listen to it, yes, but it's still very much locked to your player.

That said, those people with the problem need to know that not every music subscription works that way. I'm subscribed to eMusic.com and what I download, I believe I own. They don't DRM their music and I've found it to be a much more hassle-free than Zune Marketplace or iTunes. If I want to share, I have that option. Its great! Any mp3 player can use them! People just need to pick the right service that meets their needs.

And why can't iPod owners use subscription-based services? Just because Apple doesn't provide it? I don't think so...

dp
04-30-2007, 08:27 PM
Oh come on, you knew he meant he had ACCESS to 2 million tracks - you're just being a mouthy jerk. :rolleyes:

No, I didn't, and no, I'm not. It's the rational answer to an absurd claim. Why do I care if he has "access" to 2 million tracks. You can have "access" to 5 million tracks with the iTS. You then get to the real issue of how you consume them. If he wants to claim he downloads 10,000 new songs a month and never listens to the same song twice, sure, maybe that's a viable claim... but even amongst the most voracious new music listeners/samplers... I bet they would be hard pressed to actually document behavior that even comes close to these overly idealized, theoretical uses of subscriptions services.

David Tucker
04-30-2007, 09:10 PM
No, I didn't, and no, I'm not. It's the rational answer to an absurd claim. Why do I care if he has "access" to 2 million tracks. You can have "access" to 5 million tracks with the iTS. You then get to the real issue of how you consume them. If he wants to claim he downloads 10,000 new songs a month and never listens to the same song twice, sure, maybe that's a viable claim... but even amongst the most voracious new music listeners/samplers... I bet they would be hard pressed to actually document behavior that even comes close to these overly idealized, theoretical uses of subscriptions services.

Well when you insinuate that I'm not smart enough to tell the difference between revenue and profit then yes, you come across that way. Just following the articles I found. (No article I could find stated that subscription was a losing proposition since they don't break down their numbers to that degree so its really not debatable one way or the other.)

I don't have access to 5 million tracks at iTS. Not for what I've spent. For the cost of basically 12 albums a year I have access to as much as I feel like. I generally download 2 or 3 new albums a month. That's more than I used purchase in a year...I just didn't buy music. I still don't. Only CDs I've purchased are some anime soundtracks since they're not available on the Zune Marketplace

David Tucker
04-30-2007, 09:13 PM
I think that's ultimately where some people have a problem with this: they're used to owning music, and they can't accept NOT owning music that they're paying for. Paying for cable TV is a decent analogy, although it breaks down a little because when I pay for cable I can also record the content and keep it for later, burn it to a DVD, share it with a friend, etc. Not so with subscription music - you can listen to it, yes, but it's still very much locked to your player.

Although, on the other hand, this week for the first time ever I saw my Windows Media Center PC refuse to record a movie because it had a broadcast flag set that said no recording...so that may be the beginning of the "free ride" that we've had with cable TV. :(

Wow, that sucks...I can't believe they actually can put a flag in there like that. And I can record music if I like...Zune output, meet Mr. PC Input.

Realistically there's no way I'm doing that. Though that's about the same as when people made cassette tapes for their friends.

Jason Dunn
04-30-2007, 10:01 PM
Why do I care if he has "access" to 2 million tracks. You can have "access" to 5 million tracks with the iTS.

Either you're being obtuse again (likely) or you don't understand how subscription music works (unlikely, but possible): in order to have "access" to the entire iTunes music library, as in being able to listen to it, you'd need to BUY all of it at 99 cents/track or $X per album. The strength of subscription music is that you can listen to as much music as you want, from any band/album in the catalogue. That's a powerful proposition for almost any consumer if they enjoy discovering new music and being able to listen to any of the 2+ million songs available.

I'm truly stunned that you're arguing that giving consumers more options is a bad thing. :confused: