iTunes Subscription Service
AppleInsider is reporting that Apple may be gearing up to use the rental model in addition to the purchase modal in the iTunes Music Store. Seems my earlier prediction that if the rental model was successful, Apple would copy it. However, I wouldn't have guess it would have occurred so soon.
But it does make sense. What does Apple have to lose? Merrill Lynch's conclusion that "Apple can establish a subscription service with few barriers to entry" makes perfect sense, given the infrastructure Apple already has set up to sell music online. As I concluded before, despite its drawbacks the rental model will be cheaper for certain people with certain listening habits, notably those who want to massively expand their music library and constantly want the most recent songs. But even if the rental model will only support a niche market, which both Merrill Lynch's report and my previous analysis suggest, it seems reasonably likely to generate a profit if Apple's initial overhead is low. And, in the end, if it fails to be profitable for Apple, it will probably have failed for all the other competitors by the time Apple needs to jettison it.
Moreover, even if it does ultimately fail, it can't really hurt to fend off like-product competitors using the rental model by smacking them down with a superior product. To display my bias for a moment here, how much do you wanna bet Apple is going to do the rental modal way better than Napster, Real, and anyone else out there? Given Apple's ability to do this with a majority of their products (at least in my humble opinion for most products, but undeniably with the iTunes Music Store purchase model and the iPod), it seems a decent bet for me to make. As far as music goes, Apple's existing leverage in the recording industry seems to further support that they'll be able to pull it off better than existing competitors.
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But it does make sense. What does Apple have to lose? Merrill Lynch's conclusion that "Apple can establish a subscription service with few barriers to entry" makes perfect sense, given the infrastructure Apple already has set up to sell music online. As I concluded before, despite its drawbacks the rental model will be cheaper for certain people with certain listening habits, notably those who want to massively expand their music library and constantly want the most recent songs. But even if the rental model will only support a niche market, which both Merrill Lynch's report and my previous analysis suggest, it seems reasonably likely to generate a profit if Apple's initial overhead is low. And, in the end, if it fails to be profitable for Apple, it will probably have failed for all the other competitors by the time Apple needs to jettison it.
Moreover, even if it does ultimately fail, it can't really hurt to fend off like-product competitors using the rental model by smacking them down with a superior product. To display my bias for a moment here, how much do you wanna bet Apple is going to do the rental modal way better than Napster, Real, and anyone else out there? Given Apple's ability to do this with a majority of their products (at least in my humble opinion for most products, but undeniably with the iTunes Music Store purchase model and the iPod), it seems a decent bet for me to make. As far as music goes, Apple's existing leverage in the recording industry seems to further support that they'll be able to pull it off better than existing competitors.
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posted by Vincent at 2:05 AM
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