December 27, 2003

A Look at eMusic From Wharton [1:37 pm]

Via News.Com: Online music’s winners and losers. An odd litte piece, frankly, that seems to ignore the current economics of emusic retail, which is a loss leader for everyone. Wharton’s proposition that streaming is the answer seems to miss the technological alienation angle — are you really ready to rely on a company to be 24/7 available, not to mention not to mixup your playlist? And what if your hardwired DRM device fails?

Provocative, at least……..

To some extent, all the models could fly. Larry Kenswil, president of eLabs, the media and technology division of Universal Music Group, suggests that music, like movies, should be able to thrive in a wide variety of channels: “People can watch a movie (at a theater), or on video, or on a pay-per-view channel. They have a dozen ways.”

Some experts, though, are betting that the ranks of the online music vendors will thin out because technology, consumer preferences and costs will conspire to create a dominant business model. Wharton marketing professor Peter S. Fader says all the signs point to the eventual emergence of streaming as that model.

For the moment, though, the models based on selling tracks and albums will predominate because that is how most people have learned to obtain music online, Fader notes. Perhaps more important, downloaded music is portable. It can be burned to a CD for listening in the car. It can be put on an MP3 player for listening while jogging or flying. But, in the end, downloading is burdensome, Fader suggests. “Obtaining the songs is a nuisance. It’s a pain to download them, to organize them, to back them up.”

And when you come down to it, Fader adds, people really don’t care much about having physical ownership of their music. What they really care about is having access to the music they like, when and where they want it.

At least they don’t purely push this Wharton-based theory. We get an opposing view from Steve Jobs himself:

Not everyone, however, agrees. Apple’s Steve Jobs recently told Rolling Stone magazine that music ownership is an ingrained habit, one that will always prevail: “People don’t want to buy their music as a subscription. They bought 45s, then they bought LPs, they bought cassettes, they bought 8-tracks, then they bought CDs. They’re going to want to buy downloads.” Jobs, of course, is the mind behind iTunes and so could be somewhat partisan. But he may have a point because even with music it is important to remember that people–especially Americans–like to own things.

Then there’s the community notion (see the following FurdLog entry):

The better approach, one that will most likely have to be part of a successful business model, is to create a sense of community among buyers or subscribers–not unlike the sense of community the original Napster as well as Kazaa and Morpheus have created among their users, [Gartner's Mike] McGuire says.

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