It has been widely rumored that Apple has a music service in the works, which we may see as soon as next week. I think a $.99 per song music service (iMusic) would FLY. Here’s why:
In Europe, SMS ring tones and logos are selling like hot-cakes. Why? Well, one because they are cheap- 0.90 Euro in Spain (about $0.95) – and two because they are easy to download. You just text “EMIMEM 8 MILES” and send it to a short code like 7777 and about one second later Eminem is your new ring tone.
Is this a profitable business? Highly. For everyone involved- from the Telecom to the ring tone composer. Spain’s largest SMS provider, Movilisto, was recently sold to a UK firm, iTouch for about $60 million. That’s a two year old company that’s worth $60 million based on selling ring tones and logos for mobiles.
And if selling 0.90 Euro ring tones for mobiles is that profitable (I didn’t even mention what the telecoms are making) for SMS providers, it’s not hard to imagine that a $0.99 per song model from Apple would be highly profitable and very successful as well.
Who is set to win in a $0.99 iMusic world? Apple for sure. Music purchasers? Of course. If I am used to buying even one CD per month, that’s $15 or 15 songs I can pick up this month- and every month. Plus, I get to cherry-pick. No, I’m not interested in every song from Evanescence, but “Bring me to Life” is great. I would definitely pay $1 for that song over waste my time looking for it online.
Does the record label win? Well, yes and no. I, as a consumer, still consume my $15 per month, but that expenditure when turned into a return on artist (ROA) basis looks pretty bad. Which leads me to my next point…
One hit wonders. If a CD stinks (what a 20th century concept), people will buy just one song. Period. A big waste of money for the labels. The artist loses and the record label loses. But, I think this will usher in a “pay for performance” system; which is just what every industry needs. Outstanding performance is compensated, lack-luster performance is penalized. It’s that simple. Then everybody wins.
Here’s to Apple dropping a bomb next week.