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Why Universal's Total Music Idea Won't Work

UmgWhen I first read about UMG's Total Music project I thought, "yeah, that's for me."  But the more I think about it the more I realize they'll never pull it off.

UMG wants to create a new iTunes competitor that's totally free...well, sort of free.  They essentially want to mimic the "razor and blades" model, but in this case, the blades (songs) would be free once you buy the razor (player).  I love it, so where can it go wrong?

For starters, the hardware vendors would have to pay the labels $5/month as long as that player is in service.  That means the hardware companies need to build that cost into the price of the unit.  The BusinessWeek article linked to earlier says the typical player is used for about 18 months before the owner upgrades to a newer model, so they figure the music will cost about $90 over the life of the player (18 months x $5/month).

That sounds reasonable on the surface, but what sort of player price does that create?  When you factor in retailer discounts it quickly becomes something north of $100 that's added to the typical non-iPod pricing levels you see today.  That means these Total Music devices would likely cost more than an iPod.  I figure there are two types of consumers out there buying players: One group, and obviously the largest group, willingly pays a premium for the Apple name while the other group won't pay the premium.  Which one of these is going to switch to Total Music?  If you're willing to pay a premium you're probably more likely to buy an iPod, not a Total Music device.

Then there's this whole 18-month life cycle question.  While the majority of consumers probably do upgrade every 18 months or so, I'll bet many of those old units become hand-me-downs for someone else.  Some wind up unused in a drawer but many get sold on eBay or passed along to a friend, child, etc.  In these cases, the proposed $5/month revenue stream from hardware vendor to label doesn't end at the upgrade point.  Would the hardware vendors really sign up for an almost endless $5/month payment liability?  I doubt it, and even if they could cap it at, say, 24 months, then the artists would raise a stink for not getting paid for their songs in those later months/years.

It would be fun to see someone challenge the Apple/iTunes monster.  I'm just not convinced this is the right formula.

Comments

Andrew

Joe, there's also the suspicion that Universal will cripple Total Music with DRM. That and the costs you point out mean that I don't see much hope for TM.
By the way, this post was very garbled inside my Google Reader.

Tenspace

Joe, what would you recommend Universal do with Total Music? They've got to do something, obviously, with the way CD sales are nosediving. Do you think it's possible for the Big Three conceive a delivery model that would be a win-win and provide an accepted medium for the forseeable future? A couple of suggestions I'd like to hear your opinion on: 1) Carrier/Device royalties - extending the $5 per player model a bit further, to include ISPs and last-mile internet companies (not my original idea, read it somewhere), giving them value-added competitive leverage; 2) Painless, invisible DRM, where the user can utilize his catalog for personal use, bringing the pirating levels back to a tolerable level like they were ten years ago.

Joe Wikert

I'm glad you asked! How about a model that's more in line with the "razor and blades" one but doesn't try to hide the secondary expense? Don't build the price of the songs into the device. That's a terrible idea unless the labels are really willing to accept an 18-month payout; as an artist I'd be irate with this, btw. Keep the player price as aggressively low as possible so that it doesn't start to compete with the pricier iPod.

Next, offer a simple monthly subscription fee, an all-you-can-eat model. Keep that price down to the $5/month level they're talking about, but *separate* it from the player! That way, if I decide to opt in I know what I'm getting into and the artists will get their share as long as I'm enjoying their work. It also presents a much better model for hand-me-downs and eBay reselling where the new owner can opt out or start their own $5/month subscription. Oh, and leave DRM out of this! The whole system needs to be 100% DRM-free.

Models similar to this already exist today...I know that, but none of them have the muscle of a major label behind them. As I mentioned in the original post, I'd *love* to see a new model develop that competes with iTunes. That would be good for everyone, except Apple, I suppose...

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