When 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.