Friday, March 28, 2008

Warner Music's Take on Subscription Music

Source: WikipediaNews yesterday that Warner Music is pushing forward with their own take on subscription music... one that bundles a monthly fee (around $5/month) into your ISP bill and then lets you download any/all things you want (presumably most happening via P2P networks) with immunity from litigation.

As I have said numerous times, I am a big fan of the value proposition offered by subscription services, but this opens stirs up far more questions for me than answers based on my (assumed) use case below...

  • Comcast pays some collection agency a couple/few bucks for on every ISP customer they have
  • Comcast either then charges me an extra couple of bucks on my $50/month ISP bill or throws a few more ads at me to cover their incremental cost
  • I (and they) now have "immunity" for anything I download over their network - from MP3 search, P2P, etc.

If that is correct, then that sparks a bunch of related questions...

  1. Does it matter how many people are on my network? Theoretically, my ISP is monetizing each user but in reality they would be monetizing the household, no? What if I open up my wireless network, and invite my neighbors that don't have broadband to jump on? What if I open a coffee shop and let hundreds of users a day get on free of charge? What if I resold access, is it then different?
  2. How does my ISP cover their incremental costs via advertising? Many people don't ever visit their ISP's webpages (myself included). Do they they have to require their users to use/frequent their portals/sites? Do they require some application (like some of the old free ISP models) that throws pop-ups at me?
  3. What about wireless? Is my cellphone company considered an ISP and subject to the same fees? If so, then isn't the consumer getting charged twice for the same rights (e.g. once by Comcast and once by AT&T)?
  4. This is repeatedly denied as being "a tax", but to make this work it would have to be a *required* fee to every ISP, no? Otherwise, there is the danger of people switching to the *cheaper* ISPs that don't have cover this cost?
  5. If the ISPs need to monetize these music consumption experiences (to cover their incremental costs of contributing to the pool) that seems to dictate that they (or at least some of them) can no longer just be a dumb pipe to 3rd party music sites.
  6. Does this force Comcast and Verizon Fios (and others) to invest in building out there own music destinations to compete with Yahoo Music, AOL Music and MTV?
  7. Does this trigger an avalanche of music service acquistions by the ISPs? Does Comcast buy Napster? Does Verizon buy imeem? Does Cox Communications buy Seeqpod? If they don't "own" the music experiences of their customers then how do they cover their additional licensing costs? If the ISPs can't cover these costs (or generate additional revenue around music) then what's in it for them? Just immunity from lawsuits themselves?
Public perception will be one of the biggest hurdles (and in my opinion, most important) to overcome in this new plan. The labels have done a fabulous job painting themselves as the bad guys over the past few years and most consumers don't really care whether or not they survive. While there are lots of reasons why the blanket licensing plan has merit, it will be all for naught if the consumers aren't convinced it's in their best interest.

I suggest that Warner Music gets a great PR firm on retainer quick before this rhetoric gets loud enough to smother the plan.

The next *big* question is then... how does this ISP-fee plan work in conjunction with the other approaches that Nokia is pushing with their "comes with music" plan and rumored Apple subscription plan that would put the tax on the devices themselves. How many times do I need to pay for my music... once with my phone + once with my iPod + monthly with my ISP + monthly with my cellphone???!


J Chris A said...

The big question I have is, Who gets paid when the music isn't owned by a label? Does the RIAA get paid when email music recordings that I just produced, directly to the artist, while they are sitting next to me in the studio. What about when I spend all day listening to, or the myriad of excellent Portland bands who will never sign with a label?

jherskowitz said...

jchris -

Another good question... I didn't even dive into all the concerns from the artists' perspectives.

* How is tracking and payment done?
* What if I *want* my stuff to be free?

- J