Price Versus the iPod
By George Anderson
Yahoo is launching a new online music service. The Internet giant is banking that a low $6.99 monthly subscription fee ($4.99 with a yearly contract) and a million song library
will be enough to get consumers past the limitations that it is not compatible with Apple’s iPod and that songs can only be played while the user is current with their subscription
Dave Goldberg, general manager of Yahoo Music, told USA Today, “We don’t think the download market is really working. Subscriptions are a better answer.”
David Card, an analyst with Jupiter Research, isn’t jumping on the Yahoo bandwagon just yet. Digital music equals Apple right now, and without support for the iPod, that’s a
huge hurdle,” he said.
Mr. Goldberg is optimistic despite the obvious challenges. “We’ll break even. Our goal is to get a large base of consumers.”
Jupiter projects digital music to generate $500 million in sales this year with 60 percent from downloads and the balance from subscriptions. Mr. Card told USA Today that
he believes the business will grow to $1.7 billion by 2009, at which point subscriptions will make up $900 million of the total.
Moderator’s Comment: Are subscriptions the future of digital music retailing business model? What are your thoughts on Yahoo’s new service?
George Anderson – Moderator