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Mon, 27 Sep 2004 Subscriptions 'may fit future of online music' – Apple

Karen Haslam

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The launch of digital-music subscription service VirginDigital in the US has sparked a debate about the future of the subscription model for music distribution, with Apple admitting it may consider a subscription service in the future.

Speaking to the International Herald Tribune Apple's Eddy Cue explained his conviction that there will always be a preference for the a la carte model, saying: "Consumers have been buying music for 50 years and want to replicate that experience online."

But he was less willing to dismiss the subscription model than Apple has been in the past. Cue added: "Apple might consider a subscription service in the future but it had no plans to do so now."

Perhaps the reason for the change of heart is that it is more profitable for online companies to offer subscription services. The report explains: "An online store pays 65 or 70 cents to the record companies for each track they sell for 99 cents. But with subscription services, the online services split the fees 50-50 with the record labels, after deducting certain expenses."

Jupiter Research estimates that 2.1 million people pay for music subscription services, including the cheaper Internet radio services. By contrast, 8.5 million people have paid to download a music file. But according to Virgin, the only reason the subscription model isn't more prevalent is that it is difficult to explain to consumers. President of Virgin Digital Zack Zalon said: "Two or three years out, subscriptions will overtake à la carte because it is a much more interesting proposition. It has just been difficult to articulate to consumers what it is."

New philosophy

Virgin is pushing the subscription method with its online music store – a move that could be seen to contradict the philosophy of its high street Megastores.

Virgin Music Club customers join for a $7.99 monthly fee and are able listen to an unlimited amount of music from Virgin's one-million-track library on their computers.

The company will later add a premium services that allows customers to move tracks to a portable music player. The price of this service has not yet been confirmed. At some point in the future, Virgin plans to introduce the online store in the UK and elsewhere.

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