Napster took the wraps off its Napster To Go service yesterday - and shocked UK music fans with news that they will pay double what the service costs in the US, but it's not the company's fault, it told Macworld.
The company and its partners have aggressive plans with its subscription-based service, based around an argument that users should "Do the Math" (Americanised mantra is Napster's own).
The company believes its winning argument is price. This is because the new service lets users carry just about whatever music they like on a compatible music player (but not iPods) for as long as they pay their monthly subscription.
A representative told Macworld: "We see it as a simple choice: Pay £7,900 to fill an iPod up with tunes, or spend £14.95 per month (£179.40 per year) with Napster and refill to your heart's content".
Presumably, most music player-toting music fans will also have a goodly collection of their own tracks to pump into their player.
However, while the service costs £14.95/month in the UK, it costs just $14.95/month in the US, causing some UK users to also "do the math". At current exchange rates, UK users pay $27.95 each month for a service that costs US users $13 less each month - a difference of $156 each year, if you add it up.
Some of this difference is easily explained by Value Added Tax, which is not charged in the US. If VAT is removed from the UK price, Napster To Go costs a more reasonable £12.72 each month. At today's currency rates that's the equivalent of $23.79, a difference of $8.84 each month, or $106 each year (£56.17).
Straight currency comparisons may be unfair, as currency values fluctuate. Napster said: "You can't compare different currencies particularly when the US doesn't have to pay VAT."
But even with the VAT removed, a significant difference in price remains - and echoing Apple's response to previous criticism of differences in price in different territories, Napster blames the music labels.
"Blame the music business"
"Licenses (to distribute tracks) have to be secured in local territories - and in our case our US colleagues get a better price from the labels that we do in the UK", a representative said.
The Consumers Association (CA) - which has forced a Europe-wide investigation into Apple's iTunes prices in Europe - is aware of such conundrums. Speaking to Macworld in December, CA representative Phil Evans said:
"When we made our complaint about iTunes we specifically said we were concerned about all territorial practices - particularly in licensing - which the OFT acknowledged in their statement."
Despite grumbles based on price, Napster continues to drive its service on arguments based on cost: "iTunes is a one-dimensional business model that exists (and is subsidised by) the enduring popularity of the iPod. We expect many disgruntled iPod owners to ask Apple why they are having to pay so much to fill their players and why they can't use them with Napster."
The company's aggressive stance continues: "We'd like to hear the answer to that one too please Mr Jobs."
Apple has failed to engage Napster in battle, as yet. Requests for comment have met a silent iTunes Music Store.
Rental, not ownership
The answer is already clear. When Apple, Napster or any other digital music download seller shifts a track, the customer owns that track in perpetuity, and labels and artists are paid a similar amount to what they would earn through any other kind of retail sale.
Artists royalties as high as 13 per cent of the labels share of the sale (estimated at around 80 per cent of the iTunes track price) are paid, in addition to any relevant royalty to relevant collection agents, such as PRS or MCPS.
But when you rent a track through Napster To Go, you don't own that track, and a different type of royalty model ensues.
While it's reasonable to assume Napster is paying labels a fee for the rights to distribute tracks this way, music lovers and artists may benefit from knowing that artists royalties for such services are accounted differently. Napster pays a royalty on performance and play of each track.
We know what you like
These royalties are collected in the UK by the PRS/MCPS Alliance. They are flat rate and shared between artists according to set criteria. And in order to account for these track plays, Napster To Go has the capacity to watch what music you play on your player.
Napster explained: "Every time a track is played using Napster, then the rights owners get paid using our automated back-end system. In the case of Napster To Go, the music players log track plays and when the player is plugged back into the client, it updates our records".
Napster To go requires that users plug their music player in each month in order to keep the tracks they have on board functioning, which also serves to update the company's database servers. Up to three music players per account can be maintained.