Digital Music Downloads – Is the subscription model valid?

Digital Music News posted an article analysing Real Network’s/Rhapsody’s Q3 figures and pointed out that while subscribers are dropping, profitability is rising. Rhapsody has lost 100,000 of it’s 800,000 subscribers since the beginning of the year, but has so far turned it’s bottom-of-the-page figure from a net loss of $4.5 million recorded last year to a $1.52 million profit. This might seem like a pretty significant achievement given the loss of customers, but when you consider that Real Networks have got an R&D bill of $30 million it’s obvious that they’re taking a lot of money out of their subscription services (they run games and other media services too) before the bottom line.

Even if it is a little hard to make a sensible judgement about the success of the different arms of their business from such bald top line figures, it is at least a glimmer of hope that online music services are moving into their maturity as a viable, profitable future for the music industry, a glimmer brightened by the Guardian’s little back -of the-cigarette-packet analysis of Spotify‘s rapidly growing business. Even though it looks as if Spotify is spending a lot of money in the short term if they’re paying the normal industry license rate per stream, they likely are either being given favourable rates by the big 4, who have all taken equity in the company as part of their content provision deal, or they’re being allowed to run a comfortable line of debt with the big boys while they prove their business and gather deliciously profitable premium subscribers.

Whatever the case, it’s in the music industry’s interests to support the different ligitimate online players in their quest to design the ultimate online music provision platform, becuase the alternative is all too readily available from less scrupulous providers like the Pirate Bay and SeeqPod, who provide music for free, with no revenue stream back to the creators of the music.