New Napster Business Model May Not Fly With Consumers
I’d read a couple of things last week on the new Napster subscription model called Napster To Go. It’s a flat rate pricing model where for as long as you maintain your US$14.95 you’ll be able to download preselected playlists and tracks to your compatable WMA player. Consumers though may “Think Different”. I know I am…
A central element of the strategy is is to take on the iPod directly with an aggressive campaign touting Napster as a better value. I don’t particularly agree with that as when you stop your subscription, you can’t play the music. A more fair comparison would be XM MyFi to Napster To Go or iTunes to traditional CD sales. In both of those cases, Napster To Go offers the least value. I went to sign up for a trial subscription but the service is limited to Windows XP, Windows Media 10 and requires using IE to connect to the service.
Napster CEO Chris Gorog was at MidemNet last month where he is quoted in this excerpt in Forbes…
“We’re confident it will be the model the entire industry backs,” said Gorog. “It’s exactly what consumers want to do. Napster To Go is very similar to the P2P experience.”
He believes the best way to market the new service is to emphasise its advantages over iTunes. He’s particularly keen to highlight iTunes’ iPod-only compatibility. “We’re going to be communicating to people that it’s stupid to buy an iPod.”
I don’t see it like being P2P at all. First, the downloaders will have to pay for it, which isn’t a bad thing. The current driving force behind P2P is that people are sharing music and not paying for it. Those revenue streams help employ fat old roadies like me and keep my clients able to afford me. In a P2P environment, there is a choice that is purposely lacking in the Napster To Go model, the ability to port tracks to CD or other device. Napster To Go will allow burning of tracks, but at a rate pretty similar to the iTunes model, about a buck.
Using the Gillette razor and blade business model as a metaphor as Cringley, among others have, the iPod is the “blade” and the songs are the “razor” in the way Apple is executing the iPod/iTunes strategy. It’s done pretty well, it’s got more than 90% market share. The Napster model is more akin to Gillette, using low cost and at times free media players to entice people to subscribe. In that case, the player is the razor and song is the blade. Someone, somewhere, probably Napster is subsidising the cost of the loss leader players. Just like with the free or cheap cell phones you get when you commit to a plan. Depending on your usage pattern, the couple hundred bucks you save on that phone will easily be eclipsed by line and airtime charges. In most other parts of the world a growing number of the people using cell phones are using pay as you go phones. The phone costs a bit more, but in the end it’s a better value as you only pay for what you use.
I’m not the only one that has this opinion. Parks Associates just released a survey where 40% of the respondents would perfer a download service, compared to 8% that would prefer a subscription. Perhaps the tide will turn though if it does, there will be nothing to stop iTunes from launching the same sort of service. They should have put Napster to bed long ago.