By John Gruber
Square Reader SDK lets you use Square hardware to take payments in your app.
BusinessWeek has a story — “Universal Music Takes on iTunes”1 — regarding a supposed proposal from Universal Music chief Doug Morris to create a music-industry-owned subscription service called Total Music. BusinessWeek twists the story into pretzel-like contortions to present this scheme as clever and reasonable.
While the details are in flux, insiders say Morris & Co. have an intriguing business model: get hardware makers or cell carriers to absorb the cost of a roughly $5-per-month subscription fee so consumers get a device with all-you-can-eat music that’s essentially free.
So hardware makers will “absorb the cost”, rather than passing the cost along to consumers. Uh-huh.
Music companies would collect the subscription fee, while hardware makers theoretically would move many more players. “Doug is doing the right thing taking on Steve Jobs,” says ex-MCA Records Chairman Irving Azoff, whose Azoff Music Management Group represents the Eagles, Journey, Christina Aguilera, and others. “The artists are behind him.”
So artists love the music labels. And it’s taking on not Apple Inc. but “Steve Jobs”, personally. Uh-huh. (Good rule of thumb: the more an article attributes an Apple product or service to Steve Jobs personally, the more likely it’s a hatchet job.)
In August, Morris announced a five-month test with Wal-Mart, Google, and Best Buy. The three companies will sell music downloads that can be played on any device — a freedom not available to buyers of iTunes songs, most of which play only on Apple devices and software.
Wrong. That freedom is available to buyers of iTunes songs, in the form of Apple’s DRM-free iTunes Plus, which Universal Music has chosen not to sell. I.e. that Universal Music sold through iTunes only plays on iPods is Universal’s decision, not Apple’s. I’m not arguing that iTunes Plus is perfect — it kind of sucks, for one thing, that the price is higher than with iTunes’s “regular” DRM-laden tracks — but BusinessWeek is clearly insinuating that Universal can’t sell DRM-free music through iTunes, when in fact they can.
The hypocrisy here is running thick. If this Total Music subscription service ever sees the light of day, it almost certainly will entail the use of DRM — otherwise there’d be nothing to stop non-Total Music devices, for which the music industry received no fee, from playing the music downloaded from the service. No word from BusinessWeek on what DRM system the music industry plans to use, nor whether it’ll be compatible with any music playing devices already on the market.
The big question is whether the makers of music players and phones can charge enough to cover the cost of baking in the subscription. Under one scenario industry insiders figure the cost per player would amount to about $90. They arrived at that number by assuming people hang on to a music player or phone for 18 months before upgrading. Eighteen times a $5 subscription fee equals $90.
Thank you for performing the basic arithmetic for me.
So, apparently, this $90 is going to appear out of thin air. Most popular music players sell for around $150 or less. Many low-end players, like the iPod Shuffle and Sansa Express, retail for significantly less than $90. Either device makers are going to lose money, lots of money, on each unit sold, or else they’re going to raise the price of their players by $90. Guess which one is going to happen. But BusinessWeek claims this music, from the consumer’s perspective, will be “essentially free” and the cost will be “absorbed” by the device makers and mobile phone carriers.
No word on what happens when the 18 months are over. My guess is that your music stops working unless you start paying for a monthly subscription, or you buy another “Total Music” player and throw your old one out.
There is precedent here. When Microsoft was looking to launch a subscription service for Zune, Morris played hardball. He got the tech giant to fork over $1 for every player sold, plus royalties. Total Music would take that concept even further.
So, a 90-fold increase has “precedent” in a one dollar per unit fee. Uh-huh.
In and of itself, Total Music is not a ridiculous notion, just like regular pay-by-the-month subscription services aren’t ridiculous notions. But we all know that device makers aren’t going to eat the cost — they’re going to pass it along to consumers. A Total Music music player is going to cost somewhere around $100 more than a similar player without Total Music. And it’s not like subscription services haven’t been tried before.
So what this boils down to is BusinessWeek hailing Doug Morris as genius for coming up with the idea of a pre-paid subscription service.
No byline on the story, which seems weird. Update: Ah-ha, it’s by Ronald Grover and Peter Burrows — BusinessWeek apparently now puts article bylines all the way at the bottom of the page, underneath the comment form. Great design. ↩︎