MSN Targets Music Market with Subscription Plan

Taking a page from other rivals of the market-leading iTunes Music Store from Apple, Microsoft’s MSN Music is close to adding a subscription-style offering to its existing pay-per-download model.

MSN Music is expected to add the monthly subscription option made popular by RealNetworks, Napster and others by the end of the year.

MSN Music has been offering per-song downloads for some time, going fully live last September after months of rumors and build-up. However, the site has not been heavily promoted by the portal to the general public and it has been seen as little to no threat to iTunes.

Inevitable Showdown

However, a robust campaign to boost MSN Music by adding a monthly payment option, seen by many as the model that will win out in the long run, could change that. And published reports hint that Microsoft might be planning a direct assault on Apple’s market share with a plan to offer users who have bought songs from the iTunes Music Store free access to the same tunes in non-iTunes format, which would enable the songs to be played on a range of devices, not just the Apple iPod.

Many analysts have believed a showdown between Apple and Microsoft over digital music was all but inevitable and would come once Microsoft felt confident its technology could rival the hugely popular iPod and iTunes formats.

Still not clear is whether Microsoft’s move or any other trends will prompt a response from Apple’s iTunes, which to date has not wavered from its adherence to the pay-to-download approach.

The stakes go well beyond the right to claim leadership in the online music space and include control of the compatible device market and, perhaps most importantly, controlling the flow of content from record labels and, increasingly, movie studios.

The Other Shoe

At this point, Microsoft is saying only that it is looking at a subscription option, but most observers believe it is only a matter of time before it is rolled out.

It would follow a well-worn path in doing so, with Napster, RealNetwork’s Rhapsody and most recently Yahoo all plunging into the subscription realm in recent months.

The subscription model lets users essentially rent the rights to songs for as long as they maintain their monthly payments. If they let their subscriptions lapse, the digital rights management software controlling the music will expire, making it impossible for the songs to be copied or listened to.

The option is seen appealing to younger music fans in particular, who are often voracious consumers of music and for whom a monthly plan is far more economical than paying 99 cents — or even the 88 cents or less some alternatives to iTunes offer — for each song.

Analysts believe the subscription model will win out in the end, though it might take some time for the shift to occur, particularly since Apple has a strong built-in defense for its market share in the form of the millions of iPods already in use.

Education Needed

If nothing else, MSN would have the financial power to extend a pricing war, which Yahoo extended with its recent launch of a $6.99 per month plan, which is about half of what Napster and Rhapsody cost.

All of the iTunes rivals have their work cut out for them. Apple now estimates its own share of the digital download market is as high as 82 percent, despite dozens of smaller competitors and highly publicized launches from Napster, Yahoo and others.

In fact, a recent study by NPD Group found that Apple’s iTunes Music Store is close to rivaling the most popular peer-to-peer music sharing sites, ranking as the second most popular choice behind a P2P site for acquiring music online.

One hurdle that analysts say any alternative to iTunes must overcome is to educate consumers on the benefits of a subscription approach. Entertainment portals such as Yahoo and MSN might have the upper hand in that area, since they will attract a willing audience from the outset.

“The combination of a solid subscription service offering and a big media company will be powerful, but it’s all about execution,” Jupiter Research analyst David Card told the E-Commerce Times. “I don’t think this is a winner-take-all-market, and even if it is, it’s too early for that anyway. I suspect music services — like most media and entertainment businesses — will support multiple companies without a clear market share leader.”