Next Mobile Battleground Is Music Subscription Services
The mobile music scene is once again a hotbed of startup activity. In the first wave of innovation, the focus was on ringtones. Now the fashionable thing is music subscription services.
SEE ALSO: HP Buys Mobile Music Streaming Service Melodeo
The list of companies dabbling in the space are too many to count. Just this week, a Berkeley, Calif. startup called MOG, which has raised about $25 million in venture capital, said it has finally received Apple’s approval to be on the iPhone. Separately, MSpot’s service, which provides a cloud-based service accessible through a browser, launched on Android phones.
While nearly all of them have a desktop component—and subscription music has been around for years— what differentiates this boom in activity is that it’s being driven by mobile phones first. Michael Gartenberg, an analyst at Altimeter Group wrote on Twitter today: “Music subscription service market is getting crowded again. Mobile is a key element this time around. Expect a shakeout to start soon.”
Providers range from Thumbplay, a ringtone provider, to Rhapsody’s long-standing music service, as well as to internet and mobile giants, like Apple (NSDQ: AAPL), which bought streaming-music service Lala and has since shut it down, and Google (NSDQ: GOOG), which is building its own music service for Android phones. Another service is Seattle-based Melodeo, which was purchased by HP last week. Melodeo’s main product nuTsie (an anagram of iTunes) is available on Blackberry, Android and Windows Mobile (and we can imagine Palm (NSDQ: PALM) devices soon). It scans users’ iTunes playlists and then lets users access the songs on their mobile device in shuffle mode. In other words, it’s a streaming music service.
To date, subscription music has always faced uncertainty by the consumer. The concept of renting unlimited music for a monthly fee is comprehensible, but losing your entire library the moment you stop paying is hard to swallow. Nokia (NYSE: NOK) has even tried its hand at offering a subscription music service. Called Comes With Music, users are able to download as many songs as they want for a year and keep the tracks after it expired. The service has not fared well, partly because it is exclusive to only a handful of handsets and geographies.
With various offers presented by these companies—most at around $9.99 a month—the broader market may become more educated about downloading vs. subscribing. Forrester Research estimates that the market will grow in 2010. Last year, the digital music market generated $1.87 billion in U.S. sales with subscription music services accounting for a faction of it, or $209 million. That may rise to $242 million this year, Forrester estimates.
Will subscriptions ever surpass downloads? Skype Technologies founders Niklas Zennstrom and Janus Friis are banking on it. Their latest San Francisco, Calif.-based music startup called Rdio sells subscriptions that give access to more than five million songs for $5 to $10 a month, depending on the devices used. Friis told BusinessWeek that they are betting consumers will opt for cloud-based music services over storing music on various devices. Fris: “The whole download model is going away.”
Posted In: Apps, Entertainment, Music, Mobile, Technologies / Formats, Browsers

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