Charles Hudson's Weblog

My local paper, the San Jose Mercury News, recently posted an article about the
Apple iTunes initiative and its early success at generating interest in paid legal music downloads. I am more surprised by the amount of press given to these initiatives than I am by the success that paid music offerings are having.

I really believe (and have believed for awhile) that most people are interested in consuming music as a service and are willing to pay for it. To date, however, the P2P music exchanges have offered the best way in which to optimize for quality, selection, and price relative to their paid counterparts. However, with the release of Apple iTunes and the Jambase Rhapsody service, it is clear that things have changed. Here is my theory on why paid music services actually have a good shot of being successful even in the face of existing entrenched P2P networks:

Quality – As someone who has certainly used his share of P2P file-sharing systems, you have no assurance of quality whatsoever. When you are talking about free music, however, most users are willing to tolerate the variances in quality. Advantage: Paid Music Services

Selection – Selection is a big deal. The early attempts at paid music services were these illogical silos of label-specific content. Who wants to subscribe to 3-4 services just to have access to all of the music that they want? Advantage: Tie

Availability – Availability is a different issue than selection (although they are often confused). Whereas selection refers to the absolute breadth of music offered, availability refers to a user’s ability to get the music that he/she wants at the moment in time that he/she wants it. With P2P music exchanges, there is an availability issue if there are users who have the content that you want but are not online when you perform your search. Advantage: Paid Music Services

There are just two more things that I would like to highlight:

Unlimited Use will Trump A La Carte- There is something particularly appealing about the possibility of all-you-can eat services. Most users (including me) overestimate the amount of content that they will be able to consume on an on-going basis and have typically been burned in the past by some a la carte service (mobile phone, landline, etc.). The idea of JamBase’s unlimited streaming and pay-by-the-download burning service is more interesting to me than the iTunes model.

Paid Music Services will Poach Users from P2P Networks – There will be consumers who, frustrated with Kazaa and other P2P services for security, ease-of-use, or potential for legal recourse, will move to paid music services. I do not think that most P2P die-hards will move to paid music services, however.