One of the most innovative online music initiatives in recent times, has been the subscription model. Services like (new) Napster, Yahoo and Rhapsody offer you as much music as you can cram onto your hard drive for a fixed monthly subscription of between $5 and $9.95 a month - provided you keep paying your subscription.

I’m not going in to the pros and cons of subscribing vs "owning" (whatever that means these days), as both models have their supporters. Not as many as them that support, "free" but you can’t have everything.

But whatever you think of subscription, it does seem that the music industry should be praised for once, for allowing something new to happen and exploring new business models.

But then greed has kicked in, rather predictably. The arrangement under which these services have been working is only a temporary one - in place since 2001.

By way of comparison, the deal that the National Music Publishers Association (NMPA) agreed to charge for Internet Radio is 5.25%. The deal agreed for downloads is 8.5%. The deal that they’ve proposed to the Digital Media Association (DiMA),
which represents the main subscription companies is …….17% of revenues - double that they levy for downloads.

I suppose you could argue (and I’m sure they are) that in the case of a smaller pie, they want a bigger slice. But what about the companies who have gone out and created the market in the first place and handle all the tech, billing and the customers? In other words, the real wealth creators in the value chain.

Talks have broken down now, after DiMA counter-offered 6.9% of revenues, which is a very wide difference.

So what’s next? The NMPA must think that they have Yahoo et al over a barrel, as now they’ve launched the service, it would be difficult to withdraw it, both from customer care and an investment write-off point of view.

It needs someone over at the NMPA to think big, long term and in the spirit of partnership and interests of their members to rescue this. But my take-out is that if you try to do a deal with people who treat partners like this, don’t launch something on the basis of a temporary deal.

Source: CNet News