fixing subscription model music services.

I've already written at length about what I think Microsoft should do with the Zune. Go read it. It's surprisingly comment free for something I consider a solid piece of speculative strategy. This time, I'm talking about the issues that are keeping subscription based music services unpopular.

People don't like the idea of a subscription model music service, for many reasons. The foremost among them is the idea that they are renting the music, and that other services are offering them the ability to own it. This is undeniably correct in the sense that the music goes away. It's incorrect in the sense that most digital music retailers, including the behemoth iTunes Music Store, would disagree that they are offering to exchange ownership of digital music for money, and would instead say they are selling you a license to use a certain copy of a song a certain number of ways, on a certain number of devices. This is important, because ownership by definition includes actual control over the product. In either case, the user doesn't have it.

At least a subscription based service doesn't lie to you. And, truthfully, it offers you a better deal by leaps and bounds. That is more or less unimportant, however. The issue is public perception. And people care about the fact that the music will go away if they stop paying.

The solution to this is offering a buy-out option for users, something in the vein of a lease to own deal. However, you can't set a standard fee for this buy-out option, because 1) if the price is too high, it may as well not exist. The same price as an individual download is too high, if the user is already paying a sub fee, and 2) if the price is too low, people will sign up and download insane amounts of music in one month, paying the cost at the end of the month, because it will be cheaper than individual downloads.

If, however, the cost of buying out tracks downloaded on a subscription basis decreased over the length of the subscription, there is both a sense of security that you CAN own your music if you decide the service isn't your thing anymore, and a solid reason to stick out the subscription long enough for it to become habit. If, for the first month, buy-out costs the same as an individual download, this is reasonable. Anything less, and the retailer will get screwed. But if the price per song for buy-out decreases over time, then it becomes a good deal. Six months into a subscription, and the buy-out cost could be half the price of a download, approx 50 cents. A year in, 25. Eighteen months, 7 cents, etc.

Obviously, the price drop over time would have to be calculated to take into account the revenue generated by the service per user, as well as the amount of downloading that takes place for the average user. But it offers all of the benefits of a subscription model service, while dealing (at least somewhat) with one of the major drawbacks.

If you wanted to get really difficult, you could offer whole or partial rebates of the subscription cost for the first few months, if a user bought out all songs. This also removes some of the fear that a subscription model service will be forcing you to pay twice for the same music. If you decide to buy-out at full price, getting 2 months subscription fees off of your total purchase means no net loss for testing the service.

And if you have a good product, getting people to test the service is more valuable than anything.