Universal’s Subscription Plan: Too Little, Too Late?

Businessweek “has learned” about a story Paul Resnikoff broke at Digital Music News more than a month ago: Vivendi’s Universal Music Group is exploring some kind of subscription service, and is trying to enlist the help of the other labels.

UMG has been batting the idea around for months, and our understanding is that it remains in the embryonic stage. Still, the rough outline is that UMG is proposing that big labels will get together and offer their music up in an all-you-can eat service, which will get paid for by someone other than a consumer — an ISP, or a mobile carrier, or a hardware maker, etc.

It’s a great idea — and one the labels should have embraced years ago. Instead, they made it difficult and expensive for the existing third-party subscription services — Yahoo, Napster and RealNetworks’ Rhapsody — to gain much traction. That’s because the labels thought that subscription services would cannibalise CD sales.

They may even have been right. But now CD sales have been eroding for 7 years, and the pace will likely increase next year, so there’s little point in clinging to them anymore. The “Total Music” proposal is being presented as a way for the labels to fight Apple’s stranglehold on their digital business, but the music labels’ problem isn’t Steve Jobs (or Radiohead, or Madonna, for that matter). It’s that consumers no longer want to buy CDs, and they don’t have a product that replaces it.

There are many high hurdles to clear: Figuring out how to compensate the various labels, publishers, artists for subscription revenues is a real headache. Much more significant: figuring out how to pay for it. Businessweek says that UMG is proposing that the ISP/carrier/device maker who signs on would pay a $5 monthly fee — but that only clears the label’s fees. Someone has to get that endless stream of music to your phone, or device, or whatever, and the bandwidth costs will be significant.

And it may be that consumers are simply resistant to the idea of “renting” music instead of owning it. We don’t think that’s the case. Give them whatever they want, whenever they want it, for a small fee — and one that’s buried in their cable bill, or mobile phone bill, so they won’t feel the sting — and they’re likely to embrace it the same way they do, say, cable TV. If the labels are truly serious about protecting what’s left of their business, it’s time to get to work.