Will DRM-free music threaten iTunes?

So far, Apple has been able to dominate the online music market, but with CRM fading away, the field could be wide open for new competitors

The music subscription flop

Nobody doubts that subscription services had the potential to be a major factor in the digital music game. After all, for about $15 a month, you can download virtually all the music you want from services, Rhapsody, Napster, and Yahoo Music Unlimited. That's less than the cost of buying two CDs from iTunes or a single CD from a brick-and-mortar record store.

Subscribers can then listen to their downloaded subscription music at their PC and with their media players, which can connect to home and car stereos. But everybody, even subscription proponents, agrees that, so far, the services have been a flop. One reason is that subscription services are hard to explain.

"One of the problems with subscription music is that, until you try one, you'll never understand why you should do it," McQuivey said. "But when you try it, it's incredible. But I'm not bullish about the [subscription services] because even though I find it a satisfying experience, I don't know how they could market it to get people over that first hump."

Subscription services face other problems as well. For one thing, while the services boast more than 2 million downloadable tracks, that still isn't as many tracks as iTunes offers for sale. As a result, subscribers may still need to purchase some music in addition to their monthly subscription fee.

Then, there's the issue of the balky PlaysForSure DRM software, which the subscription services use. Microsoft rolled out PlaysForSure to great fanfare more than two years ago but has not released a significant update since. Among the frequently heard complaints associated with PlaysForSure is that it can get tangled with the software provided by music services, meaning that sometimes legitimately downloaded music can't be played.

That balkiness, and the fact that Microsoft has not indicated when, or if, it will update PlaysForSure, has angered subscription vendors.

"Yes, we feel abandoned by Microsoft," an executive at one of the subscription providers, who asked that his name not be used, said at last January's Consumer Electronics Show. "We're pretty angry about it." That anger was heightened last November when Microsoft released its Zune media player and Zune Marketplace, an online store that offers a subscription service. That put Microsoft in direct competition with the subscription services to which it also was selling DRM.

What all this means is that subscription services must change dramatically before they will have a significant impact on the digital music industry and take business away from Apple, which has repeatedly said it is unlikely to offer a subscription service. Many believe the subscription services will, indeed, change, and Microsoft claims it is leading the charge.

New subscription models

Jason Reindorp, Microsoft's director of marketing for Zune, said he's confident that subscription services will succeed, although they will probably look different in the future. He also agreed with McQuivey that the biggest problem is that many people don't understand the services.

"What's needed is a strong educational push," Reindorp said. "I can understand why, at face value, people could think that if they pay for something, they'd want to own it."