Digital Audio Insider -- the economics of music and other digital content

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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

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May 29, 2008

The New Dime Store, Part 2
by David Harrell
A few more thoughts on the new "rental" option from

The "pay once and stream forever" model does alleviate one supposed consumer concern that's mentioned in most analyses of why "rental music" (the subscription model) hasn't taken off: The fear that -- if you ever cancel your subscription -- you lose all of your music and have nothing to show for all the money you paid.

I've never really thought this to be a valid issue -- it's seems akin to complaining that you can't watch HBO and ESPN if you cancel your cable subscription. Besides, you can always re-subscribe and gain full access to the catalogs of the subscription services. But, if that concern really held some consumers back from streaming subscriptions, the new plan should be appealing. Though, as Michael Robertson points out in his analysis, purchasers of the dime streams are reliant on the continued existence of both and this particular business model. Coolfer's take, which I agree with, is that it's unlikely for anyone to be too worried about losing something they paid a dime for.

Also, I'm very curious about how record labels will be compensated for these "purchases." I haven't read anything yet about how that dime is split with the labels, but assuming that the percentage breakdown is similar to iTunes, labels would receive approximately seven cents for every dime purchase.

Based on the payouts I've seen for my own band via CD Baby's digital distribution, Rhapsody and Napster pay at least one cent every time a subscriber streams a song. (There appears to be different Napster payout rates for the ad-supported free streams and streams by paying subscribers). So whenever a Napster or Rhapsody subscriber streams a specific song seven times or more, the label receives more than it will likely receive from the one-time payment from

Yet that comparison assumes it's strictly an "either or" proposition, and that the two models are competing for the same exact same consumers, with dime purchases coming at the expense of repeated downloads within the previous subscription services. Given the relatively limited market share of the standard subscription models, it still makes sense to reach as many music consumers as possible, even under compensation plans that might pay less. (Warner Music Group is a major investor in, so it's clearly on board with the revenue split, whatever it is...)

And -- of course -- labels have long accepted different levels of compensation to reach different digital music consumers -- 70 cents for 99-cent downloads from iTunes and MP3, 20 to 33 cents for downloads from eMusic subscribers, and so on.

BTW -- I spend a bit of time with the site today. Availability is somewhat hit or miss, but I'm impressed. It's easy enough to add songs and listen to them. (Still working on my 50 free songs, so I have yet to fork over a dime...). There's also the option to "upgrade" many of the streamable songs to mp3 for an additional 79 cents, which the makes the purchase of dime stream an attractive alternative to purchasing a download from iTunes or MP3. If the streams are enough, you've saved (on a percentage basis) a lot of money, and you don't pay a penalty for opting to purchase the mp3 at a later date.

related: The Latest from Lala: The Return of the Dime Store


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    Out Now -- "Maybe Next Year" -- The New Holiday Album:

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