Digital Audio Insider -- blogging the economics of digital music

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Digital Audio Insider is David Harrell's blog about the economics of digital music.

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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 Lala.com:

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 Lala.com 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 Lala.com 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 Lala.com.

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 Lala.com 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 Lala.com, 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 Amazon.com 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 Amazon.com 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

tags: digital music Lala.com music subscriptions iTunes eMusic Napster Rhapsody

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The Layaways (my band)

New album: "The Space Between" is now available from eMusic.

"It can't be easy to make something this basically simple sound so fulfilling; it if were, everyone would do it." -- Fingertips

"The Layaways have a unique sound with great drum fills and airy vocals that will make you tap your feet and sing along." -- VIC Radio

Keep It to Yourself - free mp3
All Around the World - free mp3
Come Back Home - free mp3

Download from eMusic, iTunes, Amazon MP3, Lala.com, or CD Baby, listen to free streams at Last.fm and Napster.

"The Layaways make fine indie pop. Hushed vocals interweave with understated buzzing guitars. The whole LP is a revelation from the start." -- Lost Music

"A wonderfully crafted recording built around tasteful songwriting and musicianship..." -- PopMatters

Silence - free mp3
The Long Night - free mp3

Download from eMusic, Amazon MP3, or iTunes, listen to free streams at Last.fm, Napster, or Rhapsody.

"These are songs that you want to take home with you, curl up with, hold them close -- and pray that they are still with you when you wake up." -- The Big Takeover

Let Me In - free mp3
Ocean Blue - free mp3

Download from eMusic, Amazon MP3, or iTunes, listen to free streams at Last.fm, Napster, or Rhapsody.

More Layaways downloads:

the layaways website

Current/Recent Reading and Listening:

Music Supervision: The Complete Guide to Selecting Music for Movies, TV, Games and New Media by Ramsay Adams, David Hnatiuk, and David Weiss

It's written as a how-to guide for those looking to become music supervisors, but I found it to be a good resource for musicians (like me) who are trying to get their music used in movies, TV, etc.