Caught Napping?

When word trickled out that the revived new economy bad boy Napster had wrapped up a $52 million equity raising - it seemed pretty clear they were raising a war chest to take the fight to Apple's iTunes.

And now they have finally played their hand with the announcement of a $15 a month subscription offer, which lets customers download an unlimited number of songs from a library of over a million tracks, and transfer these to compatible MP3 players. The songs are protected with Microsoft's Janus rights management software and are playable as long as the user has an active subscription. Burning them to CD costs a bit extra.

An interesting move, but should Apple be nervous? As the Napster ads themselves declare - do the math. If you analyse people's music habits, there is a component of their online music which is made up of ripped versions of their existing CD collections. Add to this a few hundred tracks from dubious sources (no doubt one of them being the previous version of Napster), and you probably have about 2000-3000 songs.

Assuming that each month there are about 30-50 new songs that a customer would like to listen to - at face value the $15 a month Napster deals looks good as against 99c per song from Apple. But there's the rub. Thats $15 a month, each and every month. So unless you literally have an appetite for thousands of new songs every month, the monthly subscription offer works best for customers without an existing large collection of music, who effectively want their own form of interactive pay per view radio.

Music is not the only place the tension between digital ownership vs rental is playing. As consumers embrace digitally timeshifting broadcast content - pay by the month PVRs like TiVo also increasingly vie with 'free' services such as MythTV, which are based on recording to home computers.

It is an interesting debate, and will probably be resolved with most digital media distributors like Apple offering both kinds of pricing models to consumers.

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