iTunes competitors offer music-for-rent services

By Peter Suciu
February 20, 2005 -- New "all you can eat" online music services from Napster and Virgin Digital hope to convince song lovers that renting is better than owning.

If first reactions are any indication, it'll be a tough fight.

Many online critics and blogs are blasting the recently launched Napster To Go, which charges a $15 a month subscription fee. Members are allowed to download as much music as they like to their computer or portable player.

But if a member stops paying that fee, the music ceases to play.

"Who wants to rent music?" wrote one online critic. "To me at least it's a very personal thing that I tie to times and places. I want to keep it."

Unlike movies, music has always followed an ownership business model. Music fans used to buying CDs (or stealing downloads) favor returning to their favorite songs again and again.

Napster officials, however, believe that subscription services are the future a sort of radio-on-demand.

"Why suffer in a world of 30-second clips and 99-cent downloads when for the price of one CD you can have unlimited access to the world's music catalog?" said Chris Gorog, chairman and CEO of Napster.

In advertisements during the Super Bowl, Napster stressed the cost savings of its service saying $15 will buy access to 1 million songs, while its catalog would cost $1 million on iTunes.

Virgin officials, meanwhile, see subscription services as supplements to downloads. You can test drive the flavor of the month, and buy your favorites.

"Consumers like choices. Some prefer the unlimited downloading, others prefer the digital store," said Zack Zalon, president of Virgin Digital.

Virgin and Napster, which use Microsoft's music format WMA, see this combination as a way to combat the domination of Apple's iTunes, which uses a competing format.

Songs bought on iTunes will only play on the iPod digital player, while Napster and Virgin only work with players compatible with WMA.

Some analysts see subscription services as a way to differentiate Microsoft-format devices from iTunes.

"Napster To Go and other portable subscription music services [will] help expand the market for paid music service providers," says Susan Kevorkian, senior analyst for consumer markets at research firm IDC.

However, she admits not everyone is sold on the idea of paying each month to listen to the songs on their players. "Consumer education and marketing is essential because music buyers are accustomed to purchasing music to own rather than rent," she said.