Spotify, the much hyped service that has yet to appear in the U.S., is a mobile play. Rival MOG says it will have a mobile subscription offering in the near future as well. But the new mobile product from RealNetworks’s (RNWK) service, Rhapsody, has actually been up and running for a little more than a month, and the company says results are encouraging: Real says that more than 500,000 people have downloaded its app for Apple’s (AAPL) iPhone.

The problem: This stat alone doesn’t mean much. You can only get streaming music through the Real app if you’re already paying the company $14.99 a month for its “Rhapsody to Go” service.

So how many app users are paying customers? And more important, how many of them became paying customers because of the app?

I’ve asked Real for comment, but I don’t expect one, since the company has typically been close-mouthed about this stuff. But I’m told that Real has about 700,000 to 800,000 paying Rhapsody customers overall. So it’s possible that almost all of the app downloaders are already paying customers and that the app is just a nice bonus.

Did anyone out there actually start subscribing to Rhapsody because of the iPhone app? Let me know via email or in comments below.

UPDATE: Real, to its credit, isn’t making too much of the numbers itself. From spokesman Bill Hankes:

Although we are pleased to see excitement and interest in the Rhapsody iPhone app, it is too early to tell how this will translate into subscriber numbers since we suspect many of the people who downloaded the app are current subscribers already or are trying Rhapsody for the first time with the seven-day free trial.

But that was Thursday, and that’s old news. After a run-up of more than 10 percent, Real’s stock is back in the $3.30 range, where it stood before the iPhone announcement.

The problem: While a lot of digital music nerds I’ve talked to in the last day or so are excited about the app, the first of its kind to hit the market in the U.S., Wall Street seems to think consumers won’t care. They’re just not going to pay a monthly fee to listen to music.

Here’s JP Morgan’s Vasily Karaysov: “Rhapsody’s subscriber base (750K as of Q2 ’09, a decline of 50K sequentially) reflects the existing demand for a subscription-based music service irrespective of the device on which it’s available. We don’t expect the new application to reverse the challenging trend.”

To be fair, Real Networks (RNWK) is a thinly traded stock with other challenges, and it can move for all sorts of reasons. For instance, there has been a bit of buzz about the damages that Real will have to pay Verisign (VRSN), which could be significant.

But I do get the sense that even in the Apple-crazed tech press, which goes bananas for every Apple (AAPL) morsel it can find (true or not), Real’s app seems to have floated under the radar. But Real’s rival, Spotify, whose app does more or less the same thing at the same price but is only available in Europe (for now), says that demand has been overwhelming, so much so that Spotify has had to restrict its offering to new subscribers, at least temporarily. So what gives?

[Image credit: Kaibara87]

Apple (AAPL) gave Spotify the go-ahead for its streaming-music iPhone app last month. But the service doesn’t have deals to distribute music in the U.S. yet. RealNetworks’s (RNWK) Rhapsody, however, does have deals, and its app just got Apple’s nod.

So. If you want on-demand access to nearly any song you want, it’s all yours: You’re just going to need to pay Real $14.99 a month for its “Rhapsody-to-Go” subscription service.

What’s that? You like the idea of getting all the music you can eat on your iPhone, without listening to ads, but you don’t want to pay for it? Alas, no dice. Spotify mobile users in Europe are paying, too–about $16 a month–and if and when the service gets distribution in the U.S., you can expect to pay about the same.

So will anyone pay for either app? Good question. Best Buy’s (BBY) Napster says that the pricing level is too high and that it won’t offer a music app until it can get the labels to charge less for their music, adding that it thinks $5 a month is a reasonable charge.

And up until now, Rhapsody hasn’t had a whole lot of luck with its “to go” subscription pricing. But! Up until now, Rhapsody wouldn’t work with Apple’s iPod, which has made it a very, very hard sell. Now it has a very large base to sell against.

Will that make a difference? We’re about to find out.

Here’s a video that previews the app.

Rhapsody on iPhone from Rhapsody on Vimeo.

And who knows? It may even be true. But here’s one bit of nuance to chew on: Magazine mogul Jann Wenner has made money–as in, a profit–on the Web for the last five years.

How so? By licensing Rollingstone.com to RealNetworks (RNWK) and letting that company bear almost all the costs of running the site. True, the site didn’t blow anyone away. But it has generated cash. I’m told the RealNetworks deal is worth “several” millions in profit per year.

That kind of performance wouldn’t be very meaningful for a title owned by a big public company like Time Warner’s (TWX) Time Inc., where it would be important to show Wall Street that you’ve harnessed the power of the Web and turned it into your own personal growth engine.

But for Wenner’s privately held company, which owns all of three titles, a few million bucks a year in profit is a few million bucks a year in profit. And that profit has come in handy the last couple of years, when the Internet growth engine has turned out to have problems of its own.

Let’s be clear: Wenner’s cautious, cash-flow-positive strategy has now left Rolling Stone far behind everyone else on the Web when it comes to market share. Which is why I’d suggest that his company not try to replicate its print strategy–which aims to straddle an uneasy line between modern pop culture (“The Hills”!) and golden oldies (“The Beatles”!)–and forgo the idea of becoming “The Rolling Stone of Web.”

Even if Wenner had tried this years ago, I don’t think it would have worked; the Web is too diffuse and pop culture tastes too fractured for any single site to gain the kind of traction that his magazine got during its heyday. And if any site does have that power, it’s Google’s (GOOG) YouTube, and no one’s going to displace that now.

My two cents: Turn RollingStone.com into an amazing online archive that capitalizes on the magazine’s glory years, when it really was the hub for popular culture. The magazine should have a treasure trove of stuff at its fingertips–interviews, articles, photos,  etc.–but you’d be hard pressed to find any of it on the site now.

Take the interviews that Wenner himself conducted with John Lennon and other luminaries, for example: Great stuff. But if you’re looking for, say,  Wenner’s 1970 interview with Lennon, you can’t find them on his own site. You’ll have to look over on…YouTube.

It should be relatively easy, and inexpensive, to cull this stuff, make it searchable, figure out ways to recycle, repackage, and redistribute it, right? It won’t necessarily do blockbuster numbers, but it won’t cost much, either. Get lucky, and you could even turn a profit.

The service took one step toward wider distribution today when Apple (AAPL) approved its iPhone app (for a glimpse of the app, see the video at the bottom of this post). But that won’t help U.S. users until the big music labels–Warner Music Group (WMG), Sony (SNE), EMI and Universal Music Group–agree to American distribution deals.

But before we get to that, let’s back up and explain what Spotify is: A streaming-music service that lets you listen to whatever you want whenever you want, as long as you have a Web connection. A free version comes with ads, and if you want to do away with those, you can pay for a subscription.

Does that sound familiar? It should. There are plenty of models like this available in the U.S. right now, from RealNetworks’s (RNWK) Rhapsody to MySpace Music, a joint venture owned by News Corp.’s (NWS) social network and the big labels. For various reasons, equivalent (and legal) models have been much harder to come by in Europe, which explains part of the appeal there. The other explanation is that Spotify works beautifully.

But don’t take my word for it. Ask Slate.com columnist Farhad Manjoo (“The best streaming music service in the world”). Or better yet, Facebook CEO Mark Zuckerberg (“Spotify is so good”).

Meanwhile, investors–primarily European ones–have been throwing money at Spotify, and the big music labels’ international arms are enthusiastic partners (and equity shareholders). And the company’s boosters have been pointing to a U.S. launch as early as the fourth quarter of this year.

So let’s assume this happens. What then? The problem with the digital music business, as company after company has found out, is that it’s a miserable business:

• Selling music by the track is a low-margin affair that only works if you have enormous scale–Apple sells some two billion songs a year.
• It’s been nearly impossible to get more than a few hundred thousand people to pay a monthly fee for music–ask Rhapsody or Best Buy’s (BBY) Napster, which have been slogging away at this for years without gaining any traction.
• And it’s been impossible to support a free service with advertising while ponying up big licensing fees to the labels–ask Imeem, et al.

So why will Spotify be any different? Depends on whom you ask. Some figure that it has the best chance of working as a mobile service and that since phone users aren’t used to the idea of getting all the music they can eat on their phones for free, they’ll pay up if given the chance. Others think the big labels have gotten wiser and/or more benevolent about their licensing fees and are willing to wring less out of Spotify at the start in the hope that it will pay off down the road.

Still others just shrug and figure it will work out somehow because…well, one of these days, someone has to figure out how to make this work. “Everybody loves the product,” says an industry executive familiar with the company’s plans. “And there’s a hope that the business model is realistic.”

I have heard rumbling that not all of the big labels are equally enthusiastic about a U.S. licensing deal. It’s unclear whether that’s due to something specific about the U.S. market or to internecine squabbles at particular labels. But Spotify will need at least three of the big four to play along. And then we can see just how realistic the model really is.

That’s still a million miles away from Apple’s (AAPL) commanding grip on the digital music market–it has held steady at around the 70 percent mark for years–but it’s better than nothing. And given that it was at zero less than two years ago, not terrible.

The eight percent number sounded familiar to me because that’s the number the music industry has been guesstimating for some time. But NPD’s stats suggest that Amazon (AMZN) has been grabbing share from smaller players. Not included on the list below, for instance, are NPD data showing that Wal-Mart’s (WMT) download store saw its share drop from 1.9 to 1.3 percent. Also of mild interest: Share gains for the RealNetworks (RNWK) Rhapsody Store and, yes, Microsoft’s (MSFT) Zune Marketplace.

Here’s the breakdown (click on chart to enlarge).

But let’s be clear: The digital music download market looks like the search market in that it’s dominated by a single giant player. But it’s not like search in that there aren’t many benefits to running a download store with a relatively small audience: The small margins for music sales mean that you need to be awfully big to make this a significant business. Which is another reason to be wary of would-be music players that point to their plans to sell downloads (think Imeem, and iLike).

To recap: Real wants to sell a $30 piece of software called RealDVD that lets you rip and store DVDs on your computer. Real’s software adds its own set of locks to the ripped file to prevent DVD owners from passing along their files to someone else, but that isn’t nearly enough to placate Hollywood.

Real and the studios have been in court since last fall, when U.S. District Court Judge Marilyn Hall Patel issued a restraining order preventing Real from selling the software. Yesterday, Patel (whom you may recall from the old Napster days, when she essentially shut that service down) turned the restraining order into an injunction, along with a sharply worded ruling that basically described Real as a group of willfully obtuse doofuses.

Now Hollywood is dancing, and Real says it needs to “determine our course of action.” I have a suggestion for Real: Move on.

I know there’s a legitimate use for software that lets you rip DVDs you own–and more importantly, software that lets you circumvent the locks the studios put on their discs. But why not let the many other smaller companies fighting this fight, fight this fight?

Best-case scenario is that you end up with software that’s useful for a relatively small group of people: The ones who buy DVDs and want to watch them multiple times. Worst case is the one you have now: An expensive legal battle and the prospect of a product you’ll never be able to sell.

I’ve been puzzling about Real’s plan for this software from the get-go. Why release a product that is destined for a court battle?

A few people familiar with the company’s thinking have tried to explain that this fits into CEO Rob Glaser’s vision for Real’s future, which involves creating software that maintains a connected home entertainment hub. But that seems like a roundabout way to get there.

I have another theory: Glaser is a smart, pugnacious guy with a fondness for big public fights.

He spent some time in the earlier part of this decade jousting with Steve Jobs about Apple’s (AAPL) walled-garden approach to iTunes music, and lost that one. But he did get Microsoft (MSFT) to hand over $760 million to settle an antitrust case in 2005, and he still has a chunk of that cash in the bank.

Or maybe there’s an entirely different impulse behind RealDVD. But whatever it is, I’d love to hear it. Here’s a clip of Rob Glaser explaining the software’s features, but not the rationale behind it, to BoomTown’s Kara Swisher:

]]> http://mediamemo.allthingsd.com/20090812/realnetworks-still-barred-from-the-dvd-backup-business-why-does-realnetworks-want-to-be-in-the-dvd-backup-business/feed/ 0 http://mediamemo.allthingsd.com/20090203/realnetworks-that-game-spinoff-isnt-happening-obviously-but-we-do-have-plenty-of-cash/ http://mediamemo.allthingsd.com/20090203/realnetworks-that-game-spinoff-isnt-happening-obviously-but-we-do-have-plenty-of-cash/#comments Tue, 03 Feb 2009 12:47:21 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=3781 Last spring, RealNetworks announced plans to spin off its fast-growing casual games business into a separate company. That’s not going to happen in the midst of a meltdown, and today the company formally acknowledged the reality: It says there’s “no visibility as to when conditions will support separation,” so it has called off its bankers and will write off the fees it has spent on the move so far.

That’s no big deal: RealNetworks (RNWK) is writing off all sorts of stuff. It will end up taking charges of up to $249 million when the company reports its fourth-quarter earnings next week, the company announced this morning.

It also narrowed its revenue outlook a tad: Real Networks had previously predicted Q4 totals of $150 million to $157 million; now it’s saying it those numbers will land between the $151 million to $153 million range.

Not included in Real’s kitchen-sink press release: An acknowledgment that it is laying off “less than 20″ people at Rhapsody America, the music subscription joint venture it runs with Viacom’s (VIA) MTV. Real had already canned 130 people in December (and yes, it will be taking a charge for those firings, too).

But here’s the interesting thing about Real, which has fallen off most investors’ and tech-watchers’ radars: At a time when all sorts of digital media companies are gasping for air, it has actual revenue-producing businesses (Rhapsody and its game units) and a pile of cash to play with–$370 million at the end of the last quarter. It won’t be a huge surprise if CEO Rob Glaser starts snapping up struggling start-ups that looked a lot flashier a year ago.

]]> http://mediamemo.allthingsd.com/20090203/realnetworks-that-game-spinoff-isnt-happening-obviously-but-we-do-have-plenty-of-cash/feed/ 0 http://mediamemo.allthingsd.com/20090116/newsflash-no-one-buys-music-on-the-web-except-for-the-people-who-spent-37-billion-last-year/ http://mediamemo.allthingsd.com/20090116/newsflash-no-one-buys-music-on-the-web-except-for-the-people-who-spent-37-billion-last-year/#comments Fri, 16 Jan 2009 11:46:27 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=3204 Web folk have a fairly justified suspicion of anything they hear from official music industry reps these days. But this stat seems about right to me: 95 percent of all songs downloaded on the Web last year were stolen, says the industry’s international trade group.

The IFPI estimates that some 40 billion tracks were stolen/shared last year, though it’s not entirely clear how the group came up with the math. Regardless of the methodology, that’s bad, right?

Depends on how you look at it. The IFPI also notes that people spent some $3.7 billion on digital music in 2008, which is up about 25 percent. Figure about half of that comes from Apple (AAPL), which moves about two billion tracks a year from its iTunes store. The remainder would be from mobile, with a very small smattering from services like RealNetworks’ (RNWK) Rhapsody and a few dollars spent on ad-supported services like News Corp.’s (NWS) MySpace Music, etc. (News Corp. is the owner of Dow Jones and of this Web site.)

But the standard summation still applies: The growth of digital has yet to replace the decline in physical sales–overall music sales dropped seven percent last year.

]]> http://mediamemo.allthingsd.com/20090116/newsflash-no-one-buys-music-on-the-web-except-for-the-people-who-spent-37-billion-last-year/feed/ 2 http://mediamemo.allthingsd.com/20081204/realnetworks-cuts-130-75-of-workforce/ http://mediamemo.allthingsd.com/20081204/realnetworks-cuts-130-75-of-workforce/#comments Thu, 04 Dec 2008 21:10:14 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=1705 Next up on today’s layoff parade: RealNetworks (RNWK), which is cutting 130 jobs, or 7.5 percent of the workforce. Standard explanation: The company is trying to “bring expenses in line with revenues in a time of economic turmoil.”

The layoffs are companywide. The company tells us it is not shutting down the New York office of Rhapsody America, the music subscription service that Real runs as a joint venture with Viacom’s (VIA) MTV as Gawker reported this morning. The corporatewide layoffs were first reported by CNET.

Other details relevant to laid-off employees:

• All are on payroll through the end of the year
• Each will be offered a cash severance package based on length of service
• Said severance package will include six months of paid COBRA
• Etc., etc.

Real PR boss Bill Hankes has more details at the company’s blog.

]]> http://mediamemo.allthingsd.com/20081204/realnetworks-cuts-130-75-of-workforce/feed/ 1 http://mediamemo.allthingsd.com/20081204/sony-warner-music-pull-full-songs-from-ilike-look-out-theoretical-facebook-music-offering/ http://mediamemo.allthingsd.com/20081204/sony-warner-music-pull-full-songs-from-ilike-look-out-theoretical-facebook-music-offering/#comments Thu, 04 Dec 2008 17:00:18 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=1660 Last summer, iLike rolled out a new feature: Visitors to the upstart music site would be able to listen to entire songs from all the big music labels for free, via an arrangement with RealNetworks’ Rhapsody, which already had a license deal with the big guys. But Sony (SNE) and Warner Music Group (WMG) have since pulled their songs from iLike.com, say people familiar with the situation.

PR reps at both Sony, Warner and Real declined comment. iLike offered this statement:

From day one, iLike has offered only music that is fully licensed from copyright holders, via a combination of direct licenses as well as third-party relationships such as Muze and Rhapsody. From time to time these arrangements are renewed and re-negotiated, and sometimes it’s hard to avoid temporary outages in the middle of discussions.”

This isn’t a huge problem for iLike, as the “outages” only affect the offerings at iLike.com itself, and not iLike’s popular Facebook app, which is the core of its business. That’s because the Facebook app has never offered users the chance to listen to full songs from the big labels. And iLike has other pressing issues to deal with: The company is actively looking for buyers.

But it does point out one of the challenges that iLike and anyone else who wants to build a music service, or extend an existing one, face: They can’t automatically assume that someone who has deals with the music labels, as RealNetworks does, can take those deals and transfer them to a new service.

This has particular implications for Facebook, which is still exploring the possibility of launching its own music service. If Facebook wants RealNetworks (RNWK) or any other existing music service–like, say, MySpace Music–to operate a music offering on its behalf, it’s going to have to get the labels themselves to sign off on the deal. That’s not an impossible hurdle–note that RealNetworks has been able to offer free music at Yahoo (YHOO) since this fall–but it will slow things down.

]]> http://mediamemo.allthingsd.com/20081204/sony-warner-music-pull-full-songs-from-ilike-look-out-theoretical-facebook-music-offering/feed/ 1 http://mediamemo.allthingsd.com/20081203/yahoos-music-outsourcing-continues-cbs-takes-over-radio-offering/ http://mediamemo.allthingsd.com/20081203/yahoos-music-outsourcing-continues-cbs-takes-over-radio-offering/#comments Wed, 03 Dec 2008 12:01:33 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=1595 Here’s a Yahoo story I can report with certainty: The company is getting out of the Internet radio business, by handing over its Launchcast streaming music service to CBS.

The transition will kick in during the first few months of 2009, says Michael Spiegelman, who heads up Yahoo’s music unit. The two companies will share any ad revenue the service generates.

It’s one of a series of moves Yahoo (YHOO) is making to essentially outsource its music offerings to third parties; earlier this fall the company rolled out a partnership with RealNetworks’ (RNWK) Rhapsody service to provide free streaming music alongside search results.

For CBS (CBS), this represents yet another bet on digital music. The company already boasts 4.5 million monthly users for its Web radio offering, many of whom come from the AOL music service it powers. The Yahoo deal will add another three million users. That’s in addition to the audience that uses Last.fm, the Web music service it purchased for $280 million in 2007.

CBS boasts that Yahoo users will benefit by getting access to 150 additional radio stations, including actual CBS radio stations like WFAN in New York and WXRT in Chicago, which is nice. Potentially more meaningful: The new service will work on Apple (AAPL) computers and will also support Mozilla’s FireFox browser; Yahoo’s current offering only works on Microsoft’s (MSFT) Internet Explorer.

Other changes: Yahoo will phase out its paid version of Launchcast, which costs up to $3 a month and offers commercial-free programming. And while the current Launchcast player gives listeners the ability to customize their stations by selecting a mix of artists they’re interested in, the new CBS-powered player will offer a “much more programmed radio experience,” Spiegelman says. About two-thirds of Yahoo’s users end up selecting preprogrammed stations, anyway, he says.

A few years ago, this move would have had more meaning for the digital music world because Yahoo was one of the biggest players in the industry. But like other areas of Yahoo’s content business, the music group has scaled down both internally and externally: It has lost a series of executives, it has sold off its music subscription business to RealNetworks, and users who once turned to it for digital songs and videos have migrated to other parts of the Web.

]]> http://mediamemo.allthingsd.com/20081203/yahoos-music-outsourcing-continues-cbs-takes-over-radio-offering/feed/ 0 http://mediamemo.allthingsd.com/20081124/web-2o-music-pioneer-ilike-looking-for-buyers/ http://mediamemo.allthingsd.com/20081124/web-2o-music-pioneer-ilike-looking-for-buyers/#comments Mon, 24 Nov 2008 23:14:03 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=1393 iLike, the Web start-up that made a name for itself by becoming Facebook’s de facto music service, is looking for a buyer, according to multiple sources. I’m told that iLike is actively soliciting a list of buyers that include RealNetworks and Ticketmaster, which already owns 25 percent of the company.

It’s conceivable that iLike, led by brothers Hadi and Ali Partovi, is simultaneously pursuing funding options. But my understanding is that much like competitive music service iMeem, which is also on the block, iLike’s executives and investors are worried about keeping the company afloat as a standalone entity. Delivering free music on the Web has so far proven to be a high-cost, low-revenue endeavor, and that’s a difficult path to choose in this environment.

My sources couldn’t tell me what sale price iLike is hoping to get. It has raised about $16 million in two years. Most of that came from Ticketmaster (TKTM), which has now split off from Barry Diller’s IAC and trades as standalone company. A smaller slug came from Bob Pittman’s Pilot Group, which has taken a stab at other Web music start-ups, including a recent investment in Project Playlist. I’ve asked the Partovis and their PR rep for comment, but haven’t heard back.

Ticketmaster’s existing ownership makes it an obvious buyer. The company also has a relationship with RealNetworks (RNWK), which began powering a free music service for iLike this summer. And while I don’t have confirmation that the two companies have actually talked, the third very obvious buyer would be Facebook, which is responsible for the company’s success to date.

iLike originally started out as a music discovery service that promoted the homegrown music found on Garageband.com, another Partovi brother music start-up. But it really hit its stride with the launch of Facebook’s open developer platform in the spring of 2007. Since then it’s become one Facebook’s most popular apps, with more than 5.4 million active monthly users.

That hasn’t translated into huge revenue: The company hasn’t expended much effort trying to sell advertising on Facebook, which is a challenging environment to begin with. And while it generates referral fees when it sends concertgoers to Ticketmaster, those sales haven’t been significant enough to register on the company’s SEC filings so far.

Now Facebook is looking to create its own music service, and it’s conceivable that iLike could step in and take on that role for the company. One big problem: Facebook wants to provide users with a service that gives them the ability to listen to songs in their entirety, à la MySpace Music. But Facebook doesn’t actually have licenses with the big labels that allow it do that. Instead, it provides users with 30-second clips.

All Things Digital’s Kara Swisher visited with Hadi Partovi this summer; below the two talk about iLike’s history and ambitions.

]]> http://mediamemo.allthingsd.com/20081124/web-2o-music-pioneer-ilike-looking-for-buyers/feed/ 3 http://mediamemo.allthingsd.com/20081031/would-you-pay-162-a-year-for-all-the-music-you-can-eat/ http://mediamemo.allthingsd.com/20081031/would-you-pay-162-a-year-for-all-the-music-you-can-eat/#comments Fri, 31 Oct 2008 16:16:02 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=381 That’s the offer, sort of, being made by something called Datz Music Lounge.

The details, from MusicWeek (via Coolfer): You give the company 100 British pounds, and for the next year you can download all the music you want. And because you’re downloading the files in the unencrypted MP3 format, they are yours to keep, and yours to do whatever you want with: Play them on any Apple (AAPL) iPod or iPhone, make copies, burn them to CDs, etc.

Are there catches? Of course: The offer is only available to U.K. residents, who have to use a special USB dongle to make the Datz software work, and it only works on PCs running Microsoft’s (MSFT) Windows, for now. Most crucially, the company only has music from two of the big four music labels–EMI and Warner Music Group (WMG)–and it doesn’t even have all of those companies’ new releases, but a “wide selection of new music released in 2009.”

But play along, for just a minute. Say Datz does end up striking deals with Sony (SNE) and Universal Music Group (and the other big indies), and does end up getting most of the majors’ catalogs. And say Datz is still able to keep the price point about the same: Something in the $15 a month range for unlimited music to own. Could that work, from both a consumer and industry perspective?

Yes. It could.

That’s around the same price point as music subscription services offered by RealNetworks’ (RNWK) Rhapsody and Napster’s (NAPS)/Best Buy’s (BBY) Napster.com. The big difference: Those services only give you access to music, not ownership. And while I’m not hung up on owning music as long as I can get what I want when I want, I’m in the minority on this one.

But if you could hang on to your music–and not have to worry about what format you’re using, since MP3s will work on all formats–then that seems like a compelling offer. The thought of shelling out $162 in advance will likely give people pause, but presumably Datz could figure out a way to extract the payments, à la the mobile carriers, over a one-year period.

Meanwhile, $162 a year is much, much more than most people were ever spending on CDs, even during the format’s boom years. And those, obviously, are long gone. Today the industry would be pleased if the average consumer spent $20 a year on music, no matter what format it’s in.

And yes, we know what many of you are going to say: Why pay for music at all when I can steal whatever I want? Or the faux-sophisticated alternate version: Music should be free! Because it can be replicated for no marginal cost!

Well, can’t argue with that–unless you’re in favor of compensating people who create intellectual property for their work. And I’m one of those old-fashioned types who still thinks that’s a good idea. Hope Datz can pull this off.

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