Will MOG be the service that makes streaming subscription take off in the US market? That's the question music industry observers are asking today, as the web-based streaming/recommendation music service unveils its buzzed-about monthly streaming subscription service. One thing's for sure: you can't beat the price. MOG is charging a mere 5 bucks a month for streaming, on-demand access to a huge catalog of music, all legally licensed from record labels and publishers. MOG is also letting potential customers try the service for free, for one hour.
Here at FMC, we've been talking about "cloud"-based music access for years. Two FMC staffers, Kristin Thomson and Casey Rae Hunter, are big into the idea of the "celestial jukebox," where you can legally listen to almost anything you can think of instantly, without owning a physical product or digital audio file. (Kristin and Casey both use Sonos digital speaker systems that serve music wirelessly from their iTunes, streaming subscription service Rhapsody, streams of terrestrial radio stations all over the world and customizable web radio stations like Pandora.)
Overseas, the streaming service that's gotten everyone talking is Spotify — which operates on a "free-with-occasional-audio-ads" basis as well as a premium subscription version. (Check out video of Casey Rae-Hunter interviewing Spotify founder Daniel Ek here.)
In America, there have been several attempts to implement a viable streaming on-demand platform, with everyone from social network giant MySpace to smaller startups like iMeem and Lala getting in on the action. Yet nothing has taken off to the degree that industry experts are comfortable calling the cloud the "future of music." Here are a few reasons why:
1. The math is hard to make profitable. Ask a digital music service representative what the biggest challenge to growing their business is, and they're likely to say licensing costs. It's understandable that labels and publishers would want to get the most value out of their copyrights, particularly when illegal filesharing remains a huge drain on their own resources. (The good news, perhaps, for labels is that there are reports coming out seemingly every day that indicate licensed services are cutting down on piracy.) Still, it's been very difficult to arrive at a price point that consumers — many accustomed to the idea that digital music should be (or seem) free — will respond to. This is why we've seen so much experimentation with streaming music, from ad-supported schemes (which haven't panned out) to super-low pricing tiers like those offered by Lala and MOG. Ultimately, it's a good time to be a music fan, as you currently have more access to more lawful content than at any other point in history. But it remains to be seen whether any of these business models are sustainable.
2. Portability. One of the main reasons the MP3 is still ruling the digital roost is because it works on pretty much any digital device, from your computer to your mobile phone. The future, with more robust Wi-Fi, 3G and 4G broadband likely to become available, may look different. But for now, if you want to listen to cloud music on the go, you have few options. There's apps like Simplify Media that let you stream your iTunes collection to your mobile over a 3G or wireless connection, but those are still MP3s that are stored on your drive. Spotify's mobile app (again, only available in Europe), lets you cache songs, as does the rhapsody-friendly Sansa player (which is not a phone). Rhapsody has a mobile app for the iPhone and Android platforms, but it doesn't currently cache music. Pandora's iPhone app is incredibly popular (and user-friendly), but remember — it's not "on-demand listening," but rather customizable radio. And there are still compatibility issues on the home front: although the aforementioned Sonos home speaker system works with an infinite number of web radio stations, satellite radio and Rhapsody, it's not yet optimized for MOG or Spotify, two services observers think have the best shot at making streaming music "click" with consumers.
3. Artist income. You occasionally hear anonymous label execs gripe about the low returns on streaming services, at least in comparison to the margins they used to enjoy for physical product. But as we pointed out in this recent post about Google's OneBox platform, revenue is surely even less for artists. Although the legal discovery of music is enormously beneficial in terms of exposing people to more stuff, there are concerns that with such low price ceilings, musician royalties could suffer. And it's difficult to determine what an equitable cut for artists would look like when labels often enter joint ventures with digital services for "equity shares."
Don't get us wrong — we love to see all this experimentation in the marketplace. Like we said at the start of the decade when a certain notorious file-sharing program arrived on the scene, "the only alternative to an illegal Napster is a legal one." There's always hope that with net neutrality, better broadband service in more parts of the country and continued innovation, we'll end up with structures that benefit artists and fans alike. And that's a future for music that we can all get behind.