The Mossberg Report
Rent vs. Own
When you think of legal music downloading on the Internet, you naturally think of Apple Computer’s iTunes Music Store. The first successful legal music service to offer the catalogs of the major labels, iTunes has roughly an 80 percent share of the legal market, according to Apple. It offers 1.5 million tunes, about 50 percent more than most competitors, and has sold a staggering 500 million downloaded songs, vastly more than anyone else.
There are three main reasons for the success of iTunes. First, it is tightly tied to the iPod, Apple’s wildly popular portable music player. The only legal downloads of major record label songs that the iPod can play are those sold by iTunes. Second, it is well-designed, works identically on the Macintosh and Windows PCs, and is easy to use. Third, its restrictions on the use of downloads are comparatively liberal: You can copy each purchased song to up to five computers and to an unlimited number of iPods and burned CDs.
For these reasons, nobody else has been able to gain any traction in the legal market by copying Apple’s model, and that includes companies as formidable as Microsoft, Sony and Wal-Mart.
So Apple’s music competitors are trying something else: a whole different model for distributing music legally. Led by the reincarnated (legal) version of Napster, by RealNetwork’s Rhapsody service and by Yahoo’s new music service, these companies are hoping to win by renting music to consumers rather than selling it to them.
In the download model championed by Apple, the music service functions like a physical record store. You choose a track, pay 99 cents, and you own it. As long as you abide by the restrictions, which are designed to thwart mass copying by pirates, the song will play anywhere you want to hear it forever, with no further payments required.
However, those 99-cent downloads can mount up fast. If you tried to fill up even the lowest-capacity full-size iPod-which holds 5,000 songs-with tracks purchased from iTunes, it would cost you nearly $5,000. (Granted, most people start with music they already own when loading a new iPod.)
By contrast, the rental services work on a subscription model. You pay, in most cases, $180 a year, or $15 a month, for the right to download as many songs as you want for use on computers and portable players. And the newest rental contender, Yahoo, has slashed those fees to $60 a year, the equivalent of just $5 a month. That means you could fill up a 5,000-song portable player for just $60 a year.
This rental model has attracted a solid audience, but it is nowhere near as popular as iTunes — not even close. That may be because the rental model is far more complicated and restrictive than iTunes, and has several big downsides.
The biggest problem with renting is that if you stop paying your subscription, even for one month, all the songs you’ve ever downloaded — going back years — will become inert and unplayable. Rental song files are rigged with computer code that requires a monthly digital confirmation the renter is continuing to pay. Without that, the song files die.
An iTunes user could pay $500 to acquire 500 individual songs (buying whole albums is somewhat cheaper) over two years, and those songs are always hers and will always play. By contrast, a Yahoo user might download 500 rental songs over two years for just $120 in subscription fees, but the songs will become unplayable unless she pays hundreds or thousands more in subscription fees over many years, even if the fees rise.
Also, the rules for rental songs are more restrictive than for owned downloads such as Apple offers. At Yahoo, for example, you can store each song on only three computers, versus Apple’s five. And you can install each song on only two portable devices, versus an unlimited number at Apple.
Oh, and you can’t burn rental songs to a CD. To get a nonexpiring, CD-burnable, iTunes-type song from a rental service, you have to pony up 79 cents a track over and above your monthly or annual subscription fee.
Furthermore, rental services are far more complicated than iTunes to operate. At the Apple service, every song is a 99-cent download you can own, but at rental services, there are different kinds of songs. Some can be both rented and purchased (for that extra 79 cents each); others can be either rented or bought outright, but not both. Some songs can only be “streamed” — that is, they can be played directly from the Internet, but not downloaded, even on a rental basis. And some can be rented, but not streamed. You get the picture.
Not only do the rental services feature different kinds of songs, but they feature different kinds of customers, with different privileges depending on how much they pay per month or per year. Some rental plans allow you only to stream songs. Others let you download, but only to store the songs on computers, not portable players. The costliest plans — $15 a month at most services, $5 at Yahoo — allow you to stream, download and store the music on both computers and portable players.
Another huge downside of the rental services is that the songs they rent — and even the ones they sell outright for the extra 79 cents — cannot be played on the world’s best and most popular portable player: Apple’s iPod. That’s because the rental-service songs are encoded in a format owned by Microsoft, Apple’s rival, and Microsoft software is required to play them on a portable player. Apple won’t build the necessary Microsoft compatibility into the iPod.
So rental users are stuck with inferior portable players that don’t sell well and thus don’t attract the huge number of accessories available for the iPod. Apple estimates the iPod has about a 75 percent share of the total U.S. portable player market, with the next-highest brand at just 5 percent. There are over 500 accessories sold for the iPod, such as customized car mounts and leather cases, and just a few for other players.
Given all that, why would anyone use a rental service? Well, the rental model is better for people interested in sampling a wide range of music without a large out-of-pocket expense. That might make it attractive to curious but cash-poor students, for example. The rental services also have many more “community” features than iTunes does, features that allow friends and families to share music recommendations, see what others are listening to and discuss music. So they may be better for people who view music as a social activity.
But for most people, it’s no contest: Right now iTunes and the iPod are the better choice in digital music.