Details Confound Register Writer

Andrew Orlowski’s latest article “The iPod’s Achilles Heel? It’s er [sic]…Readers Digest?” manages to be almost completely wrong about the growing business of digital music. Orlowski believes that the subscription model, already an abject failure despite the backing of Real, Sony, and Microsoft under the “PlaysForSure” label, will suddenly be resurrected by Microsoft’s Zune player. However, while this idea is interesting, Orlowski makes the grave mistake of using the success of eMusic as his support, and this is just plain wrong.

eMusic has been a surprise hit among digital music purveyors, second only to iTunes in sales. According to this USA Today article, eMusic accounts for 11% of the market, while Apple seizes nearly 70% (the rest is divvied up among perennial losers Napster, Real, and MSN Music; Sony’s Connect is hidden by a rounding error.) What’s most fascinating about eMusic’s success is not only do they cater to independent bands, but they have managed this success without DRM. And, this is very, very important detail that Orlowski has utterly ignored.

An eMusic customer pays $14.99 a month for 65 downloads for a “Plus” subscription or $19.99 for a “Premium” subscription. Once a song is downloaded it can be played on any device and burned innumerable times. This is completely different from the competing subscription services where songs are locked the minute the subscription ends, and extra charges are assessed to burn the song to a CD or move the file to a portable player.

This is a vital difference, users don’t want to rent their music, they want to own it, and any system that gives them this ability it going to do far better than any current subscription service. Really, eMusic is just a different way of charging for the same bits.

Orlowski also manages to be completely wrong about the economics of digital downloads, he writes:

“iTunes doesn't generate money for anyone except Apple. Broadband providers, PC manufacturers, insurance companies, and the battery-replacement services have all profited in some way from the iPod's success - but no one in the music value chain. Steve Jobs doesn't even leave crumbs on the table.”

That’s why the labels signed a new deal with Apple apparently, they like losing money.

Although, according to this Billboard article (PDF warning), the labels are actually taking 65 cents for every song, meaning that while Apple bears the costs of servers, bandwidth, and the staff necessary to maintain the iTunes site, the music labels merely have to hand over digital content. Really, it seems the labels are getting more than a fair deal, and I think it’s a good thing that not only does Apple and the music labels make money, but the success of the iPod/iTunes/iTunes Store triumvirate has create a micro-economy based on cases, accessories, and even batteries.

Lastly, although eMusic’s CEO David Pakman takes a cheap shot at the iPod, he should realize that the iPod’s massive sales help him as well, because eMusic’s songs work on the iPod just as easily as songs from the iTunes Store. After all, “a rising tide lifts all boats.” Consumers hunting for content can happen upon eMusic and use both services equally, grabbing the unusual from eMusic and that Top 40 ohrwrum from iTunes.