Online Music Subscriptions Too Pricey

Aug 25, 2005 (04:08 PM EDT)

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Online music subscriptions will have to drop below $10 a month in order to attract a significantly larger number of consumers worldwide, a research firm said Thursday.

Fully 41 percent of people with digital music players in the United States are not willing to pony up more than $10 a month for listening to their favorite tunes, Parks Associates found. With comparable pricing presented in local currencies, the researcher found the same to be true with 62 percent of people in the United Kingdom, 49 percent in France, 52 percent in Germany and 56 percent in China.

Further more, on average, a third of the people owning digital music players in the five nations said they believed that music services should be free.

Given these finding, Yahoo Inc., which offers its subscription service for as low as $60 for an annual subscription, could reshape the market, Park Associates said. Other companies, such as Napster and Real Networks, charge $14.95 a month.

"Companies like Yahoo can afford to keep the price low because they have other revenue streams to subsidize their music services," Parks Associates analyst Harry Wang said in a statement. "Pure-plays like Napster may not be able to lower their prices."

As an alternative, however, companies smaller than Yahoo can counter low-cost competition by allying with broadband providers, such as telecom and cable companies, to make their music services part of a bundle of services. Napster's recent partnership with Bell South is a move in that direction, Park Associates said.