Is iTunes still the most expensive digital music service? Which iTunes alternative offers the best deal for music lovers? Are digital albums a better deal than CDs? And just how much are you overpaying if you buy by the track instead of by the album?
Those are the questions I set out to answer in this, the third installment of my "iTunes alternatives" series. My previous installments were in April 2009 and April 2010, and I had planned to wait until April of next year to revisit this turf. But so much has happened in the digital music space this year that I just couldn't wait. And there will probably be a whole new set of changes to look at by next April anyway.
The biggest news of the year, as far as I'm concerned, was the shutdown of Lala.com. Apple bought Lala the company in December 2009 and shut down Lala the service a little over seven months ago. That wasn't a surprise. After the purchase, all development of the Lala service had been suspended, its key Music Mover feature was disabled, and the service was closed to new members. The official shutdown was a mercy killing.
Lala's business model was genuinely disruptive, with purchase discounts of about 20% compared to iTunes, the ability for music lovers to purchase streaming rights to an album for 10 cents a track, and a digital locker where you could upload your own digital music files that you could listen to anywhere. And now it's gone.
Apple is obviously planning a cloud connection to iTunes, and I am confident its business model won't be anything like Lala's. (I'll speculate more about what a cloud-connected iTunes store might look like when I discuss the current crop of subscription services.)
With Lala out of the picture, innovation in the digital music space has ground to a halt, and discounts have shrunk. So what does the market look like now?
For more than a month, I've been looking closely at all of the mainstream digital music services available in the United States: the iTunes Store and a handful of online alternatives that sell tracks and albums in digital format. I also compared the prices of digital albums with the prices of the same CD as sold at Amazon.com.
Besides iTunes, I looked at five services in depth: Amazon MP3, Microsoft's Zune Marketplace, Rhapsody, Napster, and eMusic. I also gathered data from 7digital, but its selection had enough holes in it that I couldn't include it in my overall results. (A note of apology upfront to my international readers. This roundup includes only U.S.-based services and is based on prices in the U.S. market. These conclusions aren't relevant if you live outside the U.S.)
Amazon MP3 and eMusic are the only two pure retailers in the bunch, with no subscription options and lots of deals available.
Rhapsody and Napster (the latter owned by Best Buy) are based primarily on a subscription model, which gives you the right to listen to any track in the collection on a PC and (with the right plan) to download copies for offline listening on an Android device or an iPhone. On the sales side, neither service even tries to compete with Apple, offering prices that are typically within a few pennies of the iTunes price.
The Zune Marketplace is also a subscription service, part of Microsoft's "three screens and a cloud" strategy. Its big differentiator is the Zune Pass, which allows subscribers to play any song or album from its collection using a PC, an Xbox 360, or a Windows Phone 7 or Zune HD device. Although you can buy albums from the Zune marketplace, you might end up paying more than you would with iTunes.
I'll have a more detailed look at all three of these subscription services later this week, along with some predictions on how Apple is likely to try to compete with them in a future iteration of iTunes. Today's post is exclusively about the economics of buying songs and albums online.
Selection isn't as big an issue as it was a year or two ago. All of the major digital music services are likely to have more than enough music to keep you happy. Ironically, iTunes was less than perfect on this score compared to its major rivals.
If you buy two albums a month, the chart at the top of this page will tell you, on average, how much you'll spend at each service. But averages can be deceiving, as I explain with a closer look at the details.
Previous installments in this series:
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How much does a digital album really cost, on average?
Conventional wisdom says CDs are expensive, you get a big discount for digital downloads, and a typical album costs $9.99. The reality is very different—and considerably more complicated. (For a full explanation of the methodology I used, see the final page of this post.)
For starters, the average cost of a digital album is not $9.99. It's $12.16 at the iTunes Store, $10.52 at Amazon MP3, and $8.22 for eMusic members, who get additional discounts based on which monthly package they choose. Excluding double-CD packages, the average album at iTunes was $9.85 compared with $8.06 at Amazon and $6.35 at eMusic.
Based on the results of my survey, you can typically save at least 10% over the iTunes price for an album by buying from Amazon MP3 (prices at 7digital are similar). You can save at least 30% by using the quirky (but lovable) eMusic service, which recently expanded its selection and changed its business model dramatically and controversially.
One big surprise in my survey is that iTunes is no longer the most expensive digital music service on a per-album basis. That dubious distinction goes to Microsoft's Zune Marketplace, where album prices were actually higher than those at iTunes for my shopping list. (The cost of individual tracks is nearly identical.) In the Zune software, the Marketplace still uses Microsoft Points instead of currency, which means you have to buy a package of points and have sufficient point balancer in your account before before you can buy anything. If you use a browser window instead of the Zune software, you can buy albums and tracks at Zune.net for the equivalent cash price, with no points required.
If you buy music by the track, you'll pay pretty much the same price at every service except eMusic. At Amazon MP3 and the Zune Marketplace, per-track prices are essentially identical to those of iTunes: $1.29 for roughly a third of the tracks on my list, 99 cents for the rest. If you don't mind pre-paying for a monthly use-it-or-lose-it balance, eMusic is the only money-saving proposition. Half of the 30 tracks I surveyed at eMusic were 49 cents, with the rest split between 79 and 89 cents. In my sample of 30 tracks, that added up to a huge savings of 40% for eMusic.
The biggest surprise of all? Sometimes a CD is a better deal than a digital download. For about 25% of the albums I surveyed, a shiny silver CD in a plastic jewel box was cheaper (and of higher audio quality) than a download of the same album in lossy MP3 or AAC format.
CDs are still outrageously expensive at most brick-and-mortar retail outlets. But online, CD prices have now dropped to levels where they can often compete with digital downloads. For 5 of the 19 albums I surveyed, Amazon offered lower prices on CDs than Apple was charging for the same album as a digital download, typically with free shipping. In three of those examples, the savings equaled $3 or more per album over iTunes. As long as you don't mind waiting for your CD to arrive and then ripping the tracks yourselves, those are some significant savings.
The most extreme example of this price disparity I saw was Bob Dylan's just-released The Witmark Demos, 1962-1964, a sprawling 2-CD set that includes 47 tracks. At iTunes, Amazon MP3, Napster, and 7Digital, it costs $19.99. You can save a buck and get it for $18.99 at Rhapsody, or spend $21.00 worth of Microsoft Points to get it via the Zune Marketplace. But I bought the CD version for $12.71 from Amazon, with free shipping and a bonus CD that includes seven live tracks not available for download. If you bought individual tracks from that album from iTunes or elsewhere, you wouldn't even get a quarter of the way through the collection before you passed that price tag.
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How the other services stack up
Every service I looked at was relatively easy to use for searching, buying, and downloading tracks and albums. Most offer a web interface (iTunes is the noteworthy exception), and both Amazon and eMusic have download utilities to help you transfer your purchases to your iTunes or Windows Media library. All of the files you can buy are in high-bitrate compressed formats—Apple's files AAC-encoded, with MP3s from everyone else.
But that doesn't mean all of these services are created equal. Zune, Rhapsody, and Napster all offer monthly subscriptions, at fees of up to $15, in exchange for which you get the right to listen to anything in that service's collection, in full, as often as you want, on a supported device. I'll take a closer look at all three services in a follow-up post.
Meanwhile, if your goal is to own tracks or albums that you can freely transfer between devices, you have only two money-saving iTunesw alternatives.
The case for iTunes: It's convenient.
If you own an iPod or iPhone or iPad, then you have no choice but to use iTunes (the software) to keep your device up to date. And with your credit-card number on file at iTunes (the store), Apple makes it as easy as possible to click the Buy button on your favorite song or album. When you do, the tracks download straight into your iTunes library, ready to sync with your iPod or iPhone.
You will almost always pay a premium price for this convenience. And you will pay in another way as well: The only way to buy anything from Apple is through the iTunes software, which is slower than a web browser and isn't exactly a model citizen on Windows PCs.
The case for Amazon: Consistently lower prices
Amazon got off to a late start in the digital music business, officially opening its Amazon MP3 store less than three years ago, in January 2008. Today, its selection equals that of iTunes with consistently lower prices.
Of 19 albums available at Amazon MP3 and the iTunes store, Amazon had a lower price on 11 and matched the iTunes price on another 7; iTunes beat the Amazon MP3 price only once. On a per-song basis, there was almost no difference between the two stores, with identical prices on 28 out of 30 tracks.
You don't have to install any extra software to shop at Amazon; all you need is a web browser. Amazon's search capabilities are first rate, and you can easily compare prices for CDs and digital formats—a tactic that can sometimes point out an unexpected bargain. The Amazon downloader utility is extremely lightweight, easy to install, and works equally well with Windows and iTunes libraries.
Amazon offers daily deals and loss leaders that you simply won't find at iTunes. It's not unusual to find a hot new album for $3.99 (or even $1.99) on the day it's released, with the price going up to a normal $7.99 or $9.99 a day or two later. If you are not checking Amazon's price before you buy an album from iTunes, you are throwing money away.
The case for eMusic: Great prices, if you're willing to make a commitment
I have been an eMusic subscriber off and on (mostly on) since 2002. During that time I've watched the company's business model change as its music selection has grown. Last month, it got the biggest infusion of new titles ever and a major change in how its membership model works.
You can't begin shopping at eMusic until you sign up for a membership. (You can sign up for a monthly plan and drop it any time), Membership plans at eMusic start at $11.99 per month and go up to $79.99 per month (there are also quarterly, bi-annual, and annual plans). It used to be that your monthly dues gave you a fixed number of downloads per month. As of last month, you get a dollars-and-cents credit equal to your membership dues plus bonus credits (up to $15 per month) that increase with your dues.
Albums at the new eMusic are variably priced, and consistently at least 30% less than the same title at iTunes. In my survey, eight albums that were priced at $9.99 at iTunes cost $5.88 to $6.99 at eMusic.
The balance in your eMusic account is provided on a "use it or lose it" basis. Credits for a monthly subscription don't roll over to the next month, they get wiped out. When you've used up your allotment for the current month you have to wait until the account refreshes next month. And you can't just top off your account to complete a transaction. You have to purchase a "booster pack" of between $5 and $30—credits are good for 90 days.
My initial reaction to the eMusic changes was skepticism. But after seeing it in operation, I plan to keep my account. If you're a diehard music lover (like me) and you're not put off by the complexity of the membership-based system there's a lot to discover.
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My sample started with 20 full albums, most of them released in 2009 or 2010. The list reflects my musical tastes, with a mix of artists from major labels and indies. I didn't do any poking through bargain bins, nor have I taken into account daily specials such as those that Amazon offers. I surveyed prices in the week before Thanksgiving, to avoid having Black Friday specials skew the results.
I threw out five albums from my original list because either the album or one or more tracks were unavailable from at least one of the outlets (eMusic was missing four albums from my list, and both Rhapsody and iTunes were each missing one album). That left me with 11 single albums and 4 double albums.
To calculate cost per track, I used the two most expensive tracks from each album, on the presumption that the most popular tracks command a premium and are the ones you're most likely to want to download individually. I counted a handful of albums where one track was higher in cost than the rest and thankfully didn't run into any examples of albums where individual tracks were unavailable for download.
A sample size of 15 albums and 30 tracks is obviously not representative of the market at large and inherently has a high margin of error. Regardless, I believe the conclusions are generally accurate and fairly reflect the state of the music market today, based on my use of all these services.
Here, in table form, is a list of the 15 albums and their price at the time I surveyed them for the iTunes store, Amazon (MP3 and CD formats), and eMusic.