As Zune looms, Napster UK gives away MP3 players (potential doorstops)

As Zune looms, Napster UK gives away MP3 players (potential doorstops)

Summary: Ever hear of ARPU?  Average revenue per unit? That's one of the metrics that cellular phone carriers ("cellcos" for short) use to gauge their success.

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TOPICS: Legal
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Ever hear of ARPU?  Average revenue per unit? That's one of the metrics that cellular phone carriers ("cellcos" for short) use to gauge their success. It's also one of the reasons that the cost of your cell phone was either partially or entirely subsidized. Or, in my case (which was dumb of me), I let the phone company pay me $100 to take a cell phone. Cellcos are usually willing to subsidize the cost of the phones they provision because they'll more than make it up on the service contract you sign with them. And these days, they try to goose the contracts by signing you up for value added services above and beyond basic voice provision. This drives their ARPU up. So, it should come as no surprise that this model of giving away MP3 players (if you can call them that, more on that in a second) in order to sell monthly services (straight-out an ARPU model) is one that music subscription outfits like Napster UK are moving to. According to The Register, Napster vice president Leanne Sharman said:

We see a parallel in the UK between the mobile phone industry and the digital music business. The mobile industry is more mature than ours, but it began as a pay-as-you-go business reliant on handset sales. This is the model for the future of the digital music industry where content is king and MP3 players are disposable.

Boy, talk about yer loaded, but brilliant quotes! (you'll see why in a bit).

Starting September 14, anyone who signs up for at least a three month contract to Napster UK's Napster-to-Go service will get a free 512MB Sandisk Sansa m230 MP3 player.  While I haven't found any indication that it applies to Napster-to-Go in the US, it's only a matter of time before the ARPU model is commonplace with music and video subscription services (a ways back, Sun's CEO Jonathan Schwartz predicted that cars would one day be free under the same basic model. Free cars?). 

Napster's Napster-to-Go service cost about 15 pounds (UK) per month (approximately US$28 at the going rate) and the player isn't worth much.  You can get them dirt cheap on eBay.  More to the value of this offer however is what digital rights management (DRM) technology it relies on and where things are going in that space. In order for Napster to (a) prevent you from giving away the copies of the music you subscribe to and (b) be able to expire your subscription when you stop paying for the service (thereby deleting deactivating any subscription-related music on your portable player), it relies on Microsoft's DRM.

So what's the problem? (besides the fact DRM is involved and DRM is problematic no matter where it comes from).  To date, Microsoft has relied almost exclusively on its PlaysForSure-branded DRM-licensees like Napster (content source), Yahoo (content source), AOL (content source), FYE (content source), iRiver (device maker), Creative (device maker) and Samsung (device maker) to put a stop to Apple's momentum with its content source (the iTunes Music Store) and devices (iPods). Much the same way Microsoft plundered Apple in the PC space by licensing operating systems to PC manufacturers and letting competition between PC manufacturers drive prices down and Microsoft's software into the market, Microsoft was hoping to do the same in the digital entertainment business.  But this time, it hasn't worked against Apple and Microsoft has since decided to switch gears by launching its very Apple-esque Zune brand

Like Apple with its iTunes software, iTunes Music Store (iTMS), and iPods, Microsoft will be the sole source of software (Windows Media Player), the content (Zune Online or something like that) and and the portable playback hardware (Zune branded devices).  And like Apple, if the current reports are true, the Zune brand will eschew full compatibility with the PlaysForSure-ecosystem.  Long term, it's hard to say what the outcome of Microsoft's play will be.  But at the very least, it calls into question the long-term viability of the PlaysForSure ecosystem and all of the vendors that participate in it.  Fighting Apple was hard enough. Now, in addition to Apple, they'll have to do battle with Microsoft too -- their supposed partner in the PlaysForSure gambit. It's for this reason that I wouldn't be so quick to sign up for a PlaysForSure-based service or purchase a PlaysForSure compliant device.

But....

What was it that Sharman said? "MP3 players are disposable."

If you ask me, that's a harbinger of things to come.  Yah. I'd be a bit pissed if you sold me a PlaysForSure-compliant device only to find out that it was going to be of little or no value to me once the PlaysForSure ecosystem begins to whither on the vine thanks to Apple's existing juggernaut and Microsoft's new Zune.  But, if you gave the device to me with the idea that (a) I could throw it away if it one day becomes useless and (b) should that point in time come where I throw it away, you'll replace it with something that works, that's a different story.

This is where I think the existing PlaysForSure-vendors (content sources as well as device manufacturers) will need to head if they are to remain players in the digital content space.  I guess they could stay with Microsoft's DRM if they wanted to. But that's risky considering what Microsoft has already done to them with Zune.  Once burned, twice shy.  In an effort to distance themselves from Microsoft (as well as compete against it), they'll need to sever their ties with Redmond and find a new partner for DRM (perhaps there's life for Sun's Project DReaM after all). In the course of doing so, however, they'll need to make some sort of compatibility guarantee to their customers.  The kind where they say "Hey, customer... don't worry.. if by virtue of some technology decision we make, your MP3 player becomes obsolete, we'll give you a new one."

Finally, bear in mind that usage of the term "MP3 player" is a complete misnomer and, to some extent is confusing and misleading.  I'm sure there are people out there who, when they see the news about Napster's give away, will think that Napster's subscription service is based on MP3-formatted music. Sure, these devices will undoubtedly play files that are in the MP3 format.  But that's not why Napster and other services will be giving them away.  They'll be giving them away with the understanding that you'll be subscribing to a service that explicitly relies on files that are not delivered in the MP3 format (MP3 has no DRM capability built into it). So, when someone is giving away a portable music player for something other than playing back MP3s, should they call it an MP3 player, or should they call it something else?

Topic: Legal

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  • You need to correct your article

    [i]...thereby deleting any subscription-related music on your portable player...[/i]

    That statement is incorrect. An expired license does not result in songs being deleted. You simply get a message saying that you need to re-connect to the subscription service, and prevents the songs from being played. Once you sync up with the service, the license is updated and the songs will play again. You don't have to download the songs again.

    It is quite a bit of misinformation, especially since downloading 4000+ songs all over again would certainly be a big issue for anyone, and this is often brought up as a disadvantage of subscription services. But in fact you don't have to download the songs again, so this is really not an issue.

    It is unfortunate that ZDnet is helping to spread this myth.
    Qbt
    • Fixed.

      Some DRM systems expire content through deletion. As you point out, others may not. I've replaced the word "deleted" with "deactivated." But I'd like to highlight that this change in semantics doesn't change the overall point of the blog post regarding the future of the PlaysForSure ecosystem and how that impacts where you invest today.

      Thanks for the correction.

      db
      dberlind
  • What Happened to CRAP?

    So why hasn't Microsoft's strategy worked this time? Ask Esther
    Dyson because the answer won't come from ZDNet where
    mocking punditry is the order of the day. It's an easy target.

    Meanwhile the declarations of the obvious continue unabated.

    The sad truth is, there are about 5 people at Apple who will
    dictate what the tech echo chamber will talk about for the next 5
    years. They are the folks who are involved in the simple exercise
    of discerning what people want, and striving to provide it.

    It will become painfully obvious with the release of Vista, that
    Microsoft has followed Apple's lead since 1984. Meanwhile, the
    glassy eyed admiration of the Microsoft balance sheet has
    passed for technology reporting. There have been years of
    imitation. Zune is just the latest chapter of an ongoing story.

    Now a new and better DRM is here to rescue the victims of
    Microsoft's embrace? In the face of this potent display of the
    power of the codec over the hardware, the gadget fetish holds
    firm. The notion that hardware matters one whit, is hoplessly
    misguided. The notion that open architecture is open, is
    hoplessly misguided. Still this dance continues. Who can extrude
    the best plastic shape? Who cares!

    While 2 major OEMs beg for Apple to license them OSX, the
    peanut gallery continues to call Apple a "hardware" maker. This
    begins and ends with quality of code but Apple is a hardware
    maker? Please stow it. The small extent to which hardware does
    matter, is the extent to which it integrates with code. So it's
    2006 and Microsoft starts to clue in. Their ability to subsidize
    their hardware and become a loss leader is unprecidented.
    Competing on the terms they dictate, is not an option. they will
    dump untold cash into Zune because it's nothing short of
    controlling interest in all creative content distribution. This
    convicted monopolist will be championed by the same cast of
    characters that feel technology owes them a living.

    They will lose anyway, primarily because they are simply not
    good enough.

    And speaking of not good enough, the CRAP tirades could not
    have been more off target. The eager preparedness to agree to
    EULA's and lease the use of software has been seen as ok while
    the purchase of bits has been branded an affront to civil
    liberties. The hypocracy is miles thick in this Windows sponsored
    boy's club. The spectre of the Apple monopoly raised from
    within the dominion of the Microsoft monopoly, is laughable.
    Harry Bardal
    • Microsoft beat Apple at it's own game.

      So?

      Apple stole the GUI from Xerox PARC -- who never did make any real money off of any of their inventions. So did MIT (X-Windows) and Microsoft (Windows). No NEWS here.

      Microsoft beat Apple at its own game by offering what was for many years an inferior OS product at a more competitive price than Apple. By the time Windows 3.0 shipped, Apple had decided not to compete in the commodity PC marketplace.

      No matter, Apple has carved itself a lucrative little niche and it intends to stay in that Niche. The iTunes/iPod marketplace is decidedly different than the PC marketplace and I don't think that Microsoft knows how to compete there.
      M Wagner
      • Thanks

        Thanks for making my point. As the market begins to cycle, is
        the self congratulation going to continue? To have chosen Apple
        is to have had 6 years of trouble free, virus free, productive
        computing. Meanwhile, admiration of the MS money stack,
        produces more self diluded lock-in victims, who've had to deal
        with a litany of endemic problems.

        But this isn't about technology is it? This isn't about quality
        software engineering either. This is about winning. The criteria
        for winning is bank account size. The ZDnet contributors are
        advocates of this status quo because they lack the imagination
        to do anything but regurgitate it. These pious rants about
        consumer protection come from a largely Microsoft sponsored
        portal that depends on the MS ecosystem for it's quality of life.
        They are advertisements for Microsoft simply because they
        endorse it's use. Even the complaints are nothing but an appeal
        for forbearance and do nothing to suggest switching and
        moving money out of the MS coffers.

        Microsoft is neither an innovator, nor a leader, and this is
        increasingly clear. As the worm begins to turn, our contributors
        are having to position themselves astride these two diverging
        influences and it's getting uncomfortable.

        Zune is just another symptom of a chronic condition.

        Anyone declaring Microsoft a victor is prepared to say the
        contest is over. Nothing culd be more naive.
        Harry Bardal
    • FYI you don't lease your software... and who reads the EULA

      When you click through the clickwrap contract on your software it is not a lease. They don't call it such and it is not such.

      Second most users do not read the terms but rather see clicking the button as an anoyance they must do in order to use the software they bought.

      Ask Joe Consumer;

      1. He will tell you that he does buy his software.

      2. He won't be able to tell you what the clickwrap contract says.

      Finally,

      [url=http://caselaw.lp.findlaw.com/data2/circs/2nd/039303p.pdf ]Krause v. Titleserv Inc., 03-9303 [/url]

      [i]"rejects the idea that Section 117 can be bypassed by the software developer's unilateral characterization of the transaction as a "license." Importantly, the court goes on to hold that the defendant in the case could lawfully exercise the rights of a Section 117 "owner" even though it did not possess formal title to its copy of the program...

      ...We conclude in the absence of other evidence that Titleserv's right, for which it paid substantial sums, to possess and use a copy indefinitely without material restriction, as well as to discard or destroy it at will, gave it sufficient incidents of ownership to make it the owner of the copy for purposes of applying ? 117(a) ...

      ...Thus, a right to make those changes necessary to enable the use for which it was both sold and purchased should be provided. The conversion of a program from one higher-level language to another to facilitate use would fall within this right, as would the right to add features to the program that were not present at the time of rightful acquisition."[/i]

      -And that one is for the RIAA/MPAA/BSA who will claim that Mai was never in dispute....
      Edward Meyers
      • Without Material Restriction

        This is thread drift.

        Tell me what "without material restriction" means to you when it
        comes to resale of your "property" in an open way. Sell one, then
        test the law with the resale of thousands. A software licence
        does not grant the same kind of title that the selling of atoms
        does. Let's not dance around this or presume there are not
        fundamental differences. The ability to copy is where it starts.

        You do nothing but reinforce my point in any event. If advocates
        of CRAP theory have a problem with the restrictions of DRM,
        they should have the same problems with a EULA.

        These legal decisions are not tested until policing is in place to
        prevent piracy. This is only starting to happen now. Please tell
        me how WGA differs from DRM. It is the very same policing
        mechanism that is the prerogative of the licence holder. It is the
        license holders right to alter or expand upon terms to make
        these restrictions work. Not reading the EULA does not free the
        user from being within it's legal restrictions. If you've been given
        grace, legal or otherwise, expect it to change.
        Harry Bardal
  • Good article, David ...

    Microsoft learned its lessons well. Microsoft's actions in this space are right out of the IBM playbook. In fact, Microsoft is one of the few IBM partners who ever came out of an IBM partnership unscathed.

    Most who enter into similar partnerships with Microsoft will likely suffer the same fate that IBM partners typical face. They either get stabbed in the back and left to flounder, or they get bought out!

    I am not surprised that Microsoft is attempting to encroach on the Apple iTunes/iPod juggernaut. In my view, what makes Apple's offering so much more appealing than those PlaysForSure-compliant vendors is their business model.

    If I have to put up with DRM, at least let me BUY my songs. As long as I have a computer running any version of Windows or MacOSX, I can play those songs without paying Apple a monthly fee. And, I can even "burn them" as WAV or MP3 files so I can make them playable on non-Apple devices. This Apple-approved 'workaround' prevents wholesale piracy without locking me out of non-Apple alternatives. Those subscription services mean that I will be paying for PFS-encoded "Song A" forever (or until I decide that I don't ever again want to listen to any "Song A-Z" I ever downloaded from that subsciption-based music download service.)

    Many people make payments on a car during their entire adult life -- as soon as one is 'paid off' they buy another. For those folks, the 'Schwartz Subscription Model' may work but for those of us who prefer to have a choice about where we put our money -- and when, subscription-based services are viewed as a license to steal.

    It seems to me the earliest examples of this subscription service model were the telcos (at least for local service, including a 'free' phone), and then cableTV (we used to get a 'free' cable box too). Today, the cellcos are using essentially the same model.

    The difference that DRM brings to the table is that now they can take away services for which you have already paid!

    Until Congress "gets it" and amends the DMCA we are stuck with DRM. We are not yet stuck with a DRM-based subscription model.
    M Wagner
    • Any version? Not quite

      iTunes only works on;

      *Windows XP or 2000 (latest service packs recommended)
      *Mac OS X 10.3.9 or later

      Windows 9X/ME users and OSX prior to 10.3.9 need not apply.
      Edward Meyers