More iTunes alternatives: Can a subscription music service ever succeed?

They've been around for nearly a decade, but subscription music services like Rhapsody and Napster have never taken off, and even Microsoft has struggled with its Zune Pass. What's the problem? I take a closer look at all three services.
Written by Ed Bott, Senior Contributing Editor

If you use a subscription-based music service, you probably love it. You are also, like me, a member of one of the world's smallest cults.

In economic terms, the proposition is an obvious bargain: A music service that allows you to listen to any track or album from a selection of 10 million or more, any time you want, for a low fixed monthly price? In theory, that should be irresistible (I used that exact wordin a 2008 post). And yet the music-loving public has basically snubbed services that offer this capability. I suspect the iTunes Store does more business on a slow day than most of these services do in a year.

Why haven't subscription music services succeeded? What's the likelihood that one will finally break out next year? Will Apple charge into this space and take it over?

In this post, which follows up on my earlier look at alternatives to the iTunes store, I look at the three biggest and most well-established subscription music services in the United States: Rhapsody, Napster, and Microsoft's Zune Pass. (You'll find details about each service on <the next page.)

At least one big name didn't make it to my list: Spotify, which my friends in the UK swear by, is not included because it's unavailable in the United States. I also left out two relatively new services that are still too new for me to do more than watch with interest: MOG and Rdio. I'll make sure they're on the list for the next installment.

(And before you ask: No, Pandora and similar services aren't included here either. My definition of the category includes any service that allows subscribers to log in and play single tracks or complete albums from the service's collection in a web browser or on a supported mobile device. Pandora allows you to influence but not pick your own playlist, and it sets limits on how many tracks you can skip.)

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Why haven't subscription music services taken off? There are several huge hurdles for music consumers to get past. One, obviously, is financial: in this economy, people cringe at the thought of yet another monthly obligation, even if it is "just a few bucks." Logistically, using a subscription music service involves technical hassles like downloading a custom app for mobile access, which adds just enough friction to discourage casual use. Conceptually, a lot of consumers have trouble understanding how the service works and how it differs from iTunes. (Reading through the customer support forums at Rhapsody was a particularly painful experience.)

But there's one objection that trumps them all: None of the current crop of subscription services integrates smoothly with an iPod or iPhone. What good is an "unlimited" music subscription that doesn't follow you outside the house?

With the Zune Pass, Microsoft is trying to route around the iOS hegemony by creating its own hardware ecosystem, with dismal results so far. Meanwhile, the other services have settled on a similar technology template: for listening on a PC or a Mac, a browser-based music catalog with a pop-out player; for mobile use, iPhone, iPod Touch, and Android apps that allow you to stream from a mobile device and save tracks for offline play if the subscription level supports it.

The Rhapsody and Napster mobile apps work, but they keep your subscription tunes in one app, completely separate from the library containing music you own. That means there's no way to create a playlist that mixes tunes from both locations. You have to switch apps.

Page 2: Subscription services at a glance -->

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Three subscription music services at a glance

Here's what you can expect from each of the three services. To make comparisons easier, I've rounded prices to an even dollar amount by adding a penny where needed.


History: This granddaddy of all on-demand music services was founded in 2001and had signed all five big music labels by mid-2002. Rhapsody was acquired by RealNetworks in 2003, which picked up MTV as a partner in 2007 when Microsoft killed off its short-lived, MTV-backed URGE music service, and then absorbed the competing Yahoo! Music Service in 2008. Rhapsody was spun off into an independent company earlier this year. [Note: this paragraph has been revised to correct errors in the company timeline.]

What it costs: Take your pick of two subscription plans. Rhapsody Premier is $10 a month, and Rhapsody Premier Plus is $15 a month. (The Rhapsody-Free service is available only through the Windows-only Rhapsody program.) Although I have an annual plan, I can't find any place for a new Rhapsody subscriber to choose that option.

What you get: Access to a catalog of 10 million songs via the browser player or a Windows-only program that old-timers might remember from its previous incarnation as MusicMatch Jukebox. If you use the Rhapsody software, you can listen to any of 25 music channels and play 25 full-length songs each month without a Premier subscription. The $10 Premier plan allows you to download subscription tracks to a single mobile or portable device for offline use. For $15 a month, the Premier Plus option allows you to download to up to three portable devices. Rhapsody is also available on TiVo and through consumer electronics devices such as Sonos players.


History: The Napster brand is infamous, with its roots in the original peer-to-peer file-sharing service that was finally shut down by court order in 2002. Roxio bought the brand name from a bankruptcy auction, founded a music service in 2003, and created the subscription-based Napster To Go in 2005. The company was acquired by Best Buy in 2008.

What it costs: The core subscription plan costs $5 a month or $50 a year. Adding Mobile Access bumps the price up to $10 a month; you can save 20% by paying $96 up front for a one-year subscription. At an effective price of $8 a month, that makes this the least expensive option that allows tracks to be downloaded to a mobile device.

What you get:Napster claims a selection of "over 11 million songs" in its collection. With a $5-per-month plan, you can play any of those tracks in any browser (on a PC, a Mac, or a mobile device) as long as you have a working Internet connection. The higher-priced Mobile Access add-on lets you download tracks for offline use in an iPhone or Android app. The Napster service is also available on a handful of consumer electronics devices, including Sonos players.

Zune Pass

History: Microsoft's Zune music player debuted more than four years ago. The rest of the Zune ecosystem is only now beginning to click into place. The Zune Marketplace and the Zune Pass subscription service represent at least the third try for Microsoft in digital music over the past decade, after the abortive MSN Music service and the short-lived URGE service.

What it costs: A Zune Pass costs $15 per month. If you pay for 12 months in advance, you get a $30 discount, bringing the total annual cost to $150.

What you get: Using the Zune software (Windows only), a Zune Pass subscriber can play any track in Microsoft's collection on up to three authorized PCs and synchronize tracks with up to three Zune players or Windows Phone 7 devices. You can stream tracks from Zune.net if you sign in using an account that has an active Zune Pass. As of last month, the music portion of the Zune service is also available on an Xbox 360. The $15 monthly dues might seem steep; that amount is offset, at least in part, by 10 download credits that subscribers get in their account at the beginning of each billing period—you have one month to use those credits or lose them. Tracks you download using the monthly credits or as purchases are in DRM-free MP3 formats, unlike subscription tracks, which use Windows Media DRM.

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Does any subscription music service have a future?

Despite their long and bumpy histories, the Rhapsody and Napster services actually have more cause for cautious optimism about their respective futures today than they have in years. That hope hinges on a single word: mobile.

Both services finally delivered apps that allow offline listening on the iOS and Android platforms this year (Rhapsody has a BlackBerry app available for its subscribers today, with Napster promising BlackBerry support soon) (both companies promise Blackberry apps soon). I don't have an Android device to test either service with, but I was able to try the corresponding iOS apps on a pair of iPhones, where they lived up to expectations, offering easy searching, streaming, and downloading.

Ironically, smartphones have finally broken the stranglehold that the iPod previously had on portable music players, and the rise of the Android platform means there's finally a portable device that's truly independent when it comes to music.

For now, that is.

Staking your future on the iOS ecosystem is a sucker's bet. Eventually, probably early next year, Apple is going to add cloud-based features to iTunes on its portable devices, and when that happens, third-party apps will have a hard time competing. Meanwhile, what looks like a clear field on the Android platform could turn into a very inhospitable environment if the rumored Google Music service ever takes off.

And when Spotify finally arrives in the U.S., it will make the competitive landscape even more challenging.

Meanwhile, Microsoft has built its Zune software into the Windows Phone 7 line and into Zune players and into a well-designed PC program that syncs with both of those devices. Using the Zune software, you can mix and match subscription tracks with those you own, even creating auto playlists drawn from both sources. You can sync in either direction, with a USB cable or wirelessly.

The user-experience portion of the Zune software has always been stellar, both on the PC and on portable devices. For basic tasks, such as syncing, it runs rings around the aging iTunes software.

The Zune ecosystem is Windows only. There are no iPhone or Android apps, no Mac client, no connections to any consumer electronics devices except the Xbox 360. For the Zune service to take off, Microsoft has to sell a whole lot of Windows Phones and then convince the owners of those devices that they should add a $15 upcharge to their bill every month. Good luck with that.

And even if you include the 40 million-plus Xbox 360s, the Zune ecosystem is absolutely dwarfed by Apple, which has sold more than 300 million iPods and iPhones and iPads in the past decade.

In an overview of the Zune Pass back in 2008, I wondered whether there's even a market for a standalone music subscription service outside of obsessive music collectors:

To me, the surest sign of success for the new Zune service will be if Steve Job decides, after years of dismissing the idea, to add subscription support to the iTunes store. Rumors of an iTunes Unlimited service appear every few months, but so far at least, they’ve failed to materialize. Can Microsoft make enough of an impact this time to change that approach?

Apparently not.

As I noted earlier this week, it's been more than a year since Apple bought Lala, eventually shutting down its pioneering cloud-based music service a few months later. Maybe Steve Jobs has decided that unfettered access to music isn't a product but rather a feature of something larger—like a premium iTunes subscription that includes season passes to some popular programs currently only available on cable or as a la carte purchases. Microsoft is reportedly looking in the same direction, using the Xbox as its way of infiltrating the living room.

Over the years, I've made no secret of the fact that I love the very idea of subscription-based music services, and I think Microsoft has done an exceptional job with the design and implementation of Zune Pass. But I don't see anything to suggest that any of the current crop of services in this category can break out in 2011. Until Apple shows its hand, these services are still the stuff that cults are made of.

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