Universal Music Group To Offer iTunes Competitor

Today, BusinessWeek has reported that Universal Music Group, the largest record label in the world, is in the process of developing a digital music service that will compete with Apple's iTunes.

What seems most interesting about this news is the fact that Universal is trying to convince other major record labels to get on board. “Morris has already enlisted Sony BMG Music Entertainment as a potential partner and is talking to Warner Music Group .”

Total Music, as the service is rumored to have been named, would also implement an innovative new subscription model that attempts to save consumers money. Basically, the cost of the service would be added to the price paid for a music playing device. If hardware makers and cell carriers were to agree to absorb this cost into hardware prices, then consumers would get a device with unlimited music access in what has been described as an “all-you-can-eat” service.

“Universal is eyeing a $5/month fee for the service, under the assumption that the average lifetime of a music player is about 18 months,” as the article states. “In theory, access to Total Music would thereby add $90 to the cost of a digital music player?however, users would have all-they-can-eat subscription access to any music on the service for as long as they owned the player.”

The idea is great, but as Silicon Alley Insider notes, it should have been introduced years ago, and it will be a tough uphill battle to turn the service into one where all parties are fairly compensated.

“Figuring out how to compensate the various labels, publishers, artists for subscription revenues is a real headache,” said Peter Kafka. “UMG is proposing that the ISP/carrier/device maker who signs on would pay a $5 monthly fee — but that only clears the label's fees. Someone has to get that endless stream of music to your phone, or device, or whatever, and the bandwidth costs will be significant.”

Even though Apple comes out to be the biggest profit gainer for iTunes, I can't see too many labels ending their iTunes contracts (as Universal did) to test out a new service that may or may not succeed. With 70% of the digital music market buying their music from iTunes, sales are almost guaranteed.

Shortly after cutting of ties with Apple, Universal began to experiment with selling DRM-free music through various other digital subscription services, but this announcement only further solidifies Matt Buchanan's observation about the risky move:

“Reading between the lines, it seems clear that what's really being tested isn't DRM-free downloads, it's the non-iTunes market?is it possible to really move digital music without the iTunes/iPod machine??and Universal's ability to flex its atrophying muscles.”

Although testing out other services may have given Universal Music Group some insight into what revenue is like without iTunes, it does not compare (at least in my eyes) to offering the same media in a completely new service. Total Music will have to start from scratch, with no users, while Rhapsody and UMG's other test grounds have already been available for public use. Hopefully this will, at the least, mean no DRM restriction for Total Music.

It will be interesting to see how well the intentions of Total Music and its unique subscription model are accepted. Would you pay an extra $90 for an MP3 player if it meant no music download costs?

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