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When you're as dominant in the online music market as iTunes is, it's hard to see the chinks in its armor, but a number of alternatives have cropped up to take advantage of what some see as gaps in Apple's (Nasdaq: AAPL) service model.
One door that iTunes has left open for its competitors is streaming delivery of music.
"Where iTunes has really fallen short is on subscription and streaming -- the idea that you pay one cost and get everything or you get a lot of music for free streamed to a device," Rob Enderle, president and principal analyst with the Enderle Group, told MacNewsWorld.
"That's helped Slacker," he added, "and to a certain extent it's helped Zune."
Slacker is a free service that streams Internet radio stations to computers and mobile devices. Microsoft's (Nasdaq: MSFT) Zune service costs US$14.99 a month and offers unlimited streaming to Microsoft's media player, as well as other devices, from a library of some 6 million tracks.
Unlimited Buffet Vs. Pay Per Plate
Apple has remained a staunch supporter of a la carte music downloads. The model allows music lovers to buy tracks or albums from the iTunes store and stash them locally on a hard drive or digital music player, like an iPod.
Some competing services, though, stream the content of their music libraries to their members. In this "all you can eat" model, music lovers typically pay a monthly fee and can listen to any track in the library.
Originally, the subscription scheme was also known as the "rent your music" model because members never owned what they listened to, and if their subscription lapsed, so did their listening privileges. That model, though, has been largely supplanted by hybrid services offering a combination of the two approaches.
Mixed Metaphor
If iTunes can be viewed as a big music store online, and streaming services can be looked at as big jukeboxes in the cloud, then hybrid services, like Napster, offer the best of both worlds.
Napster's logo is a cat, which is very appropriate given the number of times the service has rebirthed itself. Although starting exclusively as an all-you-can-eat subscription service, Napster, which is owned by electronics giant Best Buy (NYSE: BBY), offers both streaming and music-to-own services. For $5 to $7 a month, a member gets unlimited streaming from the services library of 7 million tunes and five unprotected music downloads. Downloads above the monthly limit can be purchased for anywhere from 69 cents to $1.29 per track.
"We're firm believers, long-term, in the subscription model," Napster Chief Operating Officer Christopher Allen told MacNewsWorld. "Ten years from now it will be all streaming, everything will be accessed from your phone, from your TV, from your stereo, from your PC.
"This hybrid model really serves as a nice bridge between the MP3s and ownership that consumers still want today and that future of unlimited, on-demand streaming," he added.
Age of Discovery
In addition to streaming, iTunes' competitors have focused on community and discovery as a way to differentiate themselves from what Apple offers.
"Our approach is about a deeper, richer, more immersive community experience where we try to provide lots of context around the music that people are purchasing, as opposed to a straightforward search and browse engine, which iTunes does brilliantly," eMusic Chairman and CEO Danny Stein told MacNewsWorld.
eMusic is a subscription download service. It offers a variety of subscription plans from $11.99 a month for 24 music downloads (about 50 cents a track) to 50 songs for $20.79 a month (about 42 cents a track). It also offers audio book plans -- $9.99 a month for one book or $19.99 a month for two books.
To aid its members in discovery, eMusic supports contributions by human experts. "We have literally hundreds of professional contributors that write a tremendous amount of commentary about bands, labels and songs spread across dozens of genre experts," Stein explained.
"We also have a very vibrant user community that writes reviews and a very active user board community," he added. "It's really a community of passionate music fans."
Discovering music on iTunes is hampered by the a la carte method, contended Tim Anderson, a UK-based freelance journalist and author of the ITwriting blog. "A download model is bad for discovery," he told MacNewsWorld. "The requirement to purchase track by track is a huge obstacle to free discovery."
Ace in the Hole
Participating in communities built around music hubs will grow in importance in the coming years, according to Gartner (NYSE: IT) Media analyst Michael McGuire. "The knock on Apple and iTunes in the last few years was that it wasn't a real social music experience," he told MacNewsWorld. "It was for people who know what they wanted and wanted to buy it and own it."
"Whether or not the social aspect takes the market by force is still to be determined," he noted, "but increasingly, that's an important movement."
"Will it rival, in terms of revenue, iTunes or Amazon (Nasdaq: AMZN) or more importantly, CD revenue?" he asked rhetorically. "That remains to be seen."
"With the growth in social networks and people increasingly wanting to share their tastes in content," he added, "those are going to be some important cards these new services can play against iTunes."
