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The Coming Music Price War
By Eric de Fontenay (Founder & Publisher)
(more articles from this author)
2003-05-28
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When Roxio announced its acquisition of pressplay last week, it brought the digital music equation to a whole new level by doing the impossible: combining file sharing pioneer Napster, at least in name, with its dominance in the media burning market and, the cherry on the pie, a newly developed distribution infrastructure and rights to the major label catalogues. This corporate and technical configuration is exactly what analyst & the media had referred to as digital music's Holy Grail and the broader industry's salvation. And while MusicNet's founders keep to the not-so-old model, others are repositioning themselves to give Roxio/Napster a fight.

RealNetworks, which acquired Listen.com last month, announced the launch of the RHAPSODY music subscription service as part of RealOne, one of the few successful online subscription services. But beyond exploiting the synergies through acquisition and infrastructure/service integration, price competition, nearly absent from the CD market, is poised as a key tool to attract & retain paying customers. Driven by the success of Apple's 99 song formula, Listen.com will be offering burnable tracks for 79 to its RHAPSODY subscribers. Based on its earlier 49 promotion, which saw "a dramatic increase in sign-up rates... and subscribers' burning activity increase by more than 300%," digital music would appear to be quite price elastic (ie., price-sensitive market demand), opening the possibility of a price war for market share among the leading and yet-to-come aspiring OMDs.

Of course, whether this will help stem the popularity of unlicensed file sharing is anyone's guess as Kazaa topples ICQ for the title "King of the Hill" of downloaded software. But at least now, we seem to be on the right track.


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