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New Apple hire foreshadows possible iTunes subscription service

post #1 of 57
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Apple Computer has made a key hire in its quest to deploy a subscription-based iTunes music service, luring Julia Miller from Microsoft's XBox Live team.

At Microsoft, Miller was responsible for the worldwide marketing and sales programs for Xbox Live, the world's first broadband-only online gaming service. Like several of today's emerging online music download services, XBox Live is based on a monthly subscription model.

According to industry insiders, Miller left the Redmond, Wash.-based software giant for Apple in early March. Sources close to Apple later confirmed that Miller had joined the company, but were unable to produce details pertaining to her new job function. In brief conversations with other publications, Miller refused to confirm her previous employer and her present-day title at Apple.

During her two-and-a-half-year stint on Microsofts XBox Live team, Miller was influential in the branding and successful launch of the service. She brings to Apple more than fifteen years of consumer sales and marketing background, including extensive experience with SegaNet, the first online console gaming service.

Rumors have suggested that Apple has been quietly preparing a subscription-based model for its iTunes music store. Insiders expect the company to introduce the service later this year in an effort to compete with similar services from Real Networks and Napster, which offer subscribers access to an unlimited number of music downloads for a small monthly fee. The subscription service would coexist alongside Apple's already successful 99 cents per song model, sources said.

The potential for an iTunes subscription service has been a topic of conversation amongst industry analysts in recent weeks. Many question the economic significance of the subscription model and whether iTunes could benefit from offering consumers a choice in payment structure.

In a research report released to clients last week, Merrill Lynch analyst Steve Milunovich downplayed the potential of the subscription-based sales model, but said he believes Apple can establish a subscription service with few barriers to entry. "Record label executives we spoke with believe the market could be bimodal with the majority people choosing to purchase and a niche for subscription services," the analyst wrote in his report.

Industry insiders AppleInsider spoke to said Apple has nothing to lose by offering a subscription model and is aggressively following a plan that would have the service launched by the end of the year. They believe the only major obstacle at hand is developing a version of FairPlay -- the company's proprietary digital rights management software -- that is compatible with a subscription service. "[Apple] stands to lose more by not offering consumers the choice," said one industry source, who believes Apple could wind up dominating the music download market with a 90% share via a bimodal service offering. The company would also need to ink new licensing agreements with record labels to include songs "rented" under the subscription model.

Given Apple's strong relationship with the labels, insiders say Apple's goal would be to offer 100% of its music catalog through its subscription service. Competitive services are currently able to offer up to two-thirds of their catalogs in their subscription plans because of licensing restrictions. According to sources, Apple would likely be negotiating terms where the labels would receive approximately 5 cents for each song downloaded and transferred to a music device, per month. By comparison, insiders say Apple surrenders approximately 64 cents to the labels on each of the songs it sells for 99 cents. Apple has said that iTunes has been operating at close-to break even, but has showed a slight profit in recent quarters.

Prior to joining Microsoft, Miller spent five years with Pepsi Co., where she led strategic initiatives and major branding campaigns for both Pepsi and Pizza Hut. She also played a major roll in the initial launch strategy of the point-of-sale (POS) technology in the grocery store environment for Citicorp, providing flexible payments and efficient marketing strategies such as the Safeway Preferred Card.
post #2 of 57
I hate to admit it, but I would probably subscribe to such a service, at least for a while.
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post #3 of 57
Quote:
Originally posted by ibook911
I hate to admit it, but I would probably subscribe to such a service, at least for a while.

For some reason it sounds more appealing when it comes from Apple, doesn't it?
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post #4 of 57
tell me napster isn't pooping itself right now as this rumor hits the mill...
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When you're lovers in a dangerous time,
You're made to feel as if your love's a crime.
Nothing worth having comes without some kind of fight.
Gotta kick at the darkness 'til it bleeds daylight.

-...
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post #5 of 57
Well this is still a rumor and there aren't any details, but on the face of it, I'd still prefer to buy music outright.

If Apple does indeed move in this direction, it would be entertaining to hear Steve explain himself out of his declaration that "people don't want rent music".
post #6 of 57
I never had a problem personally with subscription systems. In fact I think the two go hand in hand.

1. Give me the option of filling my iPod with as much music as it will hold.

2. Make the DRM extensible and smart so that if I take a liking to a song I simply purchase it right in the iPod itself and next time I sync my transaction commences and I gain all the rights that I would have had if I had purchased the song anyways.

There is no reason why consumers can't have both.
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post #7 of 57
Aren't you all forgetting something? under many music subscription services, when you stop paying, all your files self destruct.

yeah uh I think I'll stay in control over my computer, thank you very much.
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post #8 of 57
So, when is Apple's new online gaming network opening up?
post #9 of 57
That's why there would be a choice.

I for one would seriously consider not only signing up for a subscription service, but getting a larger iPod next time around to fill it up.
post #10 of 57
Quote:
Originally posted by slughead
Aren't you all forgetting something? under many music subscription services, when you stop paying, all your files self destruct.

yeah uh I think I'll stay in control over my computer, thank you very much.

So? The plusses of subscription services are way too great to ignore. Point: How exactly do you, in its current form, cruise around the iTMS and find music you MIGHT like? There's a lot of music I might look at, but you can't tell squat from 30 second previews, and I have a huge problem spending $10 on an album then to find out its not that good. A killer subscription service would offer mega-huge playlists of various genres, sort of like a whole set of internet radio stations. Add an easy way via iTunes AND the iPod to mark a song as "Hey, add it to my cart to buy". I've bought albums based on one or two songs I've heard that I like (most I like, sometimes I regret).

Another point: Look at all the so-called 'latest and greatest' artists, who, in all sense and purpose, are all basically just another copy of the last 'latest and greatest' artist. The music might be worth listening to for a month or two, but after that, all you want to do is say "Goodbye Vanilla Ice!". But if you buy the album (esp. on the iTMS), you don't want to delete it (you spent all that money), but you don't want to keep it. And then your brain explodes.
post #11 of 57
Quote:
Originally posted by slughead
Aren't you all forgetting something? under many music subscription services, when you stop paying, all your files self destruct.

yeah uh I think I'll stay in control over my computer, thank you very much.

Oh, one more thing. If you stop thinking of a subscription service as some type of music store where its 'your music', and look at it more in the vein of 'satellite radio, but where you control what you hear", then you can get passed the "But I lose all MY music!" whining that everyone does. People make it sound like the end of the world if you let your subscription run out.
post #12 of 57
Quote:
Originally posted by Louzer
There's a lot of music I might look at, but you can't tell squat from 30 second previews, and I have a huge problem spending $10 on an album then to find out its not that good.

I agree with all your points, but I've done alright for myself with 30 second previews. A group either has it or they don't.
post #13 of 57
Quote:
Originally posted by deepkid
Well this is still a rumor and there aren't any details, but on the face of it, I'd still prefer to buy music outright.

If Apple does indeed move in this direction, it would be entertaining to hear Steve explain himself out of his declaration that "people don't want rent music".

Jobs did say in an interview some time ago, in response to being questioned about it, that if it looked like having a subscription service would be a good idea ,that Apple would come out with one.
post #14 of 57
Quote:
Originally posted by AppleInsider
Rumors have suggested that Apple has been quietly preparing a subscription-based model for its iTunes music store.

Resistance to the subscription model is futile. It's just too lucrative to have the steady flow of cash that subscriptions bring. Right now they're the WalMart of online music. They could also be the Blockbuster. There's a reason magazines don't just sell their rags on the news stand. So when I read this, I immediately thought of the rumored movie/video subscription service(s), not music. If they just wanted to add a subscription model for iTunes, they didn't need someone of this caliber. I'm sure they've had the iTunes subscription ready to go for some time now. This is for something bigger...

Look at 2005 so far:

1. Partnership with Sony
2. Mac Mini
3. Quicktime's adoption of the H.264 Codec
4. Untapped market of online movie distribution
5. OSX Tiger's upcoming release
6. Advent of dual core processors
7. IBM selling it's PC business
8. Job's announcement that 2005 will mark a turning point in HD video adoption
9. PS3 and XBox adoption of PPC
10. ...and now the big-name hiring of someone versed in subscription based services.

My prediction is an online movie distribution model that is available via iTunes, PS3 and the XBox2. 2005 will be remembered as the year the traditional PC died as an entertainment system.
post #15 of 57
Quote:
Originally posted by inslider
My prediction is an online movie distribution model that is available via iTunes, PS3 and the XBox2. 2005 will be remembered as the year the traditional PC died as an entertainment system.

i still dont think we'll see a movie download service in 2005, and some of us use computers for work, not entertainment. so 2005 wont be the death of anything except maybe itunes rivals when apple releases a subscription service.
post #16 of 57
Quote:
Originally posted by ipodandimac
i still dont think we'll see a movie download service in 2005, and some of us use computers for work, not entertainment. so 2005 wont be the death of anything except maybe itunes rivals when apple releases a subscription service.

Why else should Steve proclaim 2005 as the year of HD? Because iMovie does HD? What a snooze! We'll see. Did you see the H.264 Codec demo Steve did a while back? It's going to change everything. I'll go so far as to make another predition. In the next few years we will witness the end of the web as a print-like medium. Except for mom and pop websites, it becomes mostly interactive video. It's almost there, anyway.

Just to correct you, I predicted the demise of the PC only as an entertainment system, not for work.

I totally agree on your last statement. Apple's adoption of a subscription service WILL kill it's rivals. Perfect time for a stock split
post #17 of 57
http://macosrumors.com/20050314.php

Just saw this. Consider the source, but put this together with what I'm saying.
post #18 of 57
It would be interesting to see how Apple tie a subscription service into their offerings. How would music downloaded on such a service be used? I'd guess that you wouldn't be able to use them in iMovie, for instance, as that's making a permanent copy of the track. Likewise with burning onto CD. What about streaming to other users?

I had a wacky idea the other day for a subscription service that's used as an improved "preview" of music. It would have to be low cost - much much less than regular subscription services - but you can download as many tracks onto your iPod to give them a whirl. The catch is that they will only stay on there for a month, and you can't put them back on there in subscription form for another few months afterwards. So it's kind of "download it for a month, if you like it then buy it".

It doesn't address the problems I listed above, but it does make the subscription and a la carte services complimentary to one another. Do you think people would go for that? Or am I slowly going insane? Slowly... steadily...

Neil.
a.k.a. Arnel
post #19 of 57
Hmm... I woldn´t buy it, but I´d say it´s better to have both systems integrated. These who a sure of paying 8 bucks a month for music in normal stores wouldn´t mind something like this.
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post #20 of 57
I just do not see the appeal of renting your music. Why would you want to pay $180/yr. to *any* company in order to *keep* your music -- forever?? It's a deal that just gets worse and worse the longer you're involved with it.

I suppose it's smart for Apple to prepare just in case subscription turns out to be the next big thing, but I'd be interested in seeing if there was anything new they could bring to the table. Right now it seems like it's for people just begging to locked-in to some payment plan for very, very long time.
post #21 of 57
The appeal of renting music, is you pay for one month, grab all the songs you want, remove the DRM, & be happy
post #22 of 57
I don't see the appeal in it either, really. But then I tend to listen to a fairly small (compare to some people) collection of music, but I listen to it a lot. I can see it appealing to those that just want to be listening to the latest stuff and that's about it. But you have radio for that.

The other reason it doesn't appeal to me is that I don't want *another* monthly bill. If you start to add up all your regular payments you make to different companies every month, it will shock you. I really don't want to add more onto that.

Neil.
a.k.a. Arnel
post #23 of 57
I think I saw a glimpse of the future when I went to Apple's Quicktime What's On (News and Entertainment) page and viewed the Maverick surfing video. That was fun!
post #24 of 57
Well. 5 cents a song downloaded to the device. Let's assume the average iPod will hold 10,000 songs (as Napster says). If I filled up my iPod with music, Apple would owe the music companies $500 (10,000 * .05). At $15 per month subscription rate, I would need to be a paying customer for 2.7 years for Apple to see a profit on that.

Somehow, no matter how much we wish Apple would do it, I don't see Apple doing anything for a straight loss.

Now movies on the other hand...I'd tend to agree with other posters on that.

[Edit]
Whoops, missed that it was actually 5 cents per song d/l and transfered to a musical device PER MONTH. At $15 per month (assuming that's what it'll be), Apple would be losing money if I download 300+ songs. Even more unrealistic.
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post #25 of 57
Way to go Apple, squish that competition, dont take any guff from the likes of Napster. Destroy, takeover, overcome, humiliate, be the Monopoly that should have been yours in the 80s.
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post #26 of 57
Quote:
Originally posted by geekdreams
For some reason it sounds more appealing when it comes from Apple, doesn't it?

no, I have said all along that subscribtion is the way to go because the encodeing quality is so poor, ITMS is good for feeding ipods so long as they are only used with lower end headphones.

128-bit? for a real music collection? give me a break, FM in my area has more richness than ITMS.
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post #27 of 57
i dont think they could put 100% of their catalog online, specifically their audio book section. this would put audible.com out of business.

people buy music to listen to it over and over, however with books, people rarely listen to them again and again. does napster do audio books in their subscription service?
post #28 of 57
I think this would be great for apple. You all have to remember itunes really does not exist to make a profit. It is a method of selling iPods.

Think about a subscription service that worked with an iPod. That would be fantasic. People would finally be able to walk around with 10,000 songs in there pocket without spending 10,000 dollars.

I believe it would sell a lot of the iPods and that is why Apple will do it.

I did think about what TheFly said. I don't know how it would work like what that article says. That can't be how Napster does it either. There has to be another way they are compensating the labels. With Napster you can put the music on a portable player. Maybe they are banking that most of the people won't with napster and it balances out for them. With Apple that is not really an option since everyone that uses itunes has an iPod and iPods hold a lot more then any of the players that Napster uses.

Maybe there will be a limit to how many songs you can actually put on a player at one time. I know it seems counterproductive to the iPod but I really don't seem them allowing you to get 10,000 songs a month jammed onto an iPod. Even if they paid 1 cent a song it would be to much.
post #29 of 57
Quote:
I think this would be great for apple. You all have to remember itunes really does not exist to make a profit. It is a method of selling iPods.

This is not true. Apple never stated that anything concerneing the lack of profitability of iTunes. Yes they admitted in the beginnning that it wasn't going to make money but iTMS makes a small profit now and Apple certainly wants to improve that.

I'm a little suprised that Napster hasn't been all that forthcoming about what songs are not available through subsription. I heard they are missing 1/3 of their catalog. That's significant if you like many of the groups that have disallowed subscription renting of their music.
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post #30 of 57
I'm going to throw another rumor option into this mix.

Where is this hire's expertise? It's marketing subscription-based, online communities... for the living room. iTunes subscription is certainly not the only thing that this person can market; she can market that idea existing while plugged into your television.

The question becomes -- what will Apple want you to plug into your TV?

So could this lend credence to an iVideo service? Doubt it. But my crazy, way-out-there theory is an AirTunes device with a hard drive that plugs into your TV and has an on-screen iPod-like interface. Maybe it even has an iPod dock in the top of it, like the Mac mini perhaps almost did?

Just some food for thought.
post #31 of 57
Quote:
Originally posted by ibook911
I hate to admit it, but I would probably subscribe to such a service, at least for a while.

Fascinating.. it seemed like yesterday everyone was blasting napster for offering subscriptions and asking us to do the math. Now that apple is apparently ready to do the math, we are all happy about that?. Apple fans are a fascinating bunch. Totally irrational, they defy any mathematical model to explain their behavior and beliefs.
post #32 of 57
Quote:
Originally posted by TheFly
Well. 5 cents a song downloaded to the device. Let's assume the average iPod will hold 10,000 songs (as Napster says). If I filled up my iPod with music, Apple would owe the music companies $500 (10,000 * .05). At $15 per month subscription rate, I would need to be a paying customer for 2.7 years for Apple to see a profit on that.

Somehow, no matter how much we wish Apple would do it, I don't see Apple doing anything for a straight loss.

Now movies on the other hand...I'd tend to agree with other posters on that.

[Edit]
Whoops, missed that it was actually 5 cents per song d/l and transfered to a musical device PER MONTH. At $15 per month (assuming that's what it'll be), Apple would be losing money if I download 300+ songs. Even more unrealistic.

Yes unrealistic if everyone would fill up their ipods with different music every month. Think all you can eat restaurant. If everyone ate like my little brother, any restaurant that offered all you can eat would go out of business. Apple would most likely be banking (and napster and all the other subscription services) on the fact that you will not fill up your entire ipod and even if you do, you own an ipod mini or shuffle, not the version that holds 10,000 songs. I'm sure the figure is based on an average.
Take all the ipods and divide their total capacity by total ipods. I'm sure it's less than 10,000. Secondly, there is sufficient stats available to determine average number of songs subscribed to per month. Sorry to pop your bubble but this makes sense for apple.
post #33 of 57
Quote:
Originally posted by wnurse
Fascinating.. it seemed like yesterday everyone was blasting napster for offering subscriptions and asking us to do the math. Now that apple is apparently ready to do the math, we are all happy about that?. Apple fans are a fascinating bunch. Totally irrational, they defy any mathematical model to explain their behavior and beliefs.

You get a D-.

Troll again.
post #34 of 57
Quote:
Originally posted by inslider
Why else should Steve proclaim 2005 as the year of HD?

because HD is finally becoming mainstream (and by that i mean the Wal-mart folks of the midwest are finally getting HD).
post #35 of 57
Quote:
Originally posted by Louzer
So? The plusses of subscription services are way too great to ignore.

Thou shalt not do things on my computer that I do not want done. This is why I own a mac.

I'd use the subscription service, but only if playfair worked on it

I don't trust Apple, and I will immediately delete iTunes should it integrate a system for deleting my music, even if they tell me it wont.

What if it goes haywire and starts deleting things or malfunctioning like when Apple responded to playfair? What if they up the subscription fee to $500 after I've had it for a year and my hard drives are full of music?

What's stopping them? the fact that they're the all-knowing all-good Apple? That may be good enough for you, but not for me.

Maybe you can treat it like internet radio, but I bought a mac to avoid this kind of thing.

I'm not saying some people wont mind it, I'm not saying it's not a good idea for making money. All I'm saying is I have extreme paranoia when people put "delete" and "without your permission" in the same sentense.
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post #36 of 57
I'm not sure I'd like to rent music. I want to keep it forever without having to pay again and again for it.

Movies and TV shows... that's a very different thing! Let me have the entire season of The Simpsons and Nip/Tuck, The Incredibles movie, last season's SuperBowl, last night's Discovery Channel special ON DEMAND on my laptop or iPod video and I will gladly pay for the subscription service.

That's the next big thing. Who needs dvds, cable and satellite TV and tivo anymore. Let me just find the show I want to see from an online library and that's it.
post #37 of 57
If Apple does offer a music subscription service, I wonder if they would wait until the advent of aacPlus/HE-AAC/whatever they're calling it this week being integrated into QuickTime/iTunes first. Then all those subscription downloads could be provided at a much lower bitrate and still have great sound quality. If they were able to limit subscription downloads to, say, 32 to 64k aacPlus, they could still have CD or near CD quality but save on bandwidth and be able to pack more songs into iPod shuffle. That would also give customers a reason to still buy the song if they wanted the absolute perfect copy (which i think aacPlus at 128k would be).

Ideally, the music subscriptions would be no more than $10 a month, and half off that price (or included free) for .Mac users.

Plus, I think that a subscription service would help Apple sell to the higher education market. Apple might be one online music company with enough market power to negotiate a really good deal with the record labels for a student discount. And Apple's new service would have the #1 feature - compatible with all iPods.
post #38 of 57
Quote:
Originally posted by Tuttle
You get a D-.

Troll again.

Troll? I've probably been a mac user longer than you. I'm too old to troll (that is a game for college kids). I was merely remarking that as a group, we are irrational sometimes. Now all of a sudden, lots of people think subscription is a good idea, power to apple, kick napster butt?. We wonder why the windows crowd laugh at us and this is why. I remember remarking in some thread that subscription makes sense for some people, abeit a niche group and almost getting my head chewed off. You would have thought I had blasphemed against god or something. Regardless, it's always fun and amusing to read the mac forums. I'm glad apple has it's fanatics. Without the fanatics, the company probably would have folded a while ago, now it is strong and growing.

As to my grade, i get an F. I still can't deduce a mathematical equation to explain our group think mentality (you know, whatever steve says today is gospel, whatever he says tomorrow, is gospel too).
post #39 of 57
Quote:
Originally posted by ipodandimac
...and by that i mean the Wal-mart folks of the midwest are finally getting HD).

Hey!!! We get so much shit though. Missouri isn't too bad... Kansas and Minnesota seem to be a few months behind... lol
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post #40 of 57
There are so many things that this hiring could suggest and all the while it could suggest nothing at all.. but take a minute to speculate beyond just Apple making a carbon copy of Napster's subscription model for a second..

The subscription model as an added choice to iTunes users would definetely kill most of the competition and probably give Apple at least and 85%-90% market share as far as online music stores go. This in turn would obviously sell more iPods for what the true purpose and overall goal is of iTunes.. But it will be more costly in the short term to Apple depending on the price they pay to the record companies..

However, with the current market share Apple already has with the iPod's, they hold a lot more negotiating power at the record labels then say, Napster, who has no player per say of its own creation. You also have the potential with new people drawn in by the subscription service of people paying a fee per month (Of which if Apple does do this I expect will be lower than Napster's $15) to find songs they really like and pay 99 cents to keep them forever.

You also have an expanded subscription service you could offer to corporations or tv stations or schools of a higher per month price but businesses who would pay this in order to license the music and use it commercially.. Apple also has much greater ability than any other online music store to negotiate this with record labels and also take their product directly to the business and education market a lot easier than say, Napster, would.

Also think about this person from a "living room" standpoint. We know Apple wants to get into your living room, (Thus the rumours of a TiVo takeover and such) but think about iTunes-on-demand.. a settop box that could be purchased for a modest fee at any electronics store.. or be made available through cable and satellite companies as a component of their DVR service.. a firewire port or a USB port on the back of these boxes and a iTunes download service directly through your TV.. a service thats charged to your cable bill or internet bill or direct to a preset credit card.. think of being able to take your iPod anywhere and lacking a computer be able to plug it directly into any TV and find a cool song you just heard.. think of Hotel chains making these boxes available in their rooms if your on a trip and your laptop dies or you simply don't have one.

The possibilities are endless and we can speculate all day.. but there is alot more coming to your iPod and iTunes in the future than just a carbon copy of Napster
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