By Robert Menta - 7/27/01
In a sign that consumers are willing to pay for music online if it compels them, MusicMatch has announced that 18,000 users have subscribed to their Radio MX service. This is a fairly warm welcome for a service that has only been functional since May.
"MUSICMATCH Radio MX has surpassed our expectations for membership in just a short time," said Dennis Mudd, CEO of MUSICMATCH, Inc. "It confirms that people are willing to pay for a music service that combines personalized programming with the highest quality audio."
Radio MX is a service targeted to broadband users, streaming personalized radio at a high 128kbps compression ratio. 128kbps is the standard compression for downloaded MP3s, which offer near CD quality, but files sizes are too large to stream in real time for all but broadband users. Most Net radio users pull their music from lower 24 and 56 kbps streams, which are available for free from many sources like Shoutcast.
Of course, Shoutcast offers 128 kbps streams too. In fact, 11 out of their top 20 stations are at 128 kbps and those stations are available for free. That makes MusicMatch's success even more impressive. MusicMatch is different from Shoutcast in that it provides users with a customizable radio stream, similar to services offered by Echo.com, where the user has some control of the music that is played. Shoutcast employs a traditional straight radio stream where Net DJs control the play order.
This is all good news for the major record labels who in the next couple of months will unveil their subscription music services, MusicNet and PressPlay. These services have received heavy criticism as unworkable because of two main issues.
First, the terms from which users can receive and play music do not offer a compelling experience (you rent, not buy the tunes you download). Second, the prices proposed by the services are too high. The service will cost $120 a year for every 75 songs or 6 CDs worth of music a user downloads. That comes out to $20 a CD and after a year you have nothing to show for your money as the files expire unless you re-subscribe for another year.
MusicMatch's Radio MX service costs $4.95 a month or $50 a year, less than half of what the major labels are proposing and without any limits to how much music a user enjoys. MusicMatch has seemingly found a way to transcend the free offerings of competitive services to draw paying customers. The major labels now need to do that if they want to compete successfully against the myriad of free Napster clones.
Red Herring recently released a study, "Online Music Subscription Fees: Relating Operational Costs with Potential Consumer Demand," that concludes 41% of online adults visiting music sites are willing to pay a monthly subscription fee for access to the music they want. The report says an affordable subscription is $5 per month, but that shrinking bandwidth will force online firms to limit functionality to attain profitability at this price range.
MusicMatch claims in their press release that eighty-five percent of all MusicMatch Radio MX customers who use the service report being satisfied or extremely satisfied. If this is true then the CEO's of MusicNet and PressPlay better pay close attention as MusicMatch may have a working model for them. A model that is doing well with the functionality it presently offers, giving a measurable consumer experience to gauge future products and services against.
But then there really is no secret here. The answer is serving the needs and desires of the consumer, not the politics of the record industry.
In related news, Webcaster NetRadio said today it will again face delisting from the Nasdaq SmallCap Market on August 31. The company recently completed a 1-for-4.5 reverse stock in an effort to keep its share price above Nasdaq's $1 minimum bid requirement. With a stock price hovering around $1.25 after the split the company is struggling, which demonstrates the difficulties faced by Online music companies that rely on an advertising model to generate revenues.
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