My thoughts on on-demand streaming

I generally don’t write much about the sector anymore (too busy trying to make 8tracks work while paying the bills), but I thought worth re-posting my response to The Key to Making Free Music Services Work here.

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Keep in mind that the largest category of music service today is — by far — ad-supported radio, which generates ~$39bn in revs globally, about TWICE that thrown off by recorded music.

On-demand streaming at today’s royalty rates ($.005/stream at the low end) requires direct consumer payment to be sustainable. As Pandora has shown, an internet radio service taking the compulsory license can, despite rates that are still really expensive ($.001/stream), achieve profitability.

Fundamentally — and as Jobs has noted in the past — music is different from video content in that its utility continues over time; as such, it lends itself to an ownership model. Cable TV works just fine as a subscription b/c you don’t have much need to “save” the programming.

While I think music acquired illegally (P2P, iPod-swapping, CD-burning) will likely always remain the largest component of the market, and internet radio may well take over from iTMS and other a la carte download services to become the second-largest category over time, an on-demand subscription could gain some traction if it also incorporates downloads at a reasonable price/track, e.g. either eMusic incorporates something like Rhapsody, or vice-versa.