Entry of Low-Cost Subscriptions Could Reshape Marketplace

Portable music subscription rates will decrease to grow membership.
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Dallas, TX--Portable music subscription services will have to drop below $10 per month to attract a significant number of MP3 player owners, according to Parks Associates' upcoming report Digital Music and Portable MP3 Players.

The report, which includes data from Parks Associates' multinational consumer study Global Digital Living, finds that 41 percent of MP3 player owners in the U.S. are not willing to spend more than $10 per month for a music service subscription. With comparable service costs presented in local currencies, 62 percent in the U.K. cap their interest at this amount, with 49 percent in France, 52 percent in Germany, and 56 percent in China expressing similar price inhibitions. Furthermore, on average, one-third of the MP3 player owners across these five nations believe these music services should be free.

Given these findings, the entry of low-cost services such as Yahoo! Music could reshape the marketplace. Currently in the U.S., portable music subscriptions from companies including Napster or Rhapsody cost $14.95 per month.

"Companies like Yahoo! can afford to keep the price low because they have other revenue streams to subsidize their music services," said Harry Wang, research analyst at Parks Associates. "Pure-plays like Napster may not be able to lower their prices, but to counter low-cost competition, they can ally with telecom service providers or other broadband carriers to make their music services part of a bundled package. Napster's recent partnership with Bell South is a positive move in this direction."

On a global scale, music service providers need to be cautious when expanding across nations because consumers' price expectations vary from country to country. For instance, MP3 player owners in the U.K. and Germany are more price sensitive than owners in France and the U.S. Companies should always keep such differences in mind when formulating their entry strategies, especially subscription costs, for a particular region, Wang said.

Digital Music and Portable MP3 Players analyzes the current market landscape for digital music and MP3 players, focusing on trends in music services and hardware among evolving technologies and shifting market dynamics. The report also features survey data regarding ownership and usage of MP3 players as well as consumer attitudes toward music services.

The Global Digital Living project is a study of worldwide consumer technology trends and surveyed Internet households in thirteen nations: France, Italy, Spain, Germany, Canada, Taiwan, Japan, India, China, South Korea, Australia, the United Kingdom, and the United States.

For additional information, visit www.parksassociates.com.

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