The Netflix way

Most of the other music subscription services that have risen up in Napster's wake are complicated and confining. Signing up for them may be easy: PressPlay, MusicMatch, and Real's RealOne service -- the main players in the music subscription game -- all offer free trials and registration systems that take less than 10 minutes to fill out. Searching for music is relatively simple too; the interfaces for these services seem to have ripped a page right out of the Napster playbook.

But once the searching is done, these services spiral down into a Escheresque labyrinth of complications. All of the services make listening to digital music far more complicated than it needs to be. MusicMatch's Radio MX subscription service and Real's RealOne offering both prohibit burning. Even if you pay top dollar -- about $25 a month -- you can listen to the music only if you use specific software from the appropriate company.

"The files won't work where you want them to work," says Tim Bithoney, the former technology director for Radioactive Media Partners, which streams radio for Barnes and Noble and other sites. "You can't transfer them to a car or Rio. You have to constantly be connected to the Net and you have to use their products."

PressPlay offers slightly more flexibility. Users who sign up now get to burn 10 songs to a CD for $9.95 a month (after three months, the price goes up to $14.95). But not everything is available for burning. Eminem's latest singles are marked with the flame icon that signifies burnability, but others, like Pat Benatar's "You Better Run," can only be streamed and downloaded.

These services also don't let you keep what you've collected. When users stop paying subscription fees, the music expires, becoming unusable. And it's not as if the services are comprehensive. Each service is essentially its own fiefdom. PressPlay, a partnership between Sony and Universal, doesn't yet have rights to music from Warner or BMG. MusicNet, a joint venture between EMI, Warner and BMG, doesn't yet have access to music from Sony and Universal. And EMusic, with its focus on flexibility, has only licensed music from independent labels. Grady says that EMusic wants to stay away from the majors because it's aiming for a niche of hardcore fans. But Cherry Lane Digital's Griffin scoffs at his claim.

"Come on," says Griffin. "They want everything [but] their own corporate owner" -- Vivendi, owner of Universal Music -- "won't give them everything they have."

Last year, Congress looked into the music industry's licensing practices to see whether the labels were exercising illegal monopoly power. But so far, nothing has come of the inquiry and the standoff continues. The only services that contain music from all the major labels are the unauthorized peer-to-peer networks like KaZaA, which the industry is trying to sue out of existence. Meanwhile, the official services remain littered with holes. Without the kind of comprehensiveness and portability that Netflix offers, some argue, they're destined for failure.

"No one's going to use them because of the extra rules they impose and their proprietary formats that won't go onto a CD or MP3 portable," says Glenn Reynolds, a law professor at the University of Tennessee who also leads a techno band called Mobius Dick. "They'll fail like Circuit City's DivX did, not because there's anything wrong with the concept, but because people just won't want to deal with the hassle of managing when their songs 'expire' or which ones they have to delete to make room for the new 'N Sync single."

And yet, despite their flaws, the services can be seen as signs of progress, says Griffin. "Their services are the industry's first toe into the water," he says. "They're saying, OK you can pay one fee to get into the pool and then you can use kind of what you want, kind of how you want to. It's not perfect but it's not per piece economics either. It's a shift."

The labels have moved slowly. "They are engaged in Tarzan economics," Griffin says. "They're clinging to a vine that pays their salaries while they're swinging to the next vine that they don't yet have in hand."

Hastings agrees. "In the music business, none of the subscription services have been particularly compelling because the content owners are afraid of undercutting other channels of revenue," he says.

But Netflix may encourage them to accelerate the process of change. The industry claims to be working as fast as it can. PressPlay expects to have access to music from all the major labels by the end of the year, and Erik Flannigan, vice president of music programming at Real, says that RealOne members will soon be part of a "rent to own" plan.

"The real key is establishing the value of the temporary copy," Flannigan says. "The permanent copy is the underlying royalties minus the physical cost of goods. But if I keep a song for seven months and listen to it 33 times, how much is that worth?"

Flannigan says that Real will have hammered out the details within a few months. Other services might take longer. Figuring out the pricing details can be difficult, says Cary Sherman, president of the Recording Industry Association of America. "It's not as easy as flipping a switch," he says. "This is an evolving process where all the players are constantly working to make the systems more efficient, more cutting-edge and reflective of consumer tastes."

But money is the ultimate motivator. If Netflix continues its rise, some argue, the music industry might move faster. Subscription-based entertainment could proliferate once the industry realizes that "Netflix would be far less successful if it only offered films from half the major studios and if the DVDs it delivered could only be played on certain sorts of players," says Kelly Truelove, an indpendent peer-to-peer analyst. "Comprehensiveness and portability are appreciated as necessary conditions for success."

"In essence," says Griffin, "because we will find that we can't end the anarchy, and because new technology will add to the anarchy, we'll find a way to monetize the anarchy. That's what good business does."

Not every user would be interested in a massive jukebox that comes with a monthly fee. "It can't be a subscription," says Bithoney. "It has to be purchase." But there would seem to be a large and growing contingent of entertainment users who would welcome the change.

"I like looking at my CD collection but a lot of them collect dust," says Andrews. "If there's some kind of subscription playlist that's big enough, if I can have control of the queue, if I can turn things over when I want to, then I'd go for it. If you take away the temporary feeling, I'm in."

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