I do not own an iPod MP3 player, but I do own a Treo 650 mobile phone which has a built in MP3 player. I subscribed to Napster's "Napster To Go" service. This allows me to download an unlimited number of songs to my Treo. Unlimited?? Isn't that a contradiction to what I said in my previous post? Maybe...maybe not.
Here's how Napster To Go Works
1. I can download unlimited songs to my Treo
2. I can't sell the music
3. I basically can't copy the music to other devices (there are some exceptions)
4. I can't give anyone else my log-in info
5. If I want to burn my downloaded music to a CD I must pay for it (usually $.99)
Is this profitable for Napster? Well, how much did John Cronin spend in purchasing music in the last 12 months? ... Nothing! How about the last 5 years. Probably about $35 to $50. Now that I have easier access to information and the ability to discover music that is similar to the music I am listening to (Napster has filters that help me) I am listening to more music. I am also paying more for music. I am paying more than 10X on an annual basis for music than I did over the last five years.
What is the cost of producing a download versus a CD and its case? What is more profitable? Even though I have "unlimited" downloads, I believe it is more profitable than selling me CD's.
Can you see the power of abundance (downloads) versus scarcity (CD's)? Napster has come up with a pretty powerful business model that takes advantage of abundance and Long Tail economics.