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Music Labels Should Work With ISPs To Offer Subscription Services: In response to the Wall Street Journal story today (see below), Raymond J…

Music Labels Should Work With ISPs To Offer Subscription Services: In response to the Wall Street Journal story today (see below), Raymond James’ VP and digital media analyst Phil Leigh has responded with an insightful analysis by suggesting that music labels should work with ISPs to offer value-added music services, instead of fighting individual swappers. Giving the example of Listen.com’s Rhapsody online music subscription service, Leigh says that the labels should offer a music subscription service that the ISPs can sell directly to their subscribers on a revenue sharing basis.

“The service provides content from all five major labels for $10 per month. Since over 90% of Rhapsody users have broadband access, Listen.com might offer the service to broadband ISPs who will then market it directly to their own subscribers. As compensation, Rhapsody could share a portion of the regular $10 monthly fee with the reseller.”

“All parties benefit from such an arrangement. First, it helps Rhapsody because it provides new distribution channels for a little-known service. Despite all the flares an obscure website might shoot up to attract attention to a good product, it will be hard to match the exposure that could be obtained when the service is marketed directly by the ISP. Second, there is little cost to the ISP, which already has an automatic billing relationship to the subscriber. Thus, most of the shared revenue flows directly to the bottom-line. Third, a music subscription service will help the ISP attract additional subscribers. Our research indicates the major reason that dial-up customers fail to pay-up for to high-speed access is because of a lack of compelling content. In our analysis, a music subscription service is likely to be the first major step in providing such content, if the catalogs are broad enough and the use rules relating to CD-burning and portability are relaxed.”

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