With MOG, Will Music Subscription Services Hit a Tipping Point?

MOGMusic blogging site MOG will soon introduce an all-you-can-stream music subscription service, placing it in direct competition with existing services Rhapsody and Napster. Expected to go live by Thanksgiving, the new service — called “All Access” — will provide ad-free streaming from a library of 5 million songs for a monthly fee of $5. An expanded version with a mobile component that includes offline caching will cost more, according to CEO David Hyman, but will still be priced below competing services.

Music subscription services have been historically slow to catch on, with established brands Rhapsody and Napster struggling to reach a million paying customers despite several years of trying. More recently, though, the arrival of mobile applications and the promise of on-demand access to any song, anytime, anywhere has helped stimulate consumer interest in subscriptions — and presented a potential threat to iTunes’ dominance. But while consumers are still experimenting with the model, it’s possible that a tipping point is near, especially with European free-streaming site Spotify expected to unveil a competing model in the U.S. within months as well.

In an interview, Hyman was fairly cagey about what the new service will look like, but confirmed that all four majors and numerous independents are on board, including MOG stakeholders Universal Music Group and Sony Music Entertainment. The $5-per-month price point echoes Hyman’s February 2008 blog post concerning the future of the industry in which he expressed doubt that free ad-supported models would be sustainable but described MOG’s pricing as “as low as we can go toward free.”

MOG’s entry will gives consumers a new option among several comparable, but not identical, models. Best Buy-owned Napster is priced competitively at about $5-$7 monthly depending on commitment, and throws in a handful of MP3 downloads each month, but hasn’t yet introduced a mobile streaming service. RealNetworks’ Rhapsody is the first major U.S. service to provide on-demand mobile streams, at a monthly cost of $15. Spotify offers free desktop streaming supported by ads, but it costs about $15 monthly to extend to the mobile sphere and eliminate the ads, and the service may look different when it arrives in the U.S.

Hyman said the user interface of MOG’s upcoming service is probably its most crucial differentiator, although he declined to give more details about it except to say that it’s entirely browser-based (for now) and will offer higher-quality streams (256Kbps and up). An “innovative free trial” will be conducted soon, he said, and the mobile component will be introduced by year’s end.

MOG has raised $17.5 million to date, with Menlo Ventures leading a recent $5 million round along with Simon Equity Partners and Scott Jones. The company’s existing blog business segment isn’t profitable yet, but if MOG can capitalize on the trend toward streaming by capturing a meaningful share of the subscription market, it won’t have to be.

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