This sounds similar to what Nokia, Omnifone and some others are working on in Europe: giving away music for free to users, and the handset/service providers pay the premium, only in Apple’s (NSDQ: AAPL) case the premium would be passed onto consumers. In easier language, also called subscription services…so much for the “a radical new business model.”
The FT story says Nokia (NYSE: NOK) is offering almost $80 per handset to music labels, divided according to their market share, to subsidize the service for users…and giving it to users for free. However, Apple has so far offered only about $20 per device, the story quotes sources and labels are balking at the lowball offer. There could be two variation of the business model, the FT story says: Subscriptions, which would work only for its iPhone devices, where it has a monthly billing relationship with customers, and a bundled-in model (markup on these devices) would work with iPhones and with iPods. Presuming that each of these would have different compensation models for labels.
The subscription service may allow users to keep up to 40 or 50 tracks a year, which they would retain even if they changed their device or their subscription lapses, the story says. Still early days, it seems.