@ CTIA: RealNetwork’s Glaser Sees Unlimited Data Plans Coming With Music

imageRealNetwork’s CEO Rob Glaser, who has long-advocated for DRM-free music, is now suggesting to turn the music industry on its head once again — this time using mobile. Over breakfast yesterday at CTIA, Glaser explained the music industry should move away from charging 99 cents a song to a business model based on a common mobile metric: average revenue per user, or ARPU. Yesterday, RealNetworks (NSDQ: RNWK) launched a new service based on that concept with Vodafone (NYSE: VOD) Spain. For 12 euros a month, users not only get an unlimited data plan, but also an all-you-can-eat subscription streaming music service and a DRM-free tethered music store.

All four record labels are on board. What’s interesting is that the 12 euros is the normal price of a data plan, so users are essentially getting music for free — which the carriers like because it will drive data plan adoption. After an introductory period, the price will go up to 16 euros, but it will become the standard data plan that Vodafone pitches with the option of buying a lesser plan — without music — for 12 euros, Glaser said. “Long-term they will make more money…We’ll make it up in volume.”

He said when you sell tracks one at a time, there’s extreme price sensitivity and piracy is a problem. Glaser: “There’s opportunities in mobile. Look at the Kindle. There’s a new class of content that’s free on the Internet, but that people are willing to pay for on the Kindle.” He compared the bundling music with a data plan to Nokia’s Comes With Music, which includes unlimited downloads with a phone for a year. But he said “the problem is that it is too expensive and too upfront.” Consumers might balk at paying 50 euros more at the register for a phone with music, but 4 euros a month is less jarring, especially when it’s packaged with a device that doesn’t cost anymore.

Glaser breaks down the economics of music ARPU after the jump….

Glaser explained how ARPU breaks down for the music industry:

— The U.S. music industry is a $8 billion a year business.
— There’s 300 million people in the U.S.
— That’s about $25 a year per person, which works out to $2 a month at retail.
— The additional cost of the data plan is divided between the carriers, labels, and RealNetworks.

RealNetworks has been offering services like this in Korea for some time, and now he believes that Europe will be the gateway to the U.S. “I’m not sure if it will happen this year or next year, but it will come to the U.S. Moving away from DRM took a year before the labels were on board philosophically. Bundles are coming. The number of people who get access to music that way will be the dominate way.”

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