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Subscription Service for Jukebox Music

November 19, 2011 by

New schools of thought in the music industry suggest that a subscription service is becoming a more attractive option for digital jukebox music. Under a subscription model, operators would still contract with a music provider for access to digital music. However, this model would differ from the current one in that the operator would pay a flat monthly fee per jukebox, instead of paying the music provider as much as 20% of gross revenue per box. For this flat rate the jukebox would have access to all songs on the music service. Music would be streamed via a broadband connection. I like this model and think it would have benefits for our industry.

Subscription services are becoming more popular in the broader consumer digital music market. Napster and Rhapsody are now subscription services. I subscribed to Yahoo!’s Music Unlimited service earlier this year. The service costs $6 a month and requires the Yahoo! Music Jukebox player software. As a subscriber I can listen to any of the 2 million-plus songs in their library, streamed to my computer. I can purchase tracks at a reduced price (typically $0.79, $9.99 for albums) which I keep even if my subscription lapses. Purchased tracks can be transferred to a portable device or burned to a CD. I have found Yahoo!’s catalog deep and rich, covering more genres than I knew even existed. It’s been rare that I haven’t found something I’ve been looking for. (Note: Since this post, Yahoo! has sold their music service to Rhapsody.)

Record labels, weary of slumping CD sales and the erosion of profits, have seen the writing on the wall for the traditional distribution model and seem to be warming to the idea of a subscription model. Non-traditional label insiders contend that a subscription model is the best hope for a crumbling industry. Legendary producer Rick Rubin, famous for reinvigorating Johnny Cash’s career, was recently hired by Sony to co-head Columbia Records and made this assessment of his new employer and the industry in the New York Times:

“Columbia is stuck in the dark ages. I have great confidence that we will have the best record company in the industry, but the reality is, in today’s world, we might have the best dinosaur. Until a new model is agreed upon and rolling, we can be the best at the existing paradigm, but until the paradigm shifts, it’s going to be a declining business. This model is done.”

Rubin went on to say that he believes the subscription model is the only way to save the music business. He contends that if music is easily available at a price of five or six dollars a month, piracy could be drastically reduced.

For the subscription model to be effective in the consumer digital music market, all the record companies will have to agree. The so-called “big four” — Sony BMG, EMI, Universal and Warner — have been in rabid competition for years and haven’t shown much willingness to play nice together. We’ll see how this plays out.

Any of the current subscription services’ music libraries would work for the coin-op industry, but public performance rights would also have to be secured with the performance rights organizations (PROs) — BMI, ASCAP and SESAC. This would be no small task.

The subscription model would benefit the operator by taking the music provider out of the collection process. The operator would be back in an autonomous relationship with the location. He could set play pricing and commission splits. He could even operate machines on a cash-only basis if he so desired. It would also benefit the music provider by creating predictable revenue streams. Even the record labels might be happier, since music would be streamed to the jukebox with no copy remaining on the juke’s hard drive.

Certainly, there are some significant hurdles that need to be cleared before a subscription service is viable for our industry. Encouragingly, an open, third-party music source is the official position of the AMOA. Its jukebox subcommittee is pursuing this option in its ongoing dialog with the PROs.

Check out one of the subscription services and see if you think a version of the model would be good for the coin-op industry. I’d like to hear more opinions on the subject.

Categories: Blog, Jukebox