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Music Subscription Prices Need to Drop

The report, which includes data from Parks Associates’ multinational consumer study Global Digital LivingT, finds that 41% of MP3 player owners in the U.S. are not willing to spend more than $10 per month for a music service subscription. With comparable service costs presented in local currencies, 62% in the U.K. cap their interest at this amount, with 49% in France, 52% in Germany, and 56% in China expressing similar price inhibitions. Furthermore, on average, one-third of the MP3 player owners across these five nations believe these music services should be free.

Given these findings, the entry of low-cost services such as Yahoo! Music could reshape the marketplace. Currently in the U.S., portable music subscriptions from companies including Napster or Rhapsody cost $14.95 per month.

“Companies like Yahoo! can afford to keep the price low because they have other revenue streams to subsidize their music services,” said Harry Wang, research analyst at Parks Associates. “Pure-plays like Napster may not be able to lower their prices, but to counter low-cost competition, they can ally with telecom service providers or other broadband carriers to make their music services part of a bundled package. Napster’s recent partnership with Bell South is a positive move in this direction.”

On a global scale, music service providers need to be cautious when expanding across nations because consumers’ price expectations vary from country to country. For instance, MP3 player owners in the U.K. and Germany are more price sensitive than owners in France and the U.S. Companies should always keep such differences in mind when formulating their entry strategies, especially subscription costs, for a particular region, Wang said.

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