The Wall Street Journal is reporting (registration required) that Microsoft has ceased negotiations with the "Big Four" global music companies, calling into question the software giant’s plans to roll out a music subscription service as part of MSN Music.
According to the paper, discussions broke down Friday over royalty rates: reportedly, labels were demanding fees of $6 to $8 per user, per month. In the past, industry sources have indicated fees at that level are roughly equivalent to those being paid to music labels by other music subscription services (such as Yahoo Music, Rhapsody, and Napster); however, the same sources indicate none of the music subscription services currently have sufficient margins on music sales to generate significant revenue for their operators.
Apple’s iTunes Music Store does not currently offer a subscription service, although its contracts with the four major music distributors extend only through early 2006, and renegotiation stances are already hardening: labels want to be able to charge higher amounts for popular tunes and offer discounts for lower-demand tracks, while Apple’s Steve Jobs has so far remained adamant that iTunes’ pricing be consistent.
Although Microsoft has not announced a music subscription service, Microsoft was negotiating with EMI, Warner Music, Universal Music Group, and Sony BMG, and had been expected to announce a service soon. The Wall Street Journal reports such a subscription service from Microsoft is now on indefinite hold. Microsoft has also recently been in talks with AOL about some joint operations; AOL currently offers a music subscription plan to its subscribers.
