subscription - ReadWriteWeb

Datz Music Lounge: Gimmick or the Future of Digital Music?

Frederic Lardinois — Fri, 31 Oct 2008 11:42:41 -0800

If you live in the U.K. and you have 100 British pounds to spare, you can now subscribe to the Datz Music Lounge, where those 100 pounds can buy you unlimited access to DRM-free MP3s for one year. According to Music Week, Datz features about 2 million tracks from EMI, Warner, Beggars Group, and The Orchard. While the service is encumbered by technical problems like having to use a USB dongle, as well as a relatively limited selection of songs, we can't help but wonder whether this all-you-can-eat plan for DRM-free MP3s points towards the future of the digital music business.

]]>Sponsor

]]> For now, Datz is only available in the U.K. and users will have to buy a boxed retail package with a CD and the USB dongle from either Sainsbury's or Datz's own site. One more negative for the service is that it doesn't have a licensing agreement with either Universal or Sony, leaving it with a relatively limited music selection compared to more traditional subscription services like Rhapsody or Napster.

At about $160 a year, Datz' plan is comparable to most subscription services, though the high upfront cost and limited selection might make quite a few potential subscribers think twice about the value of this new service.

Mark Mulligan from Jupiter Research argues that Datz is a big deal - not because it might become a market leader itself, but because it has laid a licensing groundwork for the rest of the industry.

Indeed, it will be interesting to see if other services will offer similar all-you-can-eat plans in the future and if the music industry as a whole will be willing to go along with this.

At the end of the day, it is good to see yet another new business model for music services and that at least some of the labels are willing to experiment with new licensing models as well.

]]>Discuss

Vimeo's Newest Feature: More Predictable Revenue Stream

Rick Turoczy — Thu, 16 Oct 2008 21:15:39 -0800

As more and more Web users gain access to broadband connections, the ability to consume high-definition video becomes an option for more people. But where are they going to access that content?

If a loyal user base - and USA Today - are to be believed, few user-generated video sites compare with Vimeo, a small but well-loved online video site with some of the best HD capabilities around. And after today, Vimeo is highly likely to be serving up more of that HD content, thanks to the release of Vimeo Plus.

]]>Sponsor

]]> With the purchase of a Vimeo Plus subscription at $59.95 per year, users gain access to a slew of features and benefits, like an increased upload limit - up 300% from 500 MB per week to 2 GB per week. no more banner ads, the ability to customize the video player, and access to more of the social features the service offers.

But one feature stands out for anyone who has ever sat drumming his or her fingers while waiting for a video service to finish the encoding process: Buying Vimeo Plus entitles users to priority uploading. That alone may be worth $5 a month.

For all the new found freedom a paying user gets, the service still has some limits. NewTeeVee highlights some of the intricacies of the small print for Vimeo Plus, including the fact that - even with a Plus account - "HD embeds are limited to 1,000 plays." Going over that limit results in a reduction in definition until the user purchases more HD plays.

It's not just the paying customers that have limits. The free users have had some new limits added as well. Vimeo point out that "you'll only be able to upload one HD video per week. You will also be limited to creating 1 Group, 1 Channel and 3 Albums."

All in all, the trade-offs seem fair and aren't like to adversely impact users' opinions of Vimeo in the long run.

The Real Question: Can Vimeo Convert Loyal Users into Paying Customers?

Vimeo's user base is active and loyal - but relatively small. In these uneasy times for the online ad world, Vimeo's decision to trade unpredictable ad revenue for subscription revenue is shrewd. Why? Aside from the likelihood of higher revenues, the subscription base will give Vimeo a better chance of predicting its cash flow month-to-month. The higher-ups - especially when they're higher-ups like Barry Diller - tend to appreciate that kind of predictability.

But for all the predictability, will anyone bite? It's not unheard of for a loyal user base on a free service to translate into paying customers for a fee service - especially if the cost is reasonable. Flickr Pro immediately jumps to mind. With the nominal cost of Vimeo Plus, Vimeo has the potential to see that kind of conversion, as well.

Will the latest features and benefits cause those loyal users to step up? We'll have to watch - in HD - and see.

]]>Discuss

Best Buy Acquires Napster: But Why?

Frederic Lardinois — Mon, 15 Sep 2008 09:24:21 -0800

Electronics retailer Best Buy today announced that it plans to acquire music retailer Napster for $121 Million. According to the Wall Street Journal, the deal values Napster at $2.65 a share, almost double its closing price on Friday. However, while Napster was a major success story when its name was still synonymous with illegal P2P file sharing, it never quite caught on with users after it turned into a legitimate business. Judging from the press release, Best Buy is mostly interested in Napster's mobile business, where, with the help of Best Buy's marketing power, the company might just be able to create a profitable niche for itself.

]]>Sponsor

]]> Users never really warmed up to music subscription services. Napster, for example, only had about 700.000 subscribers and, according to a recent report by Jupiter Research, its subscriber numbers have actually been falling. Most consumers still prefer to own their music, even though subscription services, with their all-you-can-eat plans, often offer a good value for those who tend to have a high turnover in their music collection. In May, Napster started selling DRM-free MP3s, but judging from this sudden sale of the company, few users must have chosen Napster over Amazon's MP3 store or Apple's iTunes.

It's All About Mobile

Best Buy must think that it can push Napster to be a profitable part of its company, but over the last few years, the company never turned a profit. Best Buy, of course, does have a considerable amount of marketing power both in its ubiquitous big-box stores, as well as through TV and print advertising. Judging from the wording of the press release, it seems Best Buy is mostly interested in Napster's mobile business. In the mobile business, Apple doesn't have the dominant market position it has in the regular MP3 player market, so by positioning Napster there, Best Buy might be able to carve out a lucrative niche for the service.

Bundles

Chances are that Best Buy will start bundling Napster with anything from toaster ovens to overpriced Monster cables in the coming months. The holiday season, after all, is right around the corner and if Best Buy still wants to get some value out of the acquisition this year, they will have to act fast.

]]>Discuss

11 Things Startups Should Know About Enterprise 2.0

Bernard Lunn — Thu, 21 Aug 2008 01:40:00 -0800

Yesterday we wrote about Enterprise 2.0 from the point of view of the Enterprise, the buyer. The conclusion was that the impact of social media on the Enterprise was very big, addressing the very "nature of the firm". This post looks at Enterprise 2.0 from the point of view of the vendor, specifically startups. This is a 30,000 foot view, but we aim to get past the hype to insights you can use in your startup. Further posts in our recently launched Enterprise Chanel will drill into specific market segments, companies and technologies.

]]>Sponsor

]]>

Subscriptions are the best revenue you can get. Subscription revenue is more recession proof than advertising and more predictable than traditional enterprise software licensing. As long as you don't mess up, you will have a low churn rate. Then your new subscriptions drive your revenue growth

It is much easier to get subscriptions from a business than from consumers. Sure we all love the idea of consumer subscriptions, the potential is enormous. But do this reality check. How many subscriptions do you pay for? How many current subscription costs would you love to eliminate or drastically reduce? What would your really (no, really) agree to pay for every month? We are in a serious consumer recession in the developed markets that may last a while. What was always hard, just got an awful lot harder. Selling to business is much easier, if you focus hard on the next rule.

The other 80/20 rule. 80% of enterprise IT budgets just "keep the lights on". Only 20% goes to new stuff. I learned this in the technology nuclear winter in 2002, when a 20% cut in IT budgets meant that no (zero, nada) new projects were approved. If you can show how to reduce that 80%, you get a better shot at the 20%. That 80% market is a replacement market. You need to know what cost you are replacing. The incumbents are looking at the 20% budget as well and they have the inside track. You have to attack the 80% to make it big.

"Parallel replacement" is new. The old enterprise replacement market was based on capital expenditure write offs. If the client bought a $1m license fee over 5 years ago, you had a shot at selling another license fee for something "better, faster, cheaper". In the new enterprise world of SAAS and open source, upfront license fees are the exception rather than the rule. Buyers prefer to hold onto the old stuff a bit longer until they can see either an open source or SAAS alternative. Replacement is always very risky, leaving incumbents in control and startups banging outside the door in frustration. So you need to show that you can run in parallel with the existing solution for a period until you are established enough to be a viable, safe replacement. Step 1 is run in parallel, step 2 is replace. This is what Google Apps and Zoho are doing to Microsoft office (I use both Google Apps and MS Office. Even though I use Office less frequently I own a license, so why delete it? When I get a new laptop I will decide whether I need to buy Office). To play this new parallel replacement game you need to a) offer a free entry point (the Freemium strategy) so you get traction with a low cost of sale and b) you need to show one very clear new value proposition that will tap into that 20% budget for new stuff.

Have one simple new "blue ocean" value proposition that any business user can understand. You need this to access the 20% of budget going to new stuff. Being "cloudy" is not a value proposition, it is simple]y a way to deliver your value proposition. The incumbent can always launch their SAAS equivalent. Your free entry level just gets you through the door so that you get a chance to upsell to your subscription; free is not a value proposition. You have to show how you will do something really basic such as either a) increase revenue with a low cost of sale or, b) reduce cost on an existing process or c) create strategic sustainable advantage in measurable ways. Most likely you will do this by enabling better collaboration/communication, both within the enterprise but also, more critically, outside the firewall to the "extended enterprise". For a startup, this has to be "blue ocean", a market that has not yet been defined by the incumbents. By its very nature, this means the market size will be very hard to define and there will almost certainly not be recognized external authority that has defined the market size. Smart VC understand that Blue Ocean strategy and precise market size estimates seldom go together.

SaaS ++ means that Open Source is no longer a problem. Open Source has been great for buyers but it has also taken the entry level market away in most segments and that trend shows no sign of letting up. That is bad news for a startup looking to sell traditional software with a "better, faster, cheaper plus we try harder" replacement pitch. You cannot undersell Open Source. That has forced many ventures with great software and strong teams into the dead-pool. With a "SAAS ++" offering, you can use Open Source as the base, add a bit of new code and bundle it all up with hardware and service in a monthly fee. Unless buyers really want to do all that in-house, using their dwindling internal IT staff, you have a shot at it. SAAS alone however is not a barrier to entry. Anybody can replicate it. Which means (smart) VC will/should pass. You need the "++" bit as well. That is likely to be something to do with viral, communications and network effects that create a growing user base and proprietary data coming from that base. That is the "magic sauce".

You need to become a very good financial and data modeler. You will need some old-fashioned face to face relationship selling to get large enterprises to understand your solution, so that the "powers that be" encourage adoption and do not seek to block it. But the business will grow one subscriber at a time and users convert to subscribers one click at a time. Modeling becomes a core competency. Modeling the costs of all the SaaS components (R&D, hardware, infrastructure software, software maintenance, system and data maintenance). Modeling the cost of subscriber acquisition using SEO, SEM, social networking, conversion from free to paid and inside telephone sales in a highly efficient funnel process that delivers the right $ per subscriber. Modeling the revenue growth with multiple what if variable assumptions. Modeling the ROI for your clients at various levels of adoption.

Most external market size projections do not help your business plan. Forrester Research reports that Enterprise 2.0 will be a $4.6 billion market by 2013. That is not nearly granular enough for a real business plan. You are not really in the Enterprise 2.0 market. Saying "we will get 1% of the $4.6 billion Enterprise 2.0" market is totally meaningless and will simply get you shown the door in the VC office. You are in the market of solving a specific business problem, for a specific type of customer, competing against specific incumbents and startups. That is how you need to build a market size, from the bottom up. This is particularly true for "blue ocean" strategies where the market has not been defined by an incumbent. Building the real world, bottom up market size takes real hard work and detailed market knowledge. Look for a small enough market where you can get 20% and take that to 50% share and then leverage that market to get 10% in another market. Rinse and repeat. It is an old formula, but it works.

You need VC, they need you but there is a disconnect. Since 2000, most VC have sent any business plan with the word "enterprise" straight to the trash. With good reason. During the nuclear winter, the enterprise IT market was dead as a dodo. Then the big incumbents got into the consolidation game and it looked like you would count enterprise IT vendors on the fingers of one hand. The cost of entry was high, needing expensive sales teams upfront and the revenue was lumpy and unpredictable. Yech. Better to back a few inexpensive developers building a free service that some big vendor would buy and figure out how to monetize. That was a great game for a while. Most VC now view it as in its final innings at best. There is a shortage of buyers, no IPO market, we are in a cyclical downturn for advertising and in a major funk figuring out how social media can be funded by advertising. So VC need Enterprise 2.0. But they have missed the early winners. Very few of the current Enterprise 2.0 startups are venture backed. This is a disconnect. The early players always find it easier to bootstrap than later vendors. Today you need capital to fund the ramp-up and to build distance from competitors as the Enterprise 2.0 market moves from "below the radar" to "early hype" phase, thus dragging more entrants into every category.

Vertical is not the same as Horizontal. Classic Web 2.0 services such as Delicious, YouTube and Skype are geared at mass markets. Anything that is more niche has tended to be called "vertical". That is confusing. Vertical means a specific industry such as banking, healthcare or manufacturing and sub-sets of those industries. Horizontal (applying to any industry) should mean a set of common and linked features used by a specific type of person in the company (e.g. accounts payable by Finance, CRM by Sales and so on). The general rule of thumb has been for vertical ventures to be bootstrapped and eventually rolled up into larger entities. VC tend to view vertical as too limited. Horizontal on the other hand is big enough.

Know how to deal with secrecy, structure and control needs. Social Media is about being open, loose, unstructured, informal and fun; no ties allowed. Enterprises are about secrecy, structure and control. Ties show that you are serious and fun is for after work. The ties and fun bit is just style. But secrecy, structure and control is real. If you threaten those, many forces within the enterprise will shut you out. It will be like the red blood cells attacking the foreign virus. On the other hand, if you go along with all the secrecy, structure and control rules of the enterprise you will lose the social media benefits of extended enterprise collaboration and innovation. Many people within enterprises understand this and some of them are in a policy-making position of authority. In general, the trend is towards loose, unstructured, "emergent business networks". So "make the trend your friend", but beware of the very strong forces of opposition and deal positively with their legitimate needs.

Conclusion

What is your position in the Enterprise 2.0 market. Do you work in IT in a large Enterprise? Do you work for a large incumbent Enterprise IT vendor? Do you work for a startup that is going to change the Enterprise world? Are you writing about this rapidly emerging market? Do you have unique insights or research to share? We would love to hear from you in the comments and maybe as a Guest Author. Email us if you're interested in writing for ReadWriteWeb's Enterprise Channel.

You can subscribe now to our special RSS feed for the Enterprise channel.

]]>Discuss

Microsoft Online Services: Subscription Web Apps for Business

Frederic Lardinois — Tue, 08 Jul 2008 09:10:23 -0800

At its Worldwide Partner Conference in Houston today, Microsoft announced a roadmap and pricing for a number of online software packages for the enterprise and small business market. Microsoft Online Services is currently available in a limited beta and will come in two flavors: Business Productivity Online Standard Suite for $15 a seat, and a Deskless Worker Suite for $3 a seat.

]]>Sponsor

]]> The Business Productivity Suite will come with Exchange Online, SharePoint Online, Office Communications Online (IM and Presence), as well as Office Live Meeting. The cheaper Deskless Worker Suite will only include Exchange Online and SharePoint Online. Companies do not have to subscribe to the complete packages, but can also subscribe to individual services as well.

Microsoft Online Services is scheduled to be released out of beta at some point in the second half of 2008.

The Deskless Worker Suite, as Mary Jo Foley notes, seems to be geared towards users who might otherwise be tempted to move to Google Docs or Zoho's online office suite. Microsoft is aiming this product at workers who only spend a small part of their days at a computer, but still need access to email and and other basic online services.

As Microsoft is moving more and more services into the cloud, the big question of when (and if) Microsoft will start offering the core components of its office suite like Word and Excel online as well, still remains. For now, Microsoft seems content to offer products like Office Live Workspace that provides online storage in the cloud, but as pressure from Google and others increases, Microsoft will surely have to counter these offerings with a more fully featured web based office suite.

]]>Discuss

Microsoft Equipt: Office and OneCare in a Subscription Package

Frederic Lardinois — Wed, 02 Jul 2008 11:47:30 -0800

Microsoft today announced that it will release an all-in-one software subscription package that includes Live OneCare and Microsoft Office Home and Student 2007. Microsoft Equipt, formerly known as 'Albany,' will be sold in Circuit City stores starting mid-July. The subscription price for Equipt is set at $69.99 per year. Microsoft's regular price for buying Office Home and Student 2007 is around $150.

]]>Sponsor

]]> Subscribers will receive free upgrades when they become available and, just like owners of the Office Home and Student edition, subscribers can install Equipt on up to three computers in their household. Equipt will also come with a number of other Live branded Microsoft software that is available for free online already, including Live Messenger, Live Mail, and Live Photo Gallery.

It seems odd that Microsoft would (at least at first) exclusively sell this package through Circuit City. There doesn't seem to be any good reason to restrict the sale of Equipt to just one retailer, unless Microsoft is just trying to test the waters here to see how the public will react to a subscription service. While software subscriptions are common in the business market, consumers are used to buying their software outright, with maybe the exception of anti-virus software, which might explain the combination of OneCare and Office.

For users who already subscribe to OneCare at $49.95 a year, Equipt is a bargain at only $20 more a year. Subscribing to Equipt just for the Office package, though, might be less of a deal, especially given that Microsoft doesn't always upgrade Office every two years and that most users don't always need to have the latest version of MS Office.

Equipt clearly points in the direction that Microsoft wants to be going with software subscriptions - the question will be if mainstream users are ready.]]>Discuss

Rhapsody Embraces DRM-Free MP3s: Another Nail in The Coffin of DRM

Frederic Lardinois — Mon, 30 Jun 2008 10:21:35 -0800

Real Networks' Rhapsody music service, which had only been a subscription service so far, is joining into the every expanding fray of music services selling DRM-free MP3 files. Real has signed deals with Universal, Sony BMG, Warner, and EMI to sell songs at $.99 cents a song and $9.99 per album.

By embracing DRM-free MP3s as its format of choice, Rhapsody is driving yet another nail in the coffin of DRM'd music.

]]>Sponsor

]]> Rhapsody is also partnering with Verizon's mobile VCAST,and Yahoo, as well as MTV, VH1, CMT, and iLike.com.

While Rhapsody's subscription service will remain DRM'd for the foreseeable future, opening up an MP3 based store makes sense for Real if it wants to expand its market to owners of Apple's popular iPod, which is incompatible with Real's DRM scheme for its subscription service. Also, selling single MP3s has turned out to be a very popular way for many users to buy their music, while subscription based services always lagged behind in popular appeal.

Rhapsody will face competition from a host of similar services, most prominently Apple's iTunes, and Amazon's MP3 store. While Apple is still the dominant player in the market, Amazon's offering has found a loyal following lately by offering a slightly cheaper product at an often higher quality than Apple's DRM-free iTunes Plus. Walmart and Napster also just started offering DRM-free music earlier this year, but haven't really made a ditch into Amazon's or Apple's market share yet.

Given that most online music stores sell more or less the same songs (with maybe the exception of eMusic), price and convenience are pretty much the only ways for them to differentiate themselves from the competition. Rhapsody is hoping to set itself apart by offering users the ability to listen to 25 full-length previews a month instead of the standard 30 second clips other services offer. If this will be enough for users to start embracing yet another music service remains to be seen.

There is nothing particularly revolutionary about Rhapsody's offering, but, if anything, the fact that they are offering DRM-free MP3s now is a good sign for where the music market is heading. And with having both Verizon's and MTV's marketing behind it, Rhapsody might very well succeed where others have failed so far.

]]>Discuss

World of Warcraft Hits 10 Million Subscribers

Marshall Kirkpatrick — Tue, 22 Jan 2008 10:50:02 -0800

Blizzard Entertainment, owners of World of Warcraft, announced this morning that the game now has more than 10 million paying subscribers around the world. Online gameplay costs an average of $15 USD per month.

That's a huge number and one that I honestly think signals that with sufficient value delivered, consumers will still pay for software. This might be an anomaly of historic proportions, too, though.

]]>Sponsor

]]> Blizzard said today that those 10 million paying subscribers include 5.5 million players in Asia, 2.5 million in the US and 2 million in Europe. Consider that, advertisers, when insisting that only US audiences are monetizable. Niche blog (or is it niche?) WoW Insider asks in its coverage whether Blizzard has reached market saturation. The Warcraft brand was first introduced in 1994 and World of Warcraft was launched in 2001.

For readers unfamiliar with WoW, there's a lot of video on YouTube, including the following parody of Weird Al's "That's Your Horoscope Today". It's not the catchiest tune but it's a good tour of what goes on in the game and it's been viewed more than 4 million times. When you build software that becomes a platform for user generated content all about your software - then you're in a pretty sweet spot. Perhaps that goes without saying for a company that has 10 million people around the world paying $15 per month.

]]>Discuss