Jo Best
High prices and digital rights management incompatibility are slowing the take-up of online music services in the UK, according to analyst IDC.
Jason Armitage, senior research analyst for IDC's European consumer devices unit, said that despite the rapid increase in the number of iTunes-style stores, the UK has yet to benefit from more choices or cheaper pricing.
"In spite of the mounting competition among suppliers, pricing for subscriptions, albums and individual tracks remains stubbornly high," he wrote in a research note. "Only a handful of subscription services are currently available in the UK, offering consumers a limited range of packages at steep monthly prices."
Armitage said that part of the problem is that record labels aren't passing on the savings from selling music in digital format to their customers.
"Given the savings in distribution and packaging costs, pay-per-download services can also afford to get a lot cheaper. The first significant moves have been evident in album pricing, a format that has proven unpopular with downloaders. In the UK, online albums could be purchased at a 30 per cent to 45 per cent discount to their CD equivalents in 2005," he wrote.
It's a troubling issue for Apple CEO Steve Jobs, the man behind number one online music store iTunes. Speaking at the Apple Expo earlier this month, he said that Internet song shops are resisting pressure from record labels to increase prices.
"Record companies make more money on iTunes than they do on CDs," he said. "If they want to raise prices on iTunes, it just means they're getting a little greedy -- consumers won't like that. It will just be a message to consumers to go back to piracy, and that's not good. If the price goes up a lot, they'll go back to piracy and everybody loses."
IDC's Armitage said online music stores also need to improve their user experience -- in both pricing and music player compatibility -- to get consumers excited about buying music again.
"Services are improving, but buying music online can be an experience devoid of the pleasures of the record store," he said. "Problems in playing back tracks on portable audio players escalate, as users discover downloaded tracks are not compatible with their devices. For customers choosing which songs to download, the logic that leads to price discrepancies between newly released tracks can be bewildering."
The incompatibility war among different portable music players and video devices has attracted criticism from several quarters as well, including the Electronic Frontier Foundation.
"Interoperability problems look set to remain long-term features of online music," Armitage said. "Consumers already have existing alternatives -- in the form of physical media and free music services -- that will continue as popular methods for acquiring digital music, so usage of paid music services will remain confined to a minority of consumers in the next few years."
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