In an aggressive move to boost subscriptions, online music firm Listen.com on Thursday cut what it charges users to burn songs from its Rhapsody service from 99 cents to a loss-making 49 cents.
The drastic discount underscores the lengths to which legitimate online music companies will go to jump-start the fledgling marketplace, which is competing against still popular unauthorized services like Kazaa which attract millions with offers of virtually limitless content for free.
“We look at this as a limited-time promotion and an effort to get people in the door,” said Matt Graves, a spokesman for independently-owned Listen.com.
“We may lose a little bit on the burns, but we expect to make up in subscription revenues, so we see this as a marketing cost,” he said.
Listen.com declined to say what it costs it to offer tracks for burning, but industry experts estimate that selling a track to be burned may cost a supplier like Rhapsody or Pressplay anywhere from 60-75 cents in licensing and acquisition costs.
A little over a year ago Rhapsody, other independent services like FullAudio and the world’s major labels launched their own on-demand services for downloadable music.
But even with increased content due to cross-licensing and the recent introduction of label-approved permanent downloads or burning, only an estimated 600,000 American consumers are subscribers to the legitimate services.
By contrast, Kazaa has an estimated 11 million home users.
Rhapsody’s six-week promotion will be available to subscribers who sign up for Rhapsody through distributor Terra Lycos’ Lycos Music web site and Listen.com’s Web site between Feb 13 and March 31 and for existing subscribers.
The special fee applies to Rhapsody’s entire library of burnable content, including music from four of the five major labels, such as Bertelsmann AG, EMI Group Plc, AOL Time Warner Inc and Vivendi Universal.
Graves said Listen is currently negotiating with Sony Corp <6758.T for burning rights to its music. It also has burning rights to 30 independent labels.
"It's nice to see more experiments to figure out what consumers want. The worst case scenario for Listen is that this is overwhelmingly successful and they can't go back to 99 cents," said analyst PJ McNealy, with GartnerG2.
"They need to do something to drive subscriptions," he said, adding, "I'm sure the labels are extremely interested in what the outcome of this and to see where the appropriate price point is."