When Napster to Go was launched, we predicted that “younger” music listeners (say those under the age of 25) would prefer these rental download models to outright purchase models like iTunes.
Yahoo and Real clearly agree and have launched Yahoo Music Unlimited and Rhapsody, both music-for-rent models.
This begs a number of questions. First, will Google launch a music service? I doubt it because unlike Yahoo or MSN, everything that Google does is based around a search niche. For example, Google does not offer video downloads, but it does offer video search. It will probably introduce a music search facility in the foreseeable future which crosses all music platforms.
A second point is that I believe that these rental models will cause significant changes to the music industry. iTunes, Rhapsody, YMU, Napster and co are online distributors for record labels such as Universal, Sony BMG, EMI, and Warner Music. With the exception of Sony, few of these labels distribute any products other than their own for fear of promoting competitor’s brands. This is short-sighted; there is no need for any label to lose out on the sale of its competitors' music.
What these labels should consider is adopting a customer-centric approach by selling music buyers whatever they want to hear whether it is from their own label or not. In other words, they should get into the distribution game and treat it as a separate business from music/content production. This will better serve both their profits and their markets.
If a record label chooses this route – as Sony has – it has begun a process of vertical integration, from the production of the content through to its retail distribution.
I predict that we will see more vertical integration and a resulting contraction of music industry big names. A forthcoming article will explore possible roles for independent labels
Source: http://maxblumberg.typepad.com/dailymusings/2005/05/itunes_rental_c.html
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