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The launch of its Music Unlimited streaming service in the UK and Ireland has all four major record labels on board – but it's not giving anything away for free. Not a jot. Not even 30 seconds, as Sky's recently mothballed service offered penniless passers-by.
Sony – with EMI, Universal and Warner breathing down its neck – is launching its cloud-based streaming service, called "Music Unlimited powered by Qriocity" with two subscription plans: "basic" and "premium". Basic subscribers are charged £3.99 a month for a personalised, ad-free radio station, similar to Last.fm, and "unlimited forward skipping" of songs. (So, basically, just like Last.fm, but without the social aspect, and for more money.) Its premium version – at £9.99 a month, matching Spotify's premium offers unlimited, ad-free access to more than 6m songs.
There's no download option – users' playlists and preferences are based in the cloud – meaning customers can stream songs from their computer to their emporium of shiny Sony hardware (Bravia TVs, PS3s and the like – which already can stream music). You can also sync your new digital catalogue with already-purchased music from iTunes.
Initially sold as Sony's "direct challenge" to Apple's dominance with iTunes, executives have been quick to distance Music Unlimited from that theorem. "We realised that if we were playing catch up with the same (iTunes) model, it would be difficult to appeal to users," said Kazuo Hirai, Sony's executive vice president and head of the company's networked products and services division. "But over time, it needs to stand on its own," he added.
Ultimately, Unlimited Music is an add-on for its home entertainment range – an attempted one-up on Microsoft and Samsung, which respectively have their own range of internet-connected hardware in the living room.
So let's see, Spotify with ads for free, or Sony MUPBQ for £3.99 every month for ever and ever? So difficult. We asked Sony in what way this wasn't an Olympic-quality bobsleigh run directly down towards the chequered flag of failure.
Here's what Rob Lewis, executive chairman of Omnifone - which developed the service for Sony - said would buoy it up, with our thoughts. (The capitals are his.)
"It is much, much larger than Spotify. Sony's service will be pre-loaded onto HUNDREDS OF MILLIONS of devices every year, and automatically available to SIXTY MILLION existing Sony Network platform users. Only TEN MILLION Spotify accounts or so have been created to date, and less than a million subscribers. There is a huge untapped market out there."
No doubt. Problem is, that untapped market is probably already getting music from somewhere. And it's probably not paying £3.99 per month for it. And as to "much larger" than Spotify - well, not until you've got people signed up it's not.
"It is not just on the PC. Sony's service gives you direct access from your remote control or games controller onto BRAVIA TVs, Blu-ray players, PS3, delivering music into the home, and critically, the living room."
Again, we suspect lots of people already have music in their living room if they want it, via CD players, computers, iPods plugged into boomboxes (a huge market), and so on. Also, Microsoft has a music offering in the US and Europe - the Zune service - and this isn't an improvement on it. Plus there are many more Xbox 360s than PS3s installed around the world.
"Much larger advertising budget. Sony spends $1.5 billion a year on advertising. They spend more on marketing every month than the total amount of money ever raised by Spotify since its inception. The new service will be a central plank of Sony's global advertising campaign. It will be everywhere, hitting the mass market."
Know what's cheaper and more effective than advertising? Word of mouth. Spotify grew by word of mouth. So did We7 - they've both spent minimally on advertising as such. It's hard to see how making a paid-for service that's like radio (something you get for free) can work as a central plank of an advertising campaign. Well, not a successful campaign.
"Free trials will be available for every Sony consumer. More on that soon."
Our breath is bated. So that'll make it like Spotify. Except only briefly. And then you'll have to pay. Or abandon it ans try another free trial under a different name. Hmm, what to do?
"Spotify's paid for service (the only profitable / sustainable part of Spotify's model) is only a handful of devices, mainly PC and mobile. Sony's service on the other hand will work and be pre-loaded on hundreds of millions of gaming devices, PCs, Blu-ray players, TVs, Android devices and other Sony devices. It will feature on the remote control of many living room devices."
It'll have to be back-loaded onto those, because Sony doesn't shift hundreds of millions of devices like that every year, and the problem is still that these days you can't make people pay for music. It's astonishing that this basic realisation was never allowed to penetrate in any of the discussions of this service. Let's be clear: if Sony offered this as a free service then it might have a fighting chance of becoming quite big, because Spotify hasn't yet started in the US, and Pandora has restricted itself to North America; in both cases costs and licensing have held them back from spreading further. As for Spotify's paid-for part being the only profitable part - well, it does OK on ads (and we7 too) and the idea is that the premium subsidises the other parts. It's the freemium model.
"Financial might. Sony are the world's biggest consumer electronics vendor, own Sony Music, half of Sony ATV... They have the power, might, retail footprint, device reach and the experience in networked services, where they already transact billions of dollars of transactions every year, to bring subscription to the masses."
Of all the arguments, this is actually the weakest. (And some of the above are really quite weak.) Sony's profit margin for its latest financial year was 1.08% and its return on equity was 2.76%. True, its revenues were $77.2bn - but its profit was just $340m, which isn't a great return, and in the year before it made a $2.3bn loss (balanced out, to be fair, by a $3.8bn profit in the year before that). Its revenues have been trending down the past three years. It's not what you look at as a growth stock.
You wouldn't expect rivals to be impressed, but sometimes they say things like "it's always good to have competition". Not here. We asked Clive Gardiner of the British site we7.com, which offers ad-supported streaming music, what he thought of the offering. Gardiner has been calling for labels to lower prices for streaming for some time. Here are his thoughts:
"Any new lower price point for a monthly music subscription is a good step as labels need to become much more adaptable with subscription prices and offerings if they are to unlock potential monetisation opportunities in the wider market. However this £3.99 price only gives a limited radio-based offering, something already available for free (with ads) on we7 as Internet Radio Plus. Their £9.99 offering offers unlimited streaming, personalised playlists and a range of channels. But this type of offering is already available for the PC on we7 for £4.99 a month, and for PC and mobile for £9.99."
"In my view the type of subscription packages offered by Sony will appeal only to the same old classic subscription target group (male 30+) who dominate our and others' subscriber user base. They are not the innovative breakthrough propositions we are seeking for our users which we cannot currently get licensed. We7 users tend to be young, mainstream, choosy about what music they listen to and very keen to see affordable subscriptions on mobile. We believe giving them for example their 30 favourites plus 50 more songs that sound like them cached onto their mobile each week for £1 a week payable by premium text would unlock tens of thousands of existing we7 users who will never contemplate the more rigid "tenner-for-millions-of-songs" offerings. We also believe there is huge potential in pay-as-you-go models by giving a free ad-based Radio Plus entry experience but allowing users to purchase say 200 'requests' for £5.
"Widespread incremental monetisation can only come from the mainstream market, and we believe that will be free + impulse. These types of offerings are being demanded now – and label licensing and commercial strategy needs to adjust to allow these innovative ideas and many others to fly."
Our take? As far as competing with Spotify and other free-at-the-point-of-access services goes, Sony's play is dead on arrival. Like Sky Songs, which Sky last week conceded "just didn't see the consumer demand" it had envisaged, Music Unlimited will be popular with The Big Four record labels but a turn off for users.
We'll watch with interest. A launch in the US, Australia, Canada, France, Germany, Italy, Spain and New Zealand is on the cards for next year, and an Android app is also on the way – restricted to Sony handsets? Don't be surprised.
What do we give it - 18 months?
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