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Subsidized MP3 Portables On The Way?

Dallas — Owners of portable MP3 players overwhelmingly prefer to buy downloaded songs on an a la carte basis rather than pay for a subscription-based download service, but that attitude could change as subscriptions become portable, according to Parks Associates.

Windows Media 10-compatible portables that play subscription-based music will help generate interest in subscription services, Parks said, and although sales of these devices will grow slowly this year because of limited supplies and high prices, the research company is “bullish” on their long-term prospects because the hardware could be subsidized by the subscription services.

Hardware subsidies have become commonplace in the CE industry, starting in 1983 with the first cellular phones. Satellite TV and satellite radio followed.

Among 400 surveyed owners of MP3 portables living in Internet-connected homes, 40 percent said they were interested in buying songs for a dollar, but only 8 percent said they were interested in paying a $10 monthly subscription fee. Slightly higher interest was expressed in free music downloads that come with a commercial, said research director John Barrett.

“The market has a long way to go in promoting subscription models,” said Barrett. “There is hope Microsoft’s Janus [portable subscription] technology will boost the digital music market by enabling [subscription] portability and greater integration of hardware and content.” The industry, however, hasn’t translated the advantages into “something more tangible and desirable to consumers.” As a result, “consumers either do not fully grasp the value of a subscription ‘all-you-can-eat’ service, or they simply don’t want it.”

Service providers or retailers that bundle subscription services with a compatible MP3 portable will make such services more appealing because the bundle assures consumers of interoperability, “makes it a little easier for some people to grasp,” and makes it possible to promote the portable as being able to play every song available for downloading, Barrett said.

The economies and potential are there, he claimed. Under an annual contract, a monthly fee of $25 to $30 would cover the retail price of a $10 to $15 per month subscription, and a $200 portable spread out over a year at $16 per month, he explained.

It will take a few years for subscription services and compatible portables to take off, however. Barrett cited the availability of only two or three players compatible with Windows Media 10 subscription downloads, and firmware upgrades for existing models aren’t available yet, he said.