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Online Music Subscription Services Can Succeed at $5 Per Month, But Consumer Expectations Will Not Be Met

Red Herring Research Reports Limitations to Service to Achieve Profitability
http://biz.yahoo.com/prnews/010725/nyw091.html

SAN FRANCISCO, July 25 /PRNewswire/ -- In the post-Napster era, online music subscription firms -- including MusicNet, pressplay, Napster, FullAudio -- have promised to deliver to consumers a reasonable replacement for free music downloads. According to the Red Herring Research's most recent online music report released today, consumers can be offered an affordable subscription at $5 per month, but online music firms will be forced to limit functionality, the volume of song downloads, and the selection of songs that consumers have become accustomed to via Napster.

According to the report, ``Online Music Subscription Fees: Relating Operational Costs with Potential Consumer Demand,'' 41% of online adults visiting music sites are willing to pay a monthly subscription fee for access to the music they want. At the proposed $5 monthly subscription fee, RHR estimates online music firms will have to retain subscribers for 5 months just to cover the cost of customer acquisition. At this $5 fee, the highly variable nature of bandwidth costs plays a major threat to profitability, which will ultimately result in online music providers limiting the number and volume of downloaded songs.

``The planned subscription services promise to pick up where Napster left off,'' according to RHR analyst Matt Wells. ``But there remains a great disparity between what the online music companies are capable of providing while maintaining profitability and what consumers are expecting.''

Using MP3.com and Launch Media as proxies, the report analyzes consumer interest and acquisition, delivery of online music in terms of streaming versus downloads, sales and marketing expenditures as well as bandwidth costs.

``Online Music Subscription Fees: Relating Operational Costs with Potential Consumer Demand,'' is the latest in a series of reports published by Red Herring Research regarding online music and streaming. It is available for $295 at http://www.redherring.com/research.

Red Herring Research (RHR) reports are designed to help business leaders and industry thinkers gain reliable business intelligence with a balanced blend of insightful discussion and pertinent infographics. RHR analysis addresses the information needs of senior-level managers, executives, consultants, academics, and students and is priced within a range from $95 to $750.

About Red Herring Communications

Red Herring Communications, Inc. is an integrated network of media properties connecting the people, companies and industries whose ideas and technological innovations are inspiring and reshaping the world of business. Founded in 1993, ``Red Herring'' magazine, the company's flagship platform, provides in-depth analysis and reporting on the business of technology, innovation and entrepreneurialism. RedHerring.com, Red Herring Research and Red Herring Events offer a unique blend of news, commentary, financial analysis, investor tools and access to leaders of emerging technologies and markets. A privately held company, Red Herring Communications, Inc. is headquartered in San Francisco