In April, the mobile phone operator Vodafone introduced a music service in Spain that gives subscribers unlimited access to a broad catalog of songs on their phones for 16 euros (US$22) a month. The songs can be played on the phone or transferred to a computer. The service was only possible because the major music labels altered the underlying economics of their licensing deals, said Rob Glaser, chief executive of RealNetworks, which is supplying the music service. “That flexibility wasn’t there in 2008 anywhere in the US and Europe,” he said.
Napster, a pioneer in peer-to-peer music sharing that became a paid music service owned by the retailer Best Buy, reduced its subscription rate to US$5 from US$12.95 a month two weeks ago as a result of new deals with the labels, according to Chris Gorog, Napster’s chief executive.
The same week, Pandora, the rapidly growing Web radio service, said it would increase the number of audio commercials on its free service and offer an ad-free version, Pandora One, for US$36 a year. The founder, Tim Westergren, said he expected the company to reach profitability next year.
“There was a generation of Web companies that signed up for deals that didn’t make sense, and unfortunately they set a precedent,” Westergren said. “Now that those deals turned out to be unsustainable, it made the labels realize that there was actually not hidden money they were missing out on. I think labels have a much better understanding of the economics of the business.”
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