Microsoft, labels try to revive subscriptions

With fewer consumers than hoped for signing up for all-you-can-eat music subscriptions, Microsoft and the record industry are trying to make the option more appealing.

As of Wednesday, those who pay for the $14.95 a month Zune Pass subscription will start being able to permanently keep 10 tracks a month. The subscription already allows unlimited music downloads, but users have the ability to listen to the music only so long as they are subscribers.

Under the new plan, Zune Pass members will essentially get $10 worth of music to own each month, along with whatever subscription content they download. The move comes as much of the consumer enthusiasm in the digital music industry has been for music that is sold free of DRM (digital rights management) protections.

Both Microsoft and music industry executives acknowledge that the uptake for subscriptions has not been what they'd hoped.

"I think everybody in the industry would say they would have hoped that by this time there would be more (subscribers)," Rio Caraeff, Universal Music Group eLabs executive vice president, said in an interview.

"It's hit a plateau," Caraeff said. "It's just not as big as anybody would have hoped...We have to retool the model."

Microsoft marketing director Adam Sohn said that Microsoft saw some boost when it targeted its advertising specifically around subscriptions but said that the total number of subscribers is less than the company would like.

"It's not grown as fast as we'd like it so we think this will give it a shot in the arm," Sohn said, declining to say how many Zune Pass subscribers Microsoft currently has.

For the record industry, subscription music represents an important potential revenue stream at a time where traditional music sales have continued to decline far faster than digital downloads have grown.

Meanwhile, for Microsoft, subscription music is one of its key differentiators over the iPod/iTunes combination, as well as the key to the value of many of the music discovery options built into the latest release of the Zune software. On Tuesday, Microsoft said it was cutting the prices for its flash-based line of Zune devices, a lineup that is only a couple of months old.

Caraeff said that Microsoft won't necessarily be paying the labels more for the tracks subscribers get to keep.

"We're making some concessions," he said. "Microsoft's making some concessions. We're both working and investing."

Subscription music is also a key for some of the eventual entertainment scenarios Microsoft and the industry would like to see, where consumers don't have to manage their music on individual devices, but can instead play any song they want, wherever they are over a network.

Caraeff said he still believes there will be a point in time when the "vast majority" of people have a subscription music service, whether that comes with their device, their monthly Internet bill, or through some other means.

"As you know, we are going through a transition and we are not quite there," Caraeff said.