Apple takes new look at music subscriptions

For years, the music industry has sought an alternative to digital downloads in music subscriptions.

Neither the labels nor the services make much money from 99-cent downloads, which is why they push the more lucrative $14.99 monthly plans offered by Rhapsody, Napster and Microsoft.

With subscriptions, you get access to the entire catalog of music, but the songs expire if the subscription isn’t renewed. Apple has long resisted subscriptions, saying its customers weren’t interested.

Now, Apple is reconsidering, meeting with labels to discuss a new kind of subscription – pre-loaded iPods with access to many songs from iTunes‘ catalog.

This change is based on comments from insiders with knowledge of the meetings who didn’t want to be quoted about discussions that are not yet public. Apple had no comment.

Others have tried. SanDisk partners with Rhapsody, and online radio station Slacker has a portable device. But “because it’s Apple, it’s a huge deal,” said Eric Garland, CEO of market tracker BigChampagne.

Apple says it has sold 4 billion songs since opening iTunes in 2001. Rhapsody, which has the largest audience of the subscription services, says it has nearly 3 million subscribers. Universal Music Group recently cut a deal with cell phone maker Nokia that offers unlimited free downloads of its songs for one year on certain new phones. Universal is offering access to its own subscription plan; Sony/BMG said this week it hopes to start a subscription program.

Ted Cohen, managing partner of the Tag Strategic music consultancy, said Apple wants the same type of arrangement. He believes Apple is meeting with labels not because download sales have stalled, but as a way to sell new iPods.

“If you’ve gotten an iPhone or iPod Touch in the last six months, there’s no reason to buy a new iPod,” he said. “Well, here’s one.”

Cohen predicts pre-loaded iPods will be available by June, with a premium price of about an extra $50 for the pre-loaded music.