Apple is talking with the major record labels about a change in the iTunes Store business model that would give customers free access to the store's complete music library, according to the Financial Times. The catch is that consumers would pay a premium for Apple's iPod and iPhone devices.
The rumored model is akin to the "Comes with Music" deal Nokia inked with Universal Music last December. Apple could not immediately be reached for comment, but the British newspaper reported the negotiations hinged on a dispute over the price Apple would pay for access to the labels' libraries.
"Rumors of Apple getting into the 'all you can eat' music business have been around almost as long as the iPod itself," said Michael Gartenberg, an analyst at JupiterResearch. "The real challenge that Apple would face is taking this from something that appeals to music aficionados to something the mainstream could appreciate."
Paying an iPod Premium
One of the major sticking points with shifting the iTunes Store model, Gartenberg said, is the challenge of formulating price schemes that make sense to consumers, Apple and the record companies.
The Financial Times cites executives familiar with the matter whose research shows consumers would pay a premium of up to $100 for unlimited access to music for the lifetime of the device.
"If it costs $100 more to buy an iPod, but that money buys you access to the entire iTunes music library, then that's going to be an acceptable value proposition to a lot of consumers," Gartenberg said.
A Subscription Model?
However, the Financial Times reports, the "all you can eat" model is not the only one Apple is considering. The company is also reportedly exploring a subscription model, which is more common to the industry. A subscription, the report indicated, would come with a monthly fee of $7 to $8.
"Consumers already pay a monthly fee for their iPhones. So the notion of paying an additional fee for music on the device becomes one possibility," Gartenberg said. "There are any number of different models here that Apple could embrace."
Evangelizing New Models
If Apple does make a change to its iTunes Store business model, analysts said the company will take the time to evangelize the market and explain how business models for subscribing or renting can coexist with owning music. That's something, Gartenberg said, that companies in the digital-music business have not done well.
"One thing Apple's strategy would have going for it that the other services don't have is the fact that it works with the iPod, iPhone and the rest of the iTunes ecosystem," Gartenberg said. "That's super-important because for many consumers if it doesn't work with the iPod, it might as well not exist."
Despite its market advantage in the U.S., Apple could be rushing to compete with Nokia on a worldwide scale. Nokia is set to roll out its "comes with music" phones in the second half of this year. Nokia is also reportedly in talks with several record labels, but is setting a higher price per handset for unlimited access to music libraries.
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