More thoughts on the Datz Music Lounge and how labels are now taking a different approach to selling music. Unlike mobile subscriptions that wrap up files in DRM, the Datz service offers one year of unlimited access to unprotected MP3 files for a £99.99.

The danger in accepting a lump sum fee for unlimited downloads is obvious: Labels could lose revenue from the frequent buyers segment. Frequent buyers who opt for an annual subscription effectively place a cap on their music spending (in theory...if they use only the subscription service to acquire music). The different between the cap -- the price of the subscription -- and previous spending is lost revenue. That lost revenue could be overcome by gains from less frequent music buyers. But that's not the case here. Datz won't be exposed to the problems of a spending cap, and light buyers aren't the target market (even though each light buyer that buys a Datz subscription becomes a very lucrative customer).

Jupiter's Mark Mulligan had this to say about the subscription in a post at his blog:

One thing to be clear about though, this is not a tool to fight piracy. A hundred pounds up front might work for younger demographics if there’s a device involved (i.e. the 5310 or, say, an iPod Nano bundle) but is not going to hit the mark for a music service. For this price point it’s going to be hitting older, higher spending music aficionados. Indeed the focus on catalogue aims it even more squarely at older consumers.

The spending cap would be a problem only if consumers could replace all purchases with a subscription. Datz will get around this by limiting the amount of new releases it carries -- customers will need to pay full fare for those elsewhere. The press release offers no specifics but hints of limiting new releases while emphasizing back catalog. Datz says the service will have "a wide selection of new music released in 2009" (translation: we'll carry the developing artists so they'll get heard) as well as "an incredible back catalogue." EMI quote in the press release points to the value in seeing how customers "react to EMI's deep and rich back catalogue" (translation: is this catalog we bought worth what we hope it's worth?).

Will selection be a problem? Probably not. Datz will launch with two of the four majors (EMI and Warner Music Group) as well as some powerhouse indies. That leaves quite a few gaps. I imagine the more serious music fans will see more than enough value in Datz -- just as eMusic subscribers take what is available -- even though some new releases and labels will be missing. iTunes has trained consumers to expect a music store to have everything, so I expect some consumers to be turned off by limited choice.

The idea that labels need to protect the value of music has shifted over the years. In the past it meant stubborn adherence to established pricing tiers. Now they see the promise in new pricing schemes that may offer changes for greater revenue. The Datz subscription models strikes me as an excellent way to monetize a catalog. Per-track revenue will be far lower than what is realized for new releases, but overall revenue should grow.