Analyzing the Apple Music Rental Idea

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Apple 2.0 blogger Philip Elmer-DeWitt is just as surprised as us about Apple’s supposed plans to release an online music rental service. “Color me skeptical,” he wrote, “and not just because Steve Jobs has repeatedly attacked the idea of renting music. People rent movies and watch them once or twice, he believes, but they listen to their favorite music over and over and they want to own it.”

In this case, though, the Financial Times offers two scenarios, neither of which sound like a slam dunk:

– In one model, customers would pay a premium (say $100 extra) for an iPod that would have unlimited access to the iTunes library for the lifetime of the device. This is similar to the “Comes With Music” deal Nokia signed with Universal Music last year, Elmer-DeWitt said. “The Nokia deal, however, is for streaming music to a phone. The iPod deal would require download access and some kind of digital rights management scheme to prevent a user from siphoning off the entire library and putting it on a big hard drive.”

– In the other model, customers would pay a monthly subscription fee (say $7 or $8 dollars) for unlimited streaming access to the library, just like Napster and Rhapsody (which aren’t exactly taking the market by storm) and the right to keep a few dozen tracks per year, he said. This one would be an iPhone exclusive.

We can’t see the second one succeeding. The first makes more sense, because it’s simpler and plays more into Apple’s streamlined user interface. But it also requires a new kind of digital rights management scheme, right as the rest of the online music market is beginning to finally abandon DRM for good.