The Financial Times had an article about a rumored iPod that would “come with” music. This would be a big step for Apple as Steve Jobs has been habitually opposed to the subscription model for music. I’ve personally been opposed to the idea of subscriptions as well. I’ve always thought that owning must be more cost advantageous. But is it really?

Music subscription services such as Napster charge $12.99 a month for unlimited access. iTunes charges me 99 cents a song, or $12.99 an album. Subscribing to a music service is like buying an album a month. On average consumers spend $40 per person a year on music. That number however reflects an overall decline in music sales that has been driven file sharing. So, let’s just assume annual spending would be closer to $50 if not for file sharing. Subscribing to a music service works out $156 annually which is definitely more than what the average consumer spends on music. Also if you cancel your subscription, you’re left with nothing. Hence, Steve’s point that people want to own music.

As I get older and my own mortality is more apparent I become less and less opposed to subscription models. After all, when I own I’m really renting for the rest of my life (disregarding the value of passing property to heirs - and I don’t think heirs if I have them will want to listen to my music or be even own a CD a player). That ownership “rental period” is getting shorter with each passing day. So the real comparison is to look at what the cost of “ownership” if I were to subscribe to the music services. Assuming that iIve 40 good years left of listening to music, I come up with a lifetime cost of $3010 assuming a 4% discount rate. Would I pay $3010 to own all the music I want?

The reality is that answer for own vs. rent really depends on the individual. I think both models can make sense, but I do believe the current model of $12.99 a month is too expensive for most individuals. Record companies as usual are being to greedy. They want consumers to spend more money than they would otherwise spend buying music. I believe if that they lowered that cost to $5.99 they would have a lot more subscribers. I also think Apple is being inflexible with it’s unwillingness to adopt a subscription model. There are plenty of people who are happy to subscribe. I think the ideal model would be some type of subscription model where there’s the option of keeping a few tracks to own. I also believe a subscription model where the latest tracks are not available at a lower price could make sense.