Mossberg (M) interviews Glaser (G)

(M) Why are you in both music services and download music stores?
(G) At the end of the day, people want music both ways.  The jukebox provides unlimited access at a flat-fee.  The download store is the analogous to the physical music store.  We think subscription are the foundation, long-term, for most consumers.  75% of households have pay television, and music services will align to this. 

(M) Isnt the subscription the only provider of any profit?
(G) Alot more value can be added within a music service.  More money per subscriber than per track.  Unclear on whether the service is ultimately more profitable.  Retailers have proven profits at a massive scale, while he thinks more money can be made in the subscription service.

(M) There are irrationalities on all sides of this market.  What planet are the labels living on? Example: raising prices while sharing is still so formidable.
(G) The planet spreadsheet.  Raise price by 10%, we make 10% more money.  But piracy scale dwarfs the legal music download business.  Up to 200 million in legal activity, but is there more than a few billion in the sharing realm.  Piracy is never on the spreadsheet, or it is on a different spreadsheet - the litigation spreadsheet.  Likely will raise the price of hot albums.. but will they lower the price on catalog items (like 50 cents).  Pennywise and pound foolish.

(M) Format - rigidity on the technology side.  The proprietary DRMs in place in the market stall portable player sales.
(G) Breifly debates over units vs dollars in the flash player market.

(M) Secure music is not portable across diverse portable players - even software players.  Even Sony's decision for a proprietary format in Connect.
(G) Yes.  This is as stupid as the issues on the record company side.  We are pushing for universal playability across hardware.  We support quicktime, openMG, windows media… Suggests to labels that they use leverage to open up the formats.

(M) Is this not a risk?
(G) What are the sources of innovation in this business?  The dimensions for adding value.  If the iPod were open, it should in turn be more popular within a service that is innovative.

(M) But the iPod closed market is seamless.
(G) Banter.  Apple will replay the scene of the last 25 years.

(M) Why do labels offer iTunes better terms. Example: their terms for more flexible at the outset.  Now changed the number of identical burns, while other services are at 5.  Increase the number of machines to 5, while everyone else has 3.

(G) Two things.  Steve is better at merchandising his advantage with labels.  He got the labels to move on the individual track licenses.  But all services will soon have the same flexibility, once applications are updated. (interesting - are the rights provided by the application?)

Questions from the Crowd (C)

(C) Has the market broken down such that statutories are the solution?
(G) Practically - getting consensus on that issue is unlikely.  Consider the creation of a purgatory… for live sessions, bootlegs, etc.  We cannot release them, in case we might be hit by cascading liabilities.  A positive might be a purgatory - not cleared, but you can work with them as long as you pay some agreeable rate.

(C) Why has there not been more price action downward?
(G) Lowest Common Denominator is the issue.  The challenge is to get all majors to agree to a split model.

(C) What about independent music on the major services, in terms of promotion?
(G) We have relationships with more than 200 labels.  Within rhapsody, 90% of the tracks are listened to at least once during any given month.  Subscriptions enable a more flexible experience and the best opportunity for guerilla marketing.