UK online music hobbled by high prices

High prices and digital rights management (DRM) incompatibility are slowing the take up of online music services in the UK, according to analyst IDC.

Jason Armitage, senior research analyst for IDC's European consumer devices unit, said despite the rapid increase in the number of iTunes-style stores, the UK has yet to benefit from more choice or cheaper pricing.

"In spite of the mounting competition among suppliers, pricing for subscriptions, albums, and individual tracks remains stubbornly high," he wrote in a research note. "Only a handful of subscription services are currently available in the UK, offering consumers a limited range of packages at steep monthly prices."

The blame for this, according to Armitage, is to be laid squarely at the door of the record labels, who are refusing to pass on the savings from selling music in digital format to their customers.

"Given the savings in distribution and packaging costs, pay-per-download services can also afford to get a lot cheaper. The first significant moves have been evident in album pricing, a format that has proven unpopular with downloaders. In the UK, online albums could be purchased at a 30 per cent to 45 per cent discount to their CD equivalents in 2005," he wrote.

It's an issue troubling the man behind the number one online music store iTunes - Apple CEO Steve Jobs. Speaking at Apple Expo earlier this month, he maintained web song shops are resisting pressure from record labels to put prices up.

"Record companies make more money on iTunes than they do on CDs," he said. "If they want to raise prices on iTunes, it just means they're getting a little greedy - consumers won't like that. It will just be a message to consumers to go back to piracy and that's not good. If the price goes up a lot, they'll go back to piracy and everybody loses."

IDC's Armitage also said online music stores need to improve their user experience - both pricing and music player compatibility - to get consumers excited about buying music again.

"Services are improving but buying music online can be an experience devoid of the pleasures of the record store," he wrote. "Problems in playing back tracks on portable audio players escalate, as users discover downloaded tracks are not compatible with their devices. For customers choosing which songs to download, the logic that leads to price discrepancies between newly released tracks can be bewildering." 

The incompatibility war between Windows stores and devices and Apple's iPod and iTunes has attracted criticism from several quarters, including a report from digital campaign group the Electronic Frontier Foundation.

Armitage wrote: "However, interoperability problems look set to remain long-term features of online music. In addition, consumers already have existing alternatives - in the form of physical media and free music services - that will continue as popular methods for acquiring digital music. Although millions of UK homes will embrace MSPs, usage of paid music services will remain confined to a minority of consumers in the next few years."

According to research from analyst house JupiterResearch, one-third of households now own MP3 players, while figures from music industry trade body BPI show that UK music fans have downloaded 13 million tracks already this year.