Subscription services gain interest among music labels

Just as consumers now pay for HBO, they may one day be charged for a digital music service as part of their monthly Internet bill.

After resisting subscription services out of fear they would weaken CD sales, music companies are considering the idea in an attempt to reverse plummeting sales and unabated illegal downloading of music from the Internet.

This week, Sony BMG Chief Executive Rolf Schmidt-Holtz told a German newspaper that Sony was in discussions with other music labels and partners to offer an online music subscription service.

Warner Music Group confirmed Thursday that it was discussing a subscription service, at a cost of perhaps $5 a month added to Internet bills, that would allow users to download, copy and share music. Revenue would be divided among the labels.

Warner’s interest in the service was first reported Thursday by Portfolio.com. Two other label executives, who asked for anonymity because the discussions were confidential, said their company was contemplating a similar move.

Rhapsody, a digital music service with 1.9 million subscribers, already offers subscriptions online and through a variety of devices. Apple Inc. is said to be talking to music companies about offering some of its iPods pre-loaded with music and adding a subscription service to its online music store, iTunes.

In January, Universal Music Group launched a subscription service with Nokia called Total Music by Universal. Nokia is in discussions with other music companies, according to one industry executive. Music comes pre-loaded on a cellphone. After a certain period of time, the customer pays a monthly service fee for unlimited access to music.

“All the labels agree to the idea of subscription and we’re all talking about the structure of how much music over how much time,” said one music executive. “It’s not meant to be a panacea, but to help support this area of retail.”

Subscription services through mobile phone carriers or Internet providers is potentially attractive because it would piggyback on an existing billing relationship.

Music executives say discussions are in the early stages and face several hurdles. Some consumers prefer to own music. Others might balk at yet another charge on their monthly Internet bill.

“If a music surcharge is mandatory, consumers are going to resist,” said Russ Crupnick, senior analyst for NPD Entertainment, a market research firm.

Warner hired former Geffen Music executive Jim Griffin as a consultant several months ago to help plot the label’s digital future. Griffin could not be reached for comment.

But he told Portfolio.com that “today, it has become purely voluntary to pay for music… . If I tell you to go listen to this band, you could pay, or you might not. It’s pretty much up to you. So the music business has become a big tip jar.”

michelle.quinn@latimes.com