iPod's buyer power provokes response

iPod's music store accounts for about 70% of music downloads. It earns $0.29 of the $0.99 price of each download. The record companies think this is unfair and are trying to develop a different business model. CEO Doug Morris of Universal is trying to enlist Sony BMG and Warner who together own about 75% of the music sold in a new business venture. They have an intriging business model

... get hardware makers or cell carriers to absorb the cost of a roughly $5-per-month subscription fee so consumers get a device with all-you-can-eat music that's essentially free. Music companies would collect the subscription fee, while hardware makers theoretically would move many more players.

...the Total Music subscriber pays only for the device--and never shells out a penny for the music. "You know that it's there, and it costs something," says one tech company executive who has seen Morris' presentation. "But you never write a check for it."

Under one scenario industry insiders figure the cost per player would amount to about $90. They arrived at that number by assuming people hang on to a music player or phone for 18 months before upgrading. Eighteen times a $5 subscription fee equals $90.