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Apple Should Seriously Consider Sub Plan

People in a position to know say that yesterday's Financial Times report that Apple is discussing an "all-you-can-eat" subscription music service with major record labels is overblown, but they add that with iPod sales slowing and competition growing, now may be the time to pursue such a strategy.

The iTunes Store has become the second-largest music retailer in the U.S. behind Wal-Mart Stores. And iTunes is a catalyst for sales of the highly profitable iPod and iPhone, and would be a success even if it operated at a loss, which it doesn't. Plus, some subscription services have struggled to gain wide acceptance and Apple CEO Steve Jobs considers them more akin to rentals.

Still, despite having sold a record 22.1 million iPods in the quarter ended Dec. 29, the year-on-year growth rate was 5%, compared with 50% a year earlier. A new iTunes business model might appeal to consumers who have passed on the iPod-iTunes combo as currently offered. And new competition from social networking giants--including Facebook and MySpace--gives Apple another reason to consider alternative sales methods.

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