Right now, you've got Sony as a competitor, and Apple is dominating the space. You've still got Virgin, you've still got Microsoft, you've still got a lot of potentially very powerful brands coming into this space. Is that worrisome to you?
Well, I'd like to first address one of the comments you made -- that Apple is dominating the space. Currently, Apple is not even in the subscription business. It's not even on the playing field yet. I think that's very significant and very important for anyone following this space to remember.
Currently, Apple is not even in the subscription business. It's not even on the playing field yet.
As to the others entering the space -- obviously, it's a very competitive space, because we are all in the process of trying to get a piece of a $40bn (£22.4bn) business. The global record industry is approximately $40bn, and virtually everyone who follows the space has a recognition that all of that money could be moving online. This is why it is attracting major players like Wal-Mart, like Microsoft. In one sense, I think that it really validates why we as a company made the decision to double down and be serious about this opportunity.
Secondly, as to our competitive position, one of the things I think that is very noticeable is that Sony and Wal-Mart -- obviously two massive global organisations -- have both entered the online music space in the last few months, and our market share, as reported weekly by Nielsen SoundScan, has not declined an inch.
That's market share of downloads, or market share of revenue?
Market share of downloads, because there is no market share report on revenue.
Our market share of downloads, since Wal-Mart and Sony entered, has not declined at all. We think that's very significant, and it makes us feel very confident that we have secured a very defensible position with the biggest brand in the industry.
What is your market share right now?
In downloads, Apple claims to have 70 percent. We have approximately 15 percent. That leaves about 15 percent to all the other players.
You said margins on subscription services are about 40 percent, compared with just 10 percent on downloads. Is that correct?
Right.
How do you see those margins evolving, and why?
We think that the margins for downloads and subscriptions will be stable. We think that it is incumbent on us as a company to grow the top line as aggressively and as fast as possible so that we can get into a profitable position. We also are doing things that are helping add higher-margin products to our portfolio.
What kind of products would those be?
We have a number of things in development -- but nothing that we're publicly disclosing.
