Winning over the file sharers

What is the sweet spot in terms of price?
Again, what seems to be emerging is that when a university subsidises the service it really makes a big difference. That said, our services are typically priced at about $3 (£1.60) per student per month. By and large, we've heard from students and from administrators that that works. It is certainly an acceptable price point, given that we're still in the early days.

To be clear, that's $3 a month for access to all the music they want.
That's right. On a tethered download basis. They cannot burn that music to disc or export that music to a portable device.

My understanding is that you're able to offer that low price because the record companies are cutting you a deal on the wholesale prices. Is that right?
That's right. The music industry, by and large, has been pretty open about the fact that the college marketplace is important to them. They started sending cease-and-desist letters to universities four or five years ago. So that trend has really stressed the importance of the college demographic as part of their strategy for getting people to use the services they should, and getting them away from the services they shouldn't. They've been generous and flexible in the deals they've worked with us.

How much of a discount are they giving you, compared to the commercial services like Napster or MSN Music?
Well, I should hold off on saying specifically, but you can kind of look at it in the sense that the typical standard price of our service is $3.49 per student today. When you look at the mainstream market prices, they start at a minimum of $7.99 and go to $9 — if not higher. So the price break on the subscription experience is substantial.

You're not getting a price break on per-download songs?
That's right. We offer permanent downloads on an 89-cent basis and albums at $9.99, but that's a choice we're making. It doesn't reflect any scaled-back economics on the label side.

Do you plan to move to portable downloads, with Microsoft's Janus software, like Napster to go?
Absolutely. It's on the very near horizon.

Given how popular iPods are on campus, how will it work for you not having iPod compatibility?
Stay tuned. We don't have iPod compatibility, but the deals we're putting together with device manufacturers will be a great response. I've spent a lot of time playing with these devices, like the iRiver H10 and the Creative devices. These are very strong products and certainly comparable with the iPod today.