Will Apple Open an iTunes Buffet?

Apple (Nasdaq: AAPL) is reportedly negotiating with its recording label partners to offer iPod and iPhone users an all-you-can-listen plan for the life of the device.

According to a report in the Financial Times Wednesday, Apple would provide customers who pay a premium of up to US$100 over the retail price of an iPhone and iPod with unlimited free downloading privileges from the iTunes Store music catalog.

Apple, however, has not confirmed the report.

"We have no comment," Tom Neumayr, a spokesperson for Apple, told MacNewsWorld.

Not the First

As described in the Times report, the plan is similar to Nokia's (NYSE: NOK) "Comes With Music" program that the mobile handset maker unveiled with partner Universal Music last December. The offering would enable consumers who purchase a Nokia device with one year of unlimited access to millions of tracks available via Nokia's music service.

At the end of the one-year period, users are able to retain their downloaded songs without fearing that their music will no longer play once the subscription ends.

While the program launched in partnership with Universal Music, Nokia said it is in negotiations with other remaining major international labels to include their catalogs in the offering as well.

In its deal with the recording labels, Nokia is said to be paying the music company nearly $80 per handset. That sum will be divided among the companies based on their share of the market, according to the paper.

The sticking point with Apple, appears to be its refusal to go higher than $20 for each device, executives close to the negotiations told the Times. However, if the company can reach a deal with the recording companies, this may be the better offer for consumers, according to Zippy Aima, an ABI Research analyst.

"Apple's offer seems more lucrative for potential iPod and iPhone buyers who get access to the entire iTunes library, and it is not limited to a certain time period. The cool thing is that the consumer will not have to pay anything extra each time they download a track -- hence a better return on the initial investment made on the iPod or the iPhone. On the flip side, paying a premium on iPhone could also discourage potential buyers since these phones already fall in the high-price bracket," she explained.

A Business Imperative?

As the music industry continues to evolve and experiment with different business models to meet consumers' demands, the online music business has become increasingly competitive, said Aima.

"Hence it becomes imperative for device manufacturers and content providers to look at innovative ways to make this content available to their customers," she told MacNewsWorld.

Apple is facing competition from other players in the market. Consumers have several options available in order to access digital content. Players such as Amazon (Nasdaq: AMZN), Yahoo (Nasdaq: YHOO) and Wal-Mart (NYSE: WMT) are offering tracks free from digital rights management restrictions, which is something consumers have demanded, Aima pointed out.

Another trend in the market that several players have begun adopting is the ad supported model -- where the only investment for the consumer is to pay for the media player. Then the service provider will stream ad-supported music to their device at no extra price, save for the ads will be displayed on the screen. One such company that has adopted this model is Slacker, she added.

"Apple's consideration to offer access to the entire library of iTunes is to remain competitive in this ever-changing marketplace as different players are adopting business models that are encouraging consumers to look at options other than the iPod and thus promote sales of iPod and iPhones," Aima concluded.