Going hybrid: New Zune Pass pressures Rhapsody, Napster, eMusic

Last night, Microsoft upgraded its Zune Pass music subscription service, allowing users to pick 10 songs each month that get permanently added to their music collection. Along with significant price drops across its Flash-capacity line of Zune MP3 players, it looks as if Microsoft is making a serious push to compete with the iPod this holiday season.

Will Zune's 'Keep 10' program force the hand of Napster and Rhapsody?

Apple isn't the only one who should be looking at Zune with some trepidation. Subscription music providers such as Rhapsody and Napster will now be expected to match Microsoft's value proposition by giving their users a mixture of purchased and subscription tracks for a comparable monthly fee. The move toward an allotment of monthly DRM-free music downloads (Zune's download catalog is about 90 percent MP3) shouldn't come as a surprise to the subscription music industry, who've tossed the idea around before. While Napster and Rhapsody needn't worry too much about losing customers to Microsoft's Zune-only music subscription service, I wouldn't be surprised to see a similar program rolled out from them before the year is out, if for no other reason than to curb the wave of criticism they are likely to hear from their user base.

The larger question collectively faced by Microsoft, Rhapsody, and Napster, is whether or not the increased value of hybrid subscription services will finally pave the way to widespread adoption of the subscription music model. The math seems to check out from the consumer perspective, considering that when you subtract $10 worth of DRM-free music downloads from the Zune's $15 monthly subscription, you end up paying just $5 a month for unlimited downloads of DRM content and on-demand streaming of full songs.

Folding "permanent" music downloads into a subscription music service also helps chip away at consumer fears of watching their music collections brick upon missing a monthly payment. If subscription providers can successfully convince people they're paying $5 each month for their subscription and $10 for 10 permanent song downloads, the proposition sounds less risky. If users ever decide to opt-out of their subscription, at least they get to walk away with some of their favorite songs.

Online music retailer eMusic may also be feeling some pressure from Microsoft's infringement on its monthly MP3 download subscription model. eMusic's indie-heavy catalog offers substantially better prices (as low as $0.33 per track) for its monthly download allotments; however, it still doesn't have the major label content and full song streams of Napster, Rhapsody, and Zune. If the hybrid model offered by the Zune Pass finds traction, it may force MP3 retailers such as eMusic to retool their plans, as well.

What do you think? Does an unlimited subscription music plan with 10 DRM-free monthly downloads hit the sweet spot? Will this finally give Zune the advantage it has been looking for?