Lower prices key to MP3 subscription success

The cost of subscribing to music services will have to drop below $10 (£5.50) per month to attract a significant number of MP3 player owners.

According to research house Parks Associates, 62 per cent of MP3 player owners in the UK are unwilling to spend more than that per month for a music service subscription.

In comparison 41 per cent of US MP3 fans wouldn't stump up more than $10, with 49 per cent of users in France, 52 per cent in Germany, and 56 per cent in China expressing similar price inhibitions.

On average, one-third of the MP3 player owners across these five nations believe these music services should be free.

Park Associates said that the entry of low-cost services such as Yahoo! Music could reshape the marketplace.

"Companies like Yahoo! can afford to keep the price low because they have other revenue streams to subsidise their music services," said Harry Wang, research analyst at Parks Associates, in a statement.

The company said that music service providers need to be cautious when expanding across nations because consumers' price expectations vary from country to country.

For instance, MP3 player owners in the UK and Germany are more price sensitive than owners in France and the US. Companies should always keep such differences in mind when formulating their entry strategies, especially subscription costs, for a particular region, Wang said.