The margins on selling songs online are small to non-existent that retailers can't survive without a device.

The labels are facing huge declines in album sales at the same time the IPOD business is booming.

I say, the labels need to stop thinking about making money from the music, but move to getting a piece of the device.

Today, Apple owns the legitimate online retailing market share with its device, but nine out of ten songs acquired online on an IPOD are from file sharing networks. Which means IPODs are huge stores of illicit music.

After working several years in the music technology sector, its clear that the music people still don't get it. Why don't they get it? It's simple, they have never been about making music easier to find, exposing more choice, and giving it to the consumer the way the consumer wants it. Up to now, they have been all about hits. One great selling album paid for the great parties, smooshing, first class airfare, and the nine other albums that went bust. Now that album sales are down 20%, they are getting forced to change.

Forget "SaaS" let's talk "MASS" ( Music A Software Service).

The Service

• DRM Free Music - Make it easy for consumers. Stop worrying that everyone will make copies and swap them illegally. They already do. You're only hurting your best customers.
• Make it easy to find new music, recommend it, and play it through a radio format. People don't want spoon fed tastes. Each of us are different and we like our music our way. Just help me find more stuff I like.
• Give access to it from any place and device. Make it so easy that when I want that one track to put in the background of some video I'm putting together that I don't even think about the file sharing networks.

The Technology

• Separate the control from the file and tie it to the device. Create a middle layer that sits between the content and the mechanism for playing the file.
• The middle layer keeps track of everything and authenticates the devices.
• If a device wants to be part of the best consumer music service then they will have to license this softare.
• Open up the APIs so all the cool recommendation engines can build on top of it.

The Business Model

• Subscription. I'll admit that the price point is a little tricky, but price it more than Netflix, but less than cable TV. Just let me have access to every song ever made at a reasonable price with no DRM from a trusted source and I'll pay the monthly fee like my internet bill.
• Supplement it with Ads. People search for music like crazy. Promoters will pay to get their music noticed because they still want people to come to their concerts, and big brands will pay to reach the audience looking for music.
• Device Software Royalty. Oh, by the way, Apple, we just made a killer music service and software to run it. We'll let the music play on an IPOD, but the users will have to go through a bunch of pain to get it on there. So much pain that they'll say the IPOD looks cool, but it sucks. I bet we'll make a new device player king because they give us a royalty to license our software that integrates with the best consumer music services around.