This will only work if they can cultivate collectors, either for their products specifically, or from the artists they work with. Because they take up so much space, they have to be something you'd want to show off. In other words, because they are obviously functionally deficient, there has to be some other mechanism to make them desirable. Obviously I can listen to an album all the way through on a small iPod, or better yet on the phone I'm already carrying.
They could also achieve this via exclusivity: get small acts to release a new album only via this format for the first week, so people have to experience the album in order before it's on iTunes and everyone just buys the popular song.
I love that music has become so portable that you could actually complain that this form factor takes up too much space.
Here's a list of album formats that were around before MP3s, all of which are larger in size than a button:
CD
Minidisc
Cassette Tape
8-Track Tape
Reel-to-Reel Tape
Record
Wax Tube
With only one exception above, music storage has gotten smaller with every new format. At this point it's essentially zero. Still, if you told a kid from the 80s that his whole wall of cassette tapes would one day fit in a McDonalds bag full of buttons, he'd be pretty stoked.
You have a great point here, limited availability would work here (only 1000 copies made), and would be more meaningful than limited runs of traditional media (which is more easily duplicated).
I adore this idea. This product feels like it could be the modern day memorabilia, like records for some of the classic bands have been for some time now.
I can certainly see someone auctioning off their button, with few having been in production, for some huge artist, charity benefit, or something of that sort. You can't really do that with an MP3.
I don't think so, the point wouldn't be to completely lock it down or something. The music would probably get on the internet, which is fine (to me, at least). But for most consumers who choose to buy music, they would have to choose between buying the "collectors edition" or waiting a week to get it on iTunes.
They could also achieve this via exclusivity: get small acts to release a new album only via this format for the first week, so people have to experience the album in order before it's on iTunes and everyone just buys the popular song.