The most striking point about [last month’s UK] announcement from Virgin Media and Universal Music about the launch of the subscription service is that it has taken so long. Virgin Media says it’ll offer unlimited downloads for around the cost of 2 CDs a month. This is all well and good but comes almost a year after a virtually identical deal between Universal Music and Sky which has yet to result in a live service. So why haven’t more labels signed up, especially with findings such as Music Ally’s that 46% of people would prefer to get music from their ISP?
This is striking because record labels have transformed their attitudes to digital over the last couple of years. They’ve knocked down the protectionist walls that almost killed the industry and embraced, to varying degrees, everything from DRM-free music to a variety of models across online and mobile. But when it comes to ISP deals, it seems the brakes have been applied. This is because the power struggle here is more intense, with both sides believing they hold the stronger hand. The music industry is desperate for scale. With margins falling, compounded by subscription models, labels need huge audiences to sustain their business. As Universal’s Francis Keeling says, “It only makes sense to do deals if we can get really good scale.”
This is why the likes of Sky and Virgin, and Nokia Comes With Music, are attractive to labels. But the potentially huge audiences they command mean that they can demand ruthless revenue-share deals, especially as ISPs see music as merely another commodity service they can bolt onto their utility offering of broadband. This will only accelerate as more distribution issues, such as multi-territory licensing, are addressed.
The hoary old adage that content is king is becoming less relevant as consumers become awash in a sea of content. Convenience, as pioneered by iTunes, is moving to take the throne. Whether it’s Virgin or a start-up like Spotify, innovation in how you let people access, share and personalize content will be the only way to gain market edge.
Justin Pearse June 18 2009
Reprinted from New Media Age