Virgin and Universal Announce Unlimited MP3 Subscription: First Take

Today Universal Music and UK ISP Virgin Media announced the launch of an unlimited MP3 subscription service.  Yes, you read correctly, ‘unlimited MP3’.  And, perhaps even more significantly this goes hand in hand with Virgin committing to a graduated response (i.e. Three Strikes and You’re Out) policy for music file sharers.    Universal and Virgin have come to the negotiating table with their highest stakes and in doing so each has got their respective Holy Grail.    And don’t underestimate how high those stakes are for each party – basically Universal and Virgin have each delivered as much as they have to offer and conceded as much as they can give: they’ve both played their Aces.  Once again Universal put themselves in the position of digital trailblazers, leaving the other majors to follow in their slipstream.

Also, there’s no coincidence about the timing of the announcement i.e. the day before the final Digital Britain report is published.  The graduated response approach runs counter to the more modest ‘technical solutions’ that the then Culture Minister Andy Burnham suggested the Digital Britain report will propose.  He even went as far as to say that the graduated response approach wasn’t workable.

But he also told the music industry and the ISP’s to fix their own problems rather than wait for the ‘heavy hand of legislation’.  Given that this is exactly what has happened, it will be interesting to see how the government responds.  Its also worth noting that the release is at pains to stress that disconnections will be temporary and that Virgin will not use its own traffic management technology to enforce the action.  Thus the ISP’s arguments that their traffic management technology isn’t well suited to dealing with individual accounts remain in play.

The service itself will come in two tiers: a premium tier which is the unlimited MP3 offering, in return for a 1 year broadband bundle subscription commitment, and a second lower tier that has limited MP3s.  Unlimited streaming is available on both also.  The 12 month MP3 model is what I’ve been advocating should happen with music subscriptions for some time now, and leaves Napster’s UK offering looking even more in need of fundamental revision.

The pricing of course will be key.  UK consumers have historically shown little appetite for premium subscription services: HMV and Virgin Megastores both tried and failed – though HMV is back for a second stab, Napster has failed to break out of a small niche, Wippit closed shop and Yahoo and Rhapsody didn’t ever bother to launch here.  Of course, none of those were as compelling an offering as this, and this is smartly targeted at households not individuals.  But pricing will be key.  Price it too highly and you’ll miss the disengaged music households this and just switch over already high spending ones.  Price it too low and CD sales will be cannibalized.

It will also be interesting to see whether this announcement means that the UK’s other major label backed unlimited MP3 offering Datz will be breathed new life.

Whatever the political fall out of this announcement, there is no doubting that this is a massive step forward and shows that where there’s a will there’s a way.  If the other majors come on board Virgin Media will have a market leading digital music service that will bring real value to their subscribers.  At the same time the labels will get a major ISP implementing a twist on their preferred anti-piracy measures without needing the government to do it for them.

Datz Music Lounge: What it Means for Apple

Datz Music Lounge hit the newswires today.  There’s plenty of skepticism about it but I’d advise not to get too hung up on the caveats (i.e. that it only has a couple of the majors, won’t include many new releases and requires a 100 quid up front payment).  This is as big a deal as Nokia’s Comes With Music and MySpace Music.  Why?  Because it changes the rules of engagement for digital music subscriptions.  This is the first unlimited DRM-free music subscription service.  Sure, it requires a hefty up front fee but they need to protect against misuse.  Also, more new release catalogue will get on there over time.  The major labels are, understandably, approaching this with some caution and are trying to do their best to minimize cannibalization of CD sales and Napster and Rhapsody.  

 

There’s a decent argument that both those battles are lost.  OK, CDs will be with us for a while yet, but Napster and Rhapsody simply don’t have a future in their current guises alongside CWM and Datz.  They need to change their game plans, and quick.

 

And, of course, the rumour mill has it that Apple are edging towards a launching a subscription service of some kind.  What does this mean for them? Given their current relationships with the record labels it’s pretty safe to assume that they didn’t have any inside information from the labels on the Datz licensing terms or business model.  So they may well find themselves in the far form ideal position of being in advanced stages of developing a service which will not stand up against Datz on paper.  But don’t get too worried for Apple, their far superior marketing skills (and budgets), coupled with their market leading product development and the ace of hardware integration will see them good.  

All in all, though, Datz just turned the page on the next chapter of music subscriptions.  A chapter that could be so significant as to make the market up to this stage look like little more than a preface.