MIDiA Exclusive: 7digital Acquires Leading Competitor 24-7

UK music services provider 7digital today announced they are currently considering the acquisition of longstanding competitor 24-7 from German retail giant MediaMarktSaturn (MMS).  24-7 is one of the longest standing companies in the entire digital music space, founded in 2000 (MMS took a majority holding in 2009). In a marketplace where the average life span of a digital music start up is 5.5 years, 24-7 is a veritable veteran and powers one of the very first telco music services: TDC’s Play. 7digital takes full ownership of 24-7’s business and its existing music service customers, including Play and Saturn’s Media Markt.

Market Consolidation

2016 was a year of consolidation in the white label services space, with Omnifone going into administration and Medianet getting bought by SOCAN. 7digital’s acquisition of 24-7 further concentrates the market. With the growing brand strength of streaming services like Spotify and Tidal, telcos have been increasingly looking to partner with those brands rather than build their own. Which was one of the key drivers of market consolidation. Those companies that have weathered the storm, of which 7digital is clearly one, have done so by diversifying away from telcos. For example, in 2016 7digital powered French retailer Cdiscount’s streaming service Cstream.

Sleeping Giant Retailers

That is not to say that opportunity does not still exist in the telco sector, it does, but a successful white label services provider now has to have a much more diversified client and product portfolio. Retailers will be a big part of that mix going forward. Especially so in markets where CD sales still account for a large portion of music sales. Germany, just and so happens to be the world’s 4^th largest recorded music market with 59% of its sales physical in 2015. So powering the music service of the country’s largest CD retailer has clear potential. Add into the mix the fact Media Markt is also the leading consumer electronics retailer with a very large base of online user accounts and the tantalizing prospect of an Amazon Prime / Echo type proposition emerges, should they ever decide to go down that route.

Powering The Next Generation Of Spotifys

Another real area for growth for companies like 7digital is giving pure play services a head start in the streaming race. Bringing a streaming music service to market is no easy task and many a start up finds itself 2 years into its journey wishing it had realised just how complex a business multi-territory music licensing actually is. By bringing licensing, tech knowhow and infrastructure to the table, companies like 7digital should be well placed when a post-Spotify IPO / sale generation of streaming services look to come to market.

7digital is not quite last man standing in the white label services marketplace (there is already a new crop of competitors emerging such as Cylo and General Harmonics) but it is now in the clear position of being the leading player with more than a decade of track record behind it. Do not under estimate the importance of that latter attribute to rights holders and potential partners, both of whom want to have the security of working with a trusted company that is still going to be around next week.

With Spotify, Apple and Amazon all set to follow up their strong 2016 with an ever stronger 2017, there is no doubt that the streaming market is heating up. It will be down to new entrants to ensure that the market does not become too concentrated around too few players. The newly expanded 7digital will be hoping to be a key part of that puzzle.

Why Niche Is The Next Streaming Frontier

If 2014 was the year of fear, uncertainty and doubt for streaming then 2015 is shaping up to be the year in which streaming starts to deliver.  In fact so far streaming has helped drive revenue growth in the first half of 2015 for markets as diverse as Italy, Spain and Japan as well as of course in the streaming Nordic heartlands of Sweden, Denmark and Norway.  All this despite an accompanying average decline in download revenue of 7%.  But as I have long said, there is only so far that 9.99 AYCE (All You Can Eat) subscriptions can go.  This value proposition and price point combination constrains appeal to the aficionados and the upper end of the mainstream.  Pricing will be key to unlocking new users (as Spotify’s focus on the $1 a month for 3 months promo shows). However some highly influential elements within major labels are more resistant to pricing innovation now than they were this time last year.  So don’t hold your breath for the long overdue pricing overhaul.  The other side of the 9.99 AYCE equation though is just as important, namely choice, or rather, less choice. In fact, done right, cut down, niche music offerings should be able to fix the pricing conundrum too.

Too Much Content Is No Value At All

Most people are not interested in all the music in the world and most people are not interested in spending $9.99 (or the local market equivalent) a month for music.   All the music in the world is a compelling proposition for super fans, but it is both a daunting prospect and more than is required for casual fans.  In fact the supposed benefit becomes a problem, the excess of choice begets the Tyranny Of Choice.  Indeed, just 5% of streaming catalogues is regularly frequented.  Most of the rest is irrelevant for most consumers.

Cord Nevers Are A Music Industry Problem Too

Most music fans like one or more kinds of music most.  While super fans are happy to pay for the ability to get everything, mainstreamers are not.  This is exactly the dynamic we are seeing in the video space, with consumers increasingly turning to smaller, cheaper services such as Netflix and Amazon rather than paying through the nose for an excess of cable channels.   The TV industry calls these consumers cord cutters (i.e. those that cancelled their TV subscriptions) and cord nevers (i.e. those that never paid for cable).  Now the music industry is facing its own cord never challenge: consumers who have never taken up a music subscription and have no intention of doing so.  In the past they would have spent some money on downloads, now they’re just watching more music videos YouTube.  The music industry quite simply does not have a Netflix for its cord nevers to go to instead of the full priced subscription option.

The Case For Niche Playlist Services

But give those more casual music fans a music app just built around their tastes and for a fraction of the price and the equation changes from zero sum.  Imagine genre specific playlist apps for $3 or $4 month.  A dozen curated playlists, a handful of featured albums and a couple of radio stations, all just of your favourite style of music and all streamed into a dedicated app.  Not only does this proposition deliver clear value, it also gives the industry an opportunity to open up new users that have thus far not been swayed by the broader utility play of AYCE services.

Imagine a Country app, a Classic Rock app, a Hip-Hop app, a Metal app, an EDM app, a Jazz app…. Each of these would create clear appeal within the mainstream elements of genre fan bases.  And while there is some risk of cannibalizing $9.99 services, this should be small if they are 100% curated (i.e. no on demand element) because they would be unlikely to appeal to aficionados and the super-mainstream.  These niche music apps could be delivered by standalone curated playlist service providers like MusicQubed, white label providers like Medianet and Omnifone, or even by AYCE services like Spotify ‘doing-a-Facebook’ by spinning out standalone apps.

The Marketplace Needs Niche Services Right Now

Niche services are not however a nice-to-have, an optional extra for the industry.  They will be crucial to unlocking the scale end of the subscription market and they will be needed sooner rather than later. Organic subscription growth (i.e. not including the temporary adrenaline shot of Spotify’s limited time price promotions) is not growing fast enough.  Apple Music looks set to add a significant amount of new users before year-end but many of those will come at the direct expense of the incumbents.  All the while YouTube is leaving everyone else for dust: the amount of net new video streams (i.e. free YouTube views) in H1 2015 was more than double that of net new audio streams.

The 9.99 AYCE model still has a lot of life in it yet, but just as the mobile phone market has far more choice than high end devices, so the subscription market desperately needs the diversity that niche services would bring.

Omnifone and the Bundled Music Opportunity

I spent this morning listening to Omnifone’s CEO Jeff Hughes and CFO Matthew Bagley rounding up what has been a good year for the white label music service provider.  Omnifone have been in the game for a lot of years and have seen their fair share of ups and downs.  Now 10 years on from being founded they have turned their first annual operating profit, from a record full year revenue of £29.5 million.

When Omnifone first came to market it had no shortage of direct competitors. But as the first wave of digital music services, powered by Omnifone competitors such as OD2 and MusicNet, smashed against the rocks of the new upstart iTunes Music Store, the marketplace soon consolidated.  Omnifone wasn’t quite the last man standing, but it certainly had a lot more competitive leg room.  Over the intervening years it has managed to establish a solid reputation for providing the back end infrastructure for music services for global brands such as Sony, Blackberry and Vodafone.

Over the last year or two though, Omifone has been quietly repositioning around the streaming zeitgeist.  The most visible ouput of this strategy to date has been the formation of the direct to consumer streaming service Rara, which has since been spun out of the company.  Hughes says of streaming music that Omnifone has “built a racetrack and now we want to put horses on it”.   This, he adds, will not just mean working with big global companies but also starting to work with a select number of ‘interesting’ start-ups, up to 5 a year.

Hughes points to bullish streaming and cloud music revenue forecasts by the likes of Strategy Analytics and ABI Research as an indicator of the market opportunity.  Although these forecasts are optimistic (to put it mildly) there is clearly a pronounced pivoting towards streaming consumption.  As regular readers will know, I have little faith in 9.99 ever being established a mass market consumer price point and it will certainly never drive the numbers some people are forecasting.  But work with a hardware company to absorb some or all of the cost of the music into a device or car (or even a home as Hughes suggested) then you start to have the ability to drive mass market adoption.

Four years ago I proposed the creation of digital music box for the living room, to halt the steady demise of the home hi-fi.  Back then the economics of the proposition had to be engineered around pre-installed downloads, making it nigh on impossible to make the concept work at mass market price points without dramatic license rate discounting.  Streaming changes all of that.  Now the concept of a $/€/£250 hi-fi unit with a year’s worth of fully integrated unlimited music is a genuine opportunity (and one that some one should address with urgency).  Omnifone is exactly the sort of company who could make it happen with the right device brand.

Of course Omnifone no longer has as much competitive leg room as it once did, with the likes of 24/7, 7 Digital and Aspiro all contributing to an increasing competitive marketplace.  But as streaming continues to help drag digital music out of doldrums, Omnifone could yet play a key role in the future of digital music. Though the ISP bundle opportunity appears to be diminishing with every month that passes, mobile carriers (e.g. Cricket Wireless) and handset manufacturers (e.g. HTC) are showing growing enthusiasm for bundled music strategy.  Once the dust settles on Spotify’s stellar year, and it is clear just how much all the other streaming service ‘boats’ have been risen by Spotify’s ‘high tide’, I expect we’ll see an even stronger case for the bundled music service, and in turn more demand for the services of Omnifone et al.

Mobile Music, Beyond the AppMobile Music, Beyond the App

Yesterday I delivered a keynote at the Music 4.5 Mobile music conference.  My presentation was entitled ‘Mobile Music: Apps, Ecosystems and the Cloud’ and here are some of the highlights.

I’ve been a music industry analyst for more years than I care to remember and I recall my first mobile music experience being on a Wap 1.0 handset with a monochrome screen and no graphics.  Mobile music has obviously come on a long way since then but it remains hindered by the recurring error of trying to do too much too soon.  Mobile seems to be perennially burdened with developers’ aspirations being one step ahead of what contemporary mobile technology can deliver. Witness the continually delayed arrival of ‘NFC payments are about to go mainstream’ as a case in point.  Mobile music’s poster child Shazam, was itself far too early to market.  I remember being demoed the tech by the founder a decade ago.  It took the advent, many years later, of the iPhone and the iTunes App Store to enable Shazam to become the runaway success it currently is.  Most start ups aren’t lucky enough to manage to wait for the pieces to fall in place.

Mobile music is undoubtedly going through an unprecedented period of buoyancy, perhaps even prosperity, driven by two key dynamics: the rise of smartphones and the app boom.  46% of UK consumers have a smartphone (see figure 1) which at first glance presents a great addressable audience.  But as my former colleague Ian Fogg observed, as smartphones go mainstream we end up with the quasi-paradoxical situation of smartphones with dumb users.  (By way of illustration one panellist referred to a customer request supporting for his HTC iPhone). Most new smartphone users don’t even use a fraction of the functionality on their devices and this creates big problems for music strategy.  Because mobile music apps are inherently the domain of the tech savvy, not the tech-daunted majority.

It is easy to think that the future of mobile is apps.  But as a cautionary tale consider that UK ring tone revenues plummeted by 32% in 2011.  Once ring tones looked like the future of mobile music.  Things change, and quickly so.

Apps are just one step in the evolution of mobile

Mobile Music has had more than its fair share of false dawns, largely because of wrongly set expectations.  The App revolution appears to have finally kicked mobile music into market maturity, though in actual fact it is just one more step on the journey.

One of the key reasons apps have been such a runaway success (Apple just announced its 25^th billion App download) is because they play to the unique characteristics and strengths of mobile as a channel.  They deliver fun and convenient experiences that are typically also social, location sensitive and instantaneous.  All integral parts of the mobile phone’s DNA.

All of which is great of course, but there is a risk that the current infatuation with Apps is a focus on form over function.  Apps may have driven a paradigm shift in mobile behaviour but they are in the end just software.  They are a natural part of the evolution of the mobile platform and experience. They play just the same role as software does for the PC.  But of course we don’t excited about having McAfee and Excel icons on our desktop (see figure 2).  The reason why it feels so different for Apps is because of the channel strategy, namely App stores.  There’s just one place to go and get every type of software you could want, all of course with the same billing details and some guarantee of quality of experience.  A far cry from the PC experience of searching the web for the right software, reading reviews and creating a new user profile on yet another online store, hoping that the retailer is safe and secure.

The history of mobile music to date can be broken down into three key stages (see figure 3):

• Stores
• Apps
• Access

A lot of consumer got burned in that first stage of mobile music stores, finding themselves subjected to poor quality experiences that paled in comparison even to the supremely average contemporary online stores.  The main mistake made was to expect too much from the rudimentary technology that was available: handset memory and screens were both too small and connectivity was far too slow and patchy.  WAP 1.0 and GPRS simply weren’t music delivery technologies.  The first stage of mobile music development failed because mobile tried to be a ‘mini-me’ PC music and was doomed to never stand up to the test.

The wave of the current App boom has lots of force left in it yet.  But when it finally does subside, the marketplace is going to be left realizing that Apps are the tool not the endgame.  The next stage of mobile music will be putting into practice what the app revolution has taught us about what mobile should be, what role it should play and where it should sit.

Value chain conflicts

Perhaps one of the most challenging aspects of launching a mobile music service is the conflict across the value chain.  In highly simplistic terms there are three key constituencies in the consumer mobile value chain: the handset makers, the carriers and the retailers.  Of course sometimes one entity can play two or even all three roles.  Each wants to own as much of the customer  relationship as they possibly can.  Throw music in the mix and suddenly each of those stakeholders is busy trying to leap frog the other (see figure 4).  This of course is what Nokia found themselves up against when trying to take Comes With Music to market: the carriers simply saw Nokia trying to circumvent their own heavily funded digital music services and yet Nokia was still asking them to subsidize those very same handsets…

The mobile music service value chain has become a complex place to navigate, with not only competition but also a diversity of business models each with their own unique twist on carving up the revenue pie (see figure five).

Value Chain Conflict Translates into Consumer Confusion

But value chain conflict doesn’t just impact business, it hits consumers as well, with an increasingly confusing mish mash of music brands on any given phone. And then of course there is the added complexity of ecosystems and operating systems.  Consumers are inadvertently being forced into make bets on their long term mobile future.  Once a consumer has opted into an app store ecosystem, paid to download apps over a 2 year contract, uploaded their music to a locker, saved their playlists etc it becomes very hard to move.  Not so much velvet handcuffs as clapped in iron chains.  Add to that the complexity of handset operators developing their own app and music service ecosystems within each of the OS siloes (see figure 6) and an increasingly complex picture emerges.  All of which skews the field to music services which are not tied to any single operating system fiefdom.  Perhaps the biggest winner out of all of this mobile music fragmentation will be Facebook?  Currently quietly collecting the world’s most comprehensive set of music service user data, come the end of the year Facebook will be uniquely well positioned to act as cross-service, cross-OS conduit.  Spotify might be making a play for being the operating system for music (I say the API for music, though that’s probably semantics) but Facebook could become operating system for music *services*.

The Future’s Bright, Probably

There is no doubt that mobile brings a huge amount to the digital music equation, making music discovery, acquisition and consumption more immediate and fun than it has ever been.  With the help of the likes of TopSpin and Mobile Roadie it has become the ideal conduit for deepening direct to fan relationships.  And though mobile will play a key part in cloud focused music services it is the app developer community which has transformed mobile most. While paid mobile music services remain mired in internecine value chain conflict, Apps have transformed mobile as a music channel from an awkward, underperforming curiosity into something vibrant and truly differentiated.

Tablets add important context.  They turn the conversation from mobile music strategy to connected device music strategy.  (They  also do a better job at most music experiences than phones).  In fact talking about mobile as a separate channel is no longer that instructive, rather we should think about mobile as one consumer touch point in an integrated channel and platform strategy.

But, once again, it is crucial to consider that Apps are the enabler, not the objective.  Remember, ringtones were the future once too.  The challenge for developers is to navigate through the wild west gold rush, and establish long term learnings from the App boom experience.  Think of the App economy as one big market research project (that’s certainly how Apple views it).  When the wave subsides the mobile music landscape will have changed forever.  Artists, labels, managers, developers, carriers, handset makers all need to work together to ensure that that future is as positive a force for the music industry as the early signs suggest it could be. The depressing alternative is that we look back in 5 years at the App era as another ringtone bubble.

Rara and the Bid for the Mass Market

Today Omnifone made the move from B2B2C music service provider to consumer facing brand with the launch of their streaming music service Rara, which is being operated as an entirely separate company utilising Omnifone’s technology infrastructure.  The knee jerk reaction would be that this is bandwagon jumping in an increasingly cluttered streaming market, joining the likes of Spotify, Deezer, We7 and Juke.  But the folks at Omnifone have been in this business long enough to not simply pursue a me-too strategy.  Indeed differentiation is at the heart of the Rara strategy.

Targeting the mass market

Regular readers of this blog will know I have long argued that the paid digital music market is stagnating because it hasn’t got the tools to reach beyond the tech savvy music aficionado base it has addressed so far (mainly through iTunes).  Spotify’s recent US-and-Facebook -spurred growth has been encouraging but we are still talking about single millions of premium subscribers globally, most of whom are the same aficionado segment all other services have been chasing for the last 10+ years.  If digital music is ever going to break out of the confines of the few per cent of consumers per market that will pay for those services a new go-to-market strategy is required, as is a new series of music products.

This is where Rara come in.  They’re not bringing the new product (it will be years before anyone gets the licenses for the required next generation products from the record labels) but they are bringing a new approach to customer acquisition and a new approach to user experience.

Two key differences in approach

Rara’s target is unashamedly the mass market, the consumers the digital music bandwagon is increasingly leaving behind.  Rara uses two key tactics to reach these customers:

• Changing the funnel.  Spotify (with whom most people will rightly or wrongly benchmark Rara) use their free ad supported tier as their customer acquisition funnel.  The losses associated with supporting free Spotify users is their customer acquisition cost.   Rara’s funnel though is a combination of traditional marketing tactics (which will be backed by substantial marketing spend) and an innovative pricing strategy.  Taking a leaf out of some magazine subscription models, Rara gives consumers an introductory 3 month price of 99p / 99c which automatically switches to the full rate at the end of the period.  If this approach works, it will enable Rara to separate the wheat from the chaff, with prospective valuable customers self-selecting by submitting their payment details to get access to the heavily discounted rate.  The conversion rate for these consumers should be much higher than for ad supported free users (many of whom sign up simply to get free music).
• Changing the experience.  Digital music services and players are notorious for looking more like accountancy software than they do music software.  The ‘music collection as excel spreadsheet’ is a paradigm we have all grown used to.  But there in lies the rub.  Most of you reading this will be savvy users who have grown to tolerate a series of  inherently poor user experiences.  For the digital hold outs this just serves as another reason not to go digital.  Rara takes a different approach, giving users a highly visual experience, with colourful graphics and mood-based playlists at the core of the service.  Of course you can still dive into the excel spreadsheets but you can quite easily never need to.

Rara’s approach is not a radical departure, rather a series of welcome innovations on the current model.  Critics will argue that it is ‘just another streaming service’.  But streaming is the delivery vehicle for the experience rather than the product itself.  Think of streaming like cable TV infrastructure, and services like Rara, Spotify and Deezer as the cable companies that package channels over them.

Rara isn’t *the* answer to the music industry’s woes.  No single service is.  But with a fair wind, it could well become an important part of the answer.  The music industry desperately needs the mass market brought into the digital fold.  It needs more fresh thinking like Rara’s to help achieve that.

 

BBM Music: First Take

Today Blackberry announced their anticipated BBM Music service, which it transpires is powered by white label cloud music stalwart Omnifone (who also power the likes of Sony and Vodafone).

In short the service offers:

• 50 tracks per month for a £/$ 5.99 fee
• Is available to Blackberry Messenger (BBM) users
• Users’ tracks are available for their BBM friends to listen to (so the more friends with the service the more music you have access to)
• It is launching in Beta in the UK, US and Canada today and will eventually roll out to 18 countries

Blackberry have done something with BBM Music that many other services haven’t: they have targeted a specific defined consumer segment. Which in turn is something that the majors, Universal in particular, are increasingly looking for in music services they license to.

Blackberry has weathered a lot of tough marketplace scrutiny over recent years with many questioning how RIM will deal with the iPhone threat.  Those concerns are valid ones but primarily relate to the email-focused business users and misses the massive importance of the youth segment to Blackberry adoption.  Blackberry’s youth appeal largely stems from BBM presenting a cost-free alternative to texting for text hungry youths.  Blackberry’s ability to successfully simultaneously target these two almost diametrically opposed segments with the same device portfolio has been little short of masterful.   This was well illustrated to me when a friend recently told me about when his teenage daughter saw him checking email on his Blackberry she asked him “what do you need a Blackberry for Dad?  Aren’t you too old for one?”!

So by targeting their youth centric installed base of 45 million BBM users with a cheap, inherently viral and social music service plays to one of Blackberry’s key strengths.  Of course direct comparisons with Rhapsody, MOG, rdio, iTunes, Spotify etc are unlikely to be unfavourable, but that’s simply not what BBM Music is about.  We’ve reached the stage of maturity in digital music where we shouldn’t be talking anymore about ‘an iTunes killer’ or a ‘Spotify killer’.  Instead the music industry needs targeted segmented offerings that grow the market by engaging with un-penetrated consumer segments.  In that context, BBM Music should be a valuable addition to a digital music marketplace that is in real need of new differentiated services.

Finally….the timing of the announcement, off the back of BBM’s new found infamy as the communication method of choice for London’s rioters is unfortunate but does open up some interesting potential marketing slogans, such as ‘download while you loot’ and ‘so cheap it’s a steal’….
And if you missed it, don’t forget to submit an email subscription to this blog to get a freecopy of my latest report: ‘Agile Music: Music Formats and Artist Creativity in the Age of Music Mass Customization’.  See here for more details.

What the ISPs and the Record Labels Need to Do Next

The UK music industry and ISPs have been working towards the goals of the government-brokered Memorandum of Understanding since last summer but we’ve yet to see concrete results, in particular with regards to new music offerings. All stakeholders recognize the crucial importance of having a big fat carrot to accompany the stick. Yet we still seem to be some distance from the ISPs being empowered with truly compelling music services they can offer to their subscribers as a genuine alternative to file sharing.

On the surface of things this week’s reported tie up with Sky and Omnifone for a music subscription services seemed like a positive step forward. However, the lightest of scratches beneath the surface reveal it to actually be a microcosm of broader problems. Omnifone’s press announcement pointedly doesn’t even mention Sky as a partner for their new ISP white label offering. Although many press reports imply Sky have signed up, the only actual substance is that Sky are considering using Omnifone to power some of the technology on its offering.

The nuanced specifics here are important. Last year Sky and Universal Music proudly announced a music JV. Details were scarce in the extreme but the strategic ambition was bold. Sky has since then not been able to add any of the other 3 majors onto the JV roster. Part of this may well relate to the other majors getting increasingly narked about UMG’s highly proactive (even aggressive) digital strategy. But more broadly it talks to the fact that there is a lot of distance between what Sky wants to be able to offer its customers and what the labels feel they can provide for the financial terms Sky are willing to consider. This follows on the heels of Virgin Media dropping pursuit of PlayLouder’s MSP offering due to label concerns and also 7Digital so far failing to get any ISP to take up their white label offering.

The root of the problem is that the ISPs want to offer consumers more content and flexibility for less money (and pay the labels less) than the labels are willing to countenance.

But most UK ISPs have good reason for having high demands, as do many other continental European ISPs. They’ve been burnt once, launching poorly featured, weakly differentiated services near the turn of the century. Their inadequacies (and the subsequent failures) weren’t the fault of the ISPs per se, rather they were products of their time, restricted to the terms that the major record labels were willing to countenance back then. (e.g. 99 cents downloads that could only be played on your computer)

Apple changed the rules of the game and the failings of the ISP services were only accentuated.

The ISPs know now that if they get back in the game they have to be differentiated and be able to compete with Apple. But they also know that most of their file sharing subscribers are unlikely to be able or willing to pay much either. So the ISPs want compelling (ideally MP3) services that cost little or nothing to consumers. The labels business models can’t support that model without the ISPs picking up a lot of the cost, which they can’t afford to do due to falling broadband ARPU.

So we’re in a stalemate that nobody really expected to be in. (Indeed back in the summer of last year BMR CEO Feargal Sharkey said he expected to have something to announce “within a matter of weeks”). The labels thought the ISPs would lap up what they had to offer, and the ISPs thought they’d get more. The record labels are not about to change the fundamentals of how they value their IP, but there are some viable mid term compromises that can get us out of this malaise:

• A series of Joint Ventures: MySpace have created a blue print for using this approach to get favourable licensing terms to deliver free music that wouldn’t have been financially viable otherwise. And the labels get lots of potential upside and to extend their role in the value chain. JVs would bind the ISPs and labels closer together, create common purpose and engender greater strategic flexibility.
• Focus on free, not MP3: the success of Spotify has shown that MP3 isn’t everything. Free music streaming with good catalogue and easy to use UI is actually a winning formula. The business case for hiding the cost of a streaming service in the access subscription is a lot stronger than for MP3 downloads
• Leverage all elements of the multiplay: ISPs typically have multiple products (TV, mobile etc.). Fully leverage these. Creating a compelling music offering means going beyond a balkanized online vs mobile vs TV strategy. Fully integrate and actually drive other business areas in the process e.g. extending a streaming music offering to mobile via an on-handset app will drive mobile data usage

Time is of the essence: every day that goes by, file sharing grows in popularity and becomes more entrenched. So agreeing on intermediate solutions with a view to a longer term roadmap is far favourable to stalling until the perfect solution can be agreed upon.