A new study commissioned on behalf of Universal Music reports that if ISPs got involved in the digital music market, they could make millions in the years to come. But one can’t help wondering that this is less about the music biz helping ISPs to make more profit, but more about giving them an incentive to do something about piracy.
Around seven years ago when pressure was first starting to form against the then-fledgling BitTorrent scene, attitudes were pretty much as they are now. “They’ll never stop it, we’ll always find a way,” cried the masses grabbing music, movies and software for free, and few disagreed.
Of course, there will always be a way to acquire media free of charge, the last few decades have shown us that. But the media industries are now having to find new ways to defend their corner. There has always been talk of Big Movies or Big Music ‘owning’ politicians and lawmakers, but while this is true to the extent that their immense lobbying power allows, there has also been another more serious threat on the back-burner.
If the RIAA or MPAA owned – literally – all the major ISPs, they could affect the piracy landscape quicker than ever before. A simple rewrite or tweaking of subscriber’s Terms of Service would ensure that anyone proven to be a pirate could be ejected from the Internet in an instant, no laws needed. While this is unfeasible right now, there are easier ways of encouraging the same, like business partnerships and promises of profit.
According to a new study titled “Is There A Commercial Argument For ISP Music Services” commissioned by the BPI on behalf of Universal Music and carried out by industry analyst Ovum, if the UK’s most prominent ISPs all more or less immediately launched subscriber packages that included bundled music, they could generate new revenues of £103 million by 2013.
The BPI say this figure is based on a ‘medium adoption scenario’ and is an amount equal to 41% of the total 2009 digital music market. In an ‘accelerated adoption scenario’ the study says that the revenues could nearly double to £203m.
Aside from the profitability implied by these revenues, the report seems keen to offer other incentives to the major ISPs – Virgin Media, Sky, BT, O2, Orange and TalkTalk – to get involved in the music business. The study suggests that the inclusion of a music element to bundles would reduce subscriber ‘churn’ – the rate at which customers cancel their contracts. The example given is that an ISP with 3.5m customers could save £20m if the bundling of music cut churn by 10%, although there is no information to show that it actually would.
While suggesting good business is to be had in getting a little involved in the music business, the BPI is keen to point out that for ISPs, the more involved they get, the more they can make.
“The revenue prospects for bundled ISP music services would be substantially increased if services were offered to consumers in tandem with meaningful action to tackle illegal music downloading,” say the BPI.
We approached TalkTalk, an ISP referred to in the study, for a comment.
“TalkTalk thanks the BPI for its strategic business advice. Though some may question the value of such insight from an industry which has failed to acknowledge the impact of new technology on its own business models and is pressing the Government to criminalise its biggest customers,” a spokesperson told TorrentFreak.
Clearly TalkTalk doesn’t want to do the music industry’s dirty work for them, but if other ISPs got heavily involved in the music distribution business it might be considered natural for them to try and protect their revenues. That said, the leap from simple common carrier to having a vested interest could complicate their position.
Nevertheless, another issue the report highlights is that heavy competition is driving down the price of broadband services while consumer desire for bandwidth continues to increase. In any business working in plain commodities, the desire to bring in more profitable “added-value” products is strong.
“It’s increasingly clear that it isn’t smart to be a ‘dumb pipe’. This report shows that the revenue potential of digital music services alone makes sound economic sense for ISPs,” said BPI Chief Executive, Geoff Taylor.
So let’s imagine that the ISPs want to get involved in this market, offering bundled music for an extra £6.49 (the price level suggested in the report) – what would be so wrong with that? It’s pretty affordable after all, so why not give it a chance?
“With the right service platform, user experience and merchandising strategy, ISPs have an opportunity to reach a green-field digital music market that mainstream download-to-own services such as iTunes do not reach today,” explains report co-author and Ovum’s principal analyst, Adrian Drury.
So these suggested services aren’t of the “fill up your iPod” type, but of the “can only be used sitting-at-your-computer streaming services with limited download allocation” type. Surprised? Us neither.
Trying to convert those currently using file-sharing services over to paid models is already a big challenge. Trying to switch them to an inferior product whilst being hounded by their ISP on behalf of the music industry is a different matter altogether, and something TalkTalk refuses to be drawn into.
“Perhaps there is a goldmine for ISPs in legal downloads but that will not alter the fact that the copyright protection proposals being proposed threaten human rights,” their spokesperson told us. “They will penalise innocent broadband customers. They are expensive, unwieldy and utterly futile.”
If the record labels really did own your ISP, this is the type of environment subscribers would be pushed into. And you’d still have to fill up your iPod elsewhere at additional cost.