Summary:

It’s been about three years since people first started talking about how bundling music services with internet access could realistically pr…

It’s been about three years since people first started talking about how bundling music services with internet access could realistically provide hard-pressed labels with vital new income streams. But there are still precious few such services in operation.

So Universal, the bravest of the four majors when it comes to licensing such new services, commissioned Ovum to research the area for fellow members of the British Phonographic Industry umbrella group…

Their finding – if the top UK ISPs added bundled music options this year, it would earn them at least £100 million, and as much as £203 million, by 2013, recducing customer churn by 10 percent (£20 million a year) in the process.

But Universal, in pointing this out, is not merely being helpful to the ISPs. The label has been first to license Comes With Music, first to license Sky Songs and first to license Virgin Media’s upcoming unlimited music offering. But its counterparts are slower, and still haven’t mandated Virgin’s bundle – as digital sales plateau after what has been a 30 percent, five-year sales dip, this research looks like an attempt to march fellow labels and other service providers forward to further deals…

– It concludes that ISPs are now a “critical” future music distribution channel.

– ISP-bundled music offerings could make 41 percent of UK digital music revenue, on a “medium adoption scenario”.

– Ovum reckons digital music is a value-add extra that will stop subscribers leaving.

The methodology was interviews and it’s not clear how Ovum got to those millions. What’s missing – consideration for the pricing of any bundled service. But here’s a corroborative finding from last year’s EMR Digital Entertainment Survey, which paidContent:UK helped create:-

The research also found a consumer willingness to pay their ISPs extra bolt-on fees for bundled content. Just over a quarter of respondents would add an extra £25 a month for unlimited music downloads, or £5 a month for 50 tracks; 34 percent would pay £1 for unlimited streaming music.

In hindsight, these higher amounts seem optimistic. But the main point remains – when are labels and ISPs going to agree on terms that allow both to benefit?

BPI tells paidContent:UK: “Our aim here is to get ISPs motivated to develop their own bundled digital services by showing them the positive business case that exists.”

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