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Updated: Omnifone Touting Music Subscription Service To ISPs; Will Power Sky’s Upcoming Service

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Update 2: Despite what we were told in an earlier update, we now understand that Omnifone’s new product will facilitate Sky’s new unlimited music download service, which will be ISP-agnostic. MusicStation Next Generation will provide the backend technology to Sky’s service but, despite having deals with each of the major labels, won’t bring its licenses; all licensing will be handled by Sky, which is also developing the consumer-facing application for itself. Sky in July announced only its intention to launch such a service, with Universal an equity-holding JV partner.

We also understand Sky’s music service – which, by virtue of being ISP-agnostic, could even be subscribed to by customers of other providers like Virgin Media (NSDQ: VMED) – will include a number of price tiers, just like Sky’s TV service. A baseline monthly subscription will offer unlimited web streaming, there will be bundled packages offering download-to-own MP3s, and there will be the ultimate, a la carte unlimited downloads. The big question – will any of this be attractive enough to entice people away from illegal options and to pay for music again? Also unresolved – has Sky managed to bring the other three labels aboard, and will they be equity holders?

Original: Omnifone, the unlimited music retailer best known for its mobile MusicStation product, is the latest vendor to try and pitch its ability to save both ISPs and the music business. At Mobile World Congress, it’s touting a new addition to its product line-up, MusicStation Next Generation, that would let ISPs offer the legal, monthly-subscription service over their networks as an alternative to illegal P2P. There are no details yet of any ISPs having taken up the offer, but names of those that have are coming “shortly”, the announcement says.

The course for ISP-operated unlimited music downloads is frankly not running smoothly
7Digital made a pitch just like Omnifone’s in August, but has not been able to win any ISP customers yet.
Virgin Media has bailed on its plan to implement Playlouder MSP’s technology, that would have allowed it to pay royalties for tracks currently transferred illegally over its network by subscribers to a new Music Unlimited service.
BSkyB’s JV with Universal, announced in July, to start a new monthly subscription service, has stalled as the pair tries to attract the remaining three majors and others.

It looked like a nascent market (ISPs needed to offer legal music if they were to avoid new legislation), but the Digital Britain report, which includes few legal threats to ISPs, has removed the incentive to create new services.

What makes MusicStation Next Generation different? The company’s parallel mobile offering has already struck real deals with another kind of service provider, mobile operators; and this latest product seems also to tout Omnifone’s new relationship with Gracenote that brings its service to new devices like car radios and home entertainment systems.

Update 1: Though Telegraph.co.uk later suggested Sky’s ISP has signed to the new service, it hasn’t. At least, not yet. Sky is amongst the ISPs Omnifone is in discussion with. No ISP announcements to be made just yet.