A new study titled “Is There A Commercial Argument For ISP Music Services” commissioned by the BPI and carried out by industry analyst Ovum, concludes that if the if the top ISPs in the UK embraced music subscriptions, they could generate new revenues of £103 million ($106M US) by 2013.
The study used a medium adoption scenario, equivalent to 41% of the total retail value of the UK digital music market in 2009. Ovum also calculates that an accelerated service-adoption scenario could push the bundled digital music services market to as much as £203 million($307M US) in 2013. Increased efforts to stop piracy could push the profits even higher according to the report.
Music Reduces Customer Churn
Additionally, Ovum found that bundled music services would help reduce the cost of ISP subscriber churn. A big ISP with around 3.5m customers would generate indirect value of more than £20m per year if its bundled music service cuts churn by just 10%.
Geoff Taylor, BPI Chief Executive, welcomed the report: “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.”
“UK music companies want to innovate and develop exciting new digital offerings. ISPs such as Virgin Media have recognised that legal digital music services offer a more exciting and profitable future than continued widespread piracy.”
Adrian Drury, the report’s co-author and Ovum’s principal analyst, said: “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.”
“The opportunity in revenue terms for the leading UK ISPs is compelling, and in a crowded, increasingly mature broadband market, ISPs can differentiate their value-added offerings with innovative music services.”
