Music Could Mean $300 Million To ISP’s Says Study
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.”
I liked the response from TalkTalk, one of the UK’s leading ISPs: “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.
http://torrentfreak.com/music-biz-hopes-to-end-piracy-by-tempting-isps-with-millions-100308/
They’re absolutely right, ISPs have no interest in doing the dirty work of the BPI and PRS, unless it makes them money. £103million seems optimistic to me, for a “download-to-own” service. This is the Spotify model, not the iTunes model, and seeing as Spotify can’t seem to make money from subscribers, and iTunes UK haven’t taken a hit in sales since Spotify showed up, I would conjecture that customers are vastly disinterested in paying a subscription for music which is tied to their computers. Music customers have iPods, they want their music to be mobile. The industry is still trying to direct the actions of customers, when it should be trying to monetise what customers are already doing.
“New” revenue…….
The whole point around this discussion is to determine what the user’s value piece is and where in the user’s value chain it exists. Would the value be the music itself or the bundle of services built around its accesability, portability and use? The obstacle the industry faces is not with the ISPs, rather it is with itself; aka the “crabs in a barrel” syndrome. The publishers and labels cannot agree on an equitable split of revenue derived from bundling via ISPs.Publishers & labels want ISPs to do the dirty work in exposing users who allegedly abuse the system, yet they don’t wanna PAY the ISPs to have them provide such a service. The data and results are pretty clear; The opportunity to reach a much wider audience, deliver more services and enhanced value to user. The key takeaway from these discussions must center on the level of services provided to the customer, and the value these services ultimately have for customer experience. This is applicable not only to music, but other forms of entertainment as well. We’ve already seen the expansion of many DSPs into movies, tv, games, etc., which all compete directly with music for user time attention and ultimately $$$$. While we await the results of the experimental trials between TDC, AAPT w/EMI, respectively, Spotify is revving up its launch into US, albeit to an already crowded field. While it would be a great disruption to see Spotify pair its expertise and experience with an ISP, Spotify has all but said it does not want to be “exclusive” with anyone. An extra 300 million for the music industry won’t fix all the holes that exist, but it would sure buy a whole lotta plugs to say the least.