3 Major Labels Resist Unlimited Download Model
ISP Virgin Media and Universal announced an unlimited download service that would allow subscribers to keep the tracks. But Sony Music and EMI are now signaling that they don't believe in the model and WMG has yet to decide.
The fear is that an unlimited download service will be most attractive to heavy downloaders who are already paying for tracks and hoping to pay less for more. “We want to work with Virgin Media as a partner but any deal has to sit comfortably with how we value our assets against how it values its customers,” a label source told New Media Age. “We have to evaluate each deal as it comes in and make sure we’re happy with the overall value of the proposition.”
A source at Universal source chided the other labels over fears that
the new service would cannibalize sales elsewhere and that their
research indicated download levels would average 35 tracks a month. “The labels don’t want unlimited music services marketed to the regular
music buyer,” said Steve Mayall of consultancy Music Ally. “What Virgin is trying to do is
groundbreaking so it’s complicated to set up and the problems could be
seen as speed bumps rather than road blocks. But it does need to find a
way past them.”
I’d LOVE to see what they’re proposing to the music publishers for unlimited mechanical reproductions – no matter whether the labels want to do this or not, getting publisher buy-in is the real bugbear…
What is the payment model? Divide downloads by net revenue and distribute accordingly? If there is a flat minimum per download, it’s hard to see how they will be profitable. And if there’s not, I don’t see any label going along with it.
It seems like eMusic’s model minus the download limit, which is the factor that guarantees a certain minimum payment per song. It’s just hard to see this working, at least if they depend on having major label releases…
(For clarity, I think 35 tracks/month is ludicrous. Median maybe, but not average.)
Funny how history repeats itself – this is very similar to what Napster was saying back in 1999, that most users would “eat a lot” at first, but then consumption would level out, and they’d still be paying the monthly subscription fee.
Anyone who thinks Virgin/Universal’s offering about is unrealistic really has no business criticizing the major labels for saying no to Napster back in 1999, when such a concept was WAY more radical and contentious…
Mechanicals in the UK are based on a percentage of wholesale and automatically get paid to MCPS / publishers, so there isn’t an issue with publishers in the UK (where this is being proposed). But yes it would be a huge issue here in the U.S. since mechanicals are based on a penny rate in the US.