Virgin Media and Universal Music Group  have taken the plunge into an ISP and digital music collaboration to provide customers in the UK with unlimited access to MP3 downloads and streaming of Universal label artists. Although the exact monthly fee for this service has yet to be determined, Virgin plans to provide the service for the cost of a couple of albums a month. Virgin is in negotiations to bring other music labels’ catalogues into the service and is set to launch the service in time for Christmas of 2009.

This Virgin/Universal collaboration is not the first of its kind. In 2008, Danish ISP company, TDC, teamed up with EMI, SONY/BMG, and Warner Music to provide unlimited free music downloads at no extra cost to their broadband and mobile ISP services. Launched in April, TDC’s “PLAY” music service gave customers access to over 1 million music tracks for download. As protection against piracy, these downloaded tracks were DRM protected and expired 30 days after the cancellation of the internet subscription.

In contrast, the Virgin Media service will provide MP3 downloads that are unfettered with any protective encryption, allowing customers to keep the MP3 regardless of the tenure of subscription and to be able to play the MP3s on any device.

As part of the deal with Universal, Virgin will be committed to policing their ISP service for piracy activity, especially any peer-to-peer (P2P) file-sharing. The point of the unlimited downloads was to lure customers away from file sharing networks, the idea being that if customers could legitimately download to their heart’s content through their service, they would not need to resort to piracy networks. To this end, Virgin plans to implement its graduated response system, an adoption of the French “three strikes” regime. In consultation with BPI (Britain’s music trade body), Virgin’s plan would temporarily suspend the internet connection of any repeat file-sharing offenders. Virgin’s three-strike approach differs slightly from the conventional, however, as a permanent suspension/disconnection is considered disproportionate punishment, according to chief executive Neil Berkett.

Virgin is also very serious about including education as a part of their approach to anti-piracy. Last year, Virgin issued 800 warning letters to its ISP customers regarding their participation in illegal file-sharing.  With their new service, Virgin will continue to educate their customers about online piracy and to raise awareness of legal alternatives.

The success of the service’s anti-piracy goal will ultimately depend on whether Virgin will be able to get other record labels on board. Customers engaging in illegal downloading would only stop if they had access to all the songs they would normally search for through P2P networks. A catalogue limited to only a small subset of what is available in mainstream music, regardless of the unlimited access, may not be enough incentive for habitual downloaders to do the right/legal thing.

Collaborating with Universal, one of the major pillars of the music industry, is a large step forward in their goal. While still in negotiations with other labels, an issue that may pose a problem for Virgin is in showing these record labels that the gains from this service will supplement other digital music sales and not simply steal customers away from other services such as iTunes.

Although many details have yet to be released, Virgin’s approach seems to be an excellent adaptation to past incarnations and has the potential to solve many of the piracy issues of the music industry. It is essential for the music industry to embrace the development of the file-sharing and downloading culture and it is great to see the industry innovating new ways to capture the attention of music consumers.

There has been a lot of buzz lately over approaches combining the role of ISPs with digital music sales. In light of the abysmal state of CD sales in North America, it is no secret that the Canadian music industry is itching for a revolutionary model to bring the industry out of its slump. The success of Virgin/Universal’s plans to launch their service in the UK may be a stepping stone for such a service to also develop in Canada.

Posted in Digital Downloads, Innovation, Internet, Internet Sharing, Music Industry, Telecommunications