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Thursday, April 3, 2008

Warner Music seeks to offer 'all you can eat' digital music

Broadband customers will soon be able to download unlimited music from the major labels as part of their monthly contract


Consumers can look forward to unlimited music downloads as part of their broadband contracts, following confirmation that Warner Music is in talks with the main British internet service providers.

The record label is actively pursuing deals with the ISPs, aiming to establish a new business model in which customers, or ISPs, pay a subscription fee for access to a vast library of songs, rather than buying them on a 'per track' basis.

Separately, three of the major labels – Sony BMG, Warner, and EMI – announced today that they had concluded a deal with a Danish telecommunications company which will open their digital catalogues to broadband and mobile customers as part of their monthly contract.

Confirmation of the UK talks comes after it was reported that Warner's chief executive, Edgar Bronfman, had hired a senior music industry consultant to pursue a similar strategy in the US.

It has been suggested that American broadband customers would pay an additional fee on top of their usual package - possibly about $5 a month - for access to the whole Warner catalogue, which includes artists such as R.E.M., the Red Hot Chilli Peppers, and Green Day.

A source close to one of the UK's largest ISPs, who would not be named, said: "Conversations are definitely happening with Warner, but the idea is that eventually all the major labels will come on board. The music industry is shifting more and more to an 'access' model, and we're actively looking at services where unlimited tracks would be bundled into a tariff."

Sony BMG and Universal are meanwhile understood to be collaborating in a partnership known as Total Music, which would approach ISPs with a united front and offer their entire music catalogue in return for a share of the monthly revenues.

British ISPs indicated to Times Online that they would be keen to introduce such a service, especially as they want to be able to generate revenue from products other than internet connections, but they said all the labels would have to be on board in order for them to sign up.

"There’s no point in just having one label," a source close to another ISP said. "The catalogue you could offer customers wouldn't be big enough."

The source added that the labels had also proposed that ISPs should give a minimum guarantee of revenue per month derived from such a service. "That is unattractive to us," the source said. "If, on the other hand, they're willing to offer a reasonable revenue share with us, then we can reach an agreement."

Details of Warner's discussions with the British ISPs emerged as the Danish phone company TDC announced that it had struck a deal with Sony BMG, Warner and EMI, to give customers access to more than a million tracks from the labels' digital catalogues as part of their monthly contract.

For no extra fee, mobile and broadband customers of TDC will be able to download tracks from artists such as James Blunt, Brice Springsteen, and Robbie Williams, as long as they continue to pay their monthly bills

The labels are understood to have agreed a one-off licence payment from TDC, rather than a revenue-sharing deal.

The songs, which will play on computers and any music-enabled phone – but not iPods – will be protected by digital rights management (DRM) software, meaning that customers will periodically have to renew access to the tracks using a key provided by TDC. When customers cancel their TDC subscription, they will stop getting new keys and their access to the tracks will expire.

"This is going to change the way people consume music," Frank Taubert, chief executive of 24-7 Entertainment, which is providing the back-end technology for TDC's service, said.

"In the past there have been barriers to entry in the digital music market, for instance questions about pricing and also DRM, but what our service will show is that if you give the consumer access to music via a base subscription model, you make the barriers to entry very low."

Asked how TDC could make the one-off payment to the labels without increasing their subscription fees, Mr Taubert said: "Think of this as money coming out of the budget that would usually go to acquiring new customers and retaining existing ones. The theory is, this new service will make the network very 'sticky' for the customer."

A spokesman for EMI said the company "did not comment on contractual terms."

Music companies have long been looking at ways to reduce their reliance on sales of albums and individual tracks and embrace so-called 'all you can eat' music packages. The sticking point has been the share of a monthly tariff – or other fee – to which they are entitled.

Earlier this month it was reported that Apple was in discussions with the major labels to introduce a similar package allowing customers access to unlimited music in return for paying a $100 premium on an iPod.

Apple is thought to have offered only $20 of that premium to record labels – an offer which the labels have rejected.

Nokia, meanwhile, has successfully wooed Universal to sign up to its new Comes With Music phone, which is due out in the second half of the year, and which will give customers full access to the label's millions of songs from the time they sign their phone contract.

A spokesman for the BPI, the music industry body, said: "All of our members are talking to the ISPs, but the two sides are still too far apart for anything to happen imminently." ISPs would also have to show they were willing to take stronger measures to clamp down on illegal downloading in order for the labels to reach any kind of deal, the spokesman said.

It is understood that any deal would involve the labels' music being protected by DRM, meaning that if a customer changed their ISP, they would be unlikely to be able to keep any music they had downloaded.

Customers would probably be able to play the music on any phone and some media players, but not on iPods.

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