Universal Music and Virgin Media, striking out with MP3s?
The major record companies' retreat from DRM took another step today, when Universal Music Group and Virgin Media, a leading broadband provider in the U.K., announced what amounted to a DRM-free, all-you-can-eat subscription music service. Although it's still vaporware and confined to the U.K., the new service strikes me as a big deal, with some equally large caveats.
Unlike Napster or Rhapsody, which essentially provide access to an unlimited library of music for a monthly fee, the Virgin Media service will let people acquire an unlimited amount of music. (The service is due later this year, the companies said; Virgin is still trying to round up licenses from other labels and music publishers.) An offer like that could completely trump today's subscription offerings, which have struggled to win acceptance among mainstream consumers. It's simple to explain and requires no change in music fans' approach to collecting tunes. But this brings us to caveat No. 1, which is pricing. There was no indication from the companies today what they planned to charge for the service, but it's likely to be considerably more than what Nokia collects for its DRM-based "Comes With Music" phones (where the downloads are nailed to the user's phone and/or PC). My back-of-the-envelope calculation was that "Comes With Music" carries an $8 to $16 monthly premium for two years' worth of unlimited downloads from all four major record companies. I know there's some argument that music fans aren't hugely sensitive to prices, but I have trouble believing they'll tolerate ISP rates that are 40% or 50% higher so they can download tracks guilt-free.
In addition to the hint of trial-ballooning, the deal has the whiff of a quid pro quo. Universal agreed to offer DRM-free downloads, and in return Virgin agreed to take more steps to counter file-sharing. In particular, Virgin agreed to "educate file sharers about online piracy" and temporarily suspend Internet access for "persistent offenders." Here is caveat No. 2. As Gartner analyst Mike McGuire ably put it, "How do they determine who is naughty and nice?" The entertainment industry is eager to have ISPs warn their customers who are detected sharing copyrighted files, then sanction them if they don't stop. French lawmakers went so far as to enact a three-strikes-and-you-lose-your-Net-access law, only to have jurists there quickly declare it to be unconstitutional. The fundamental problem is, as the famous New Yorker cartoon observed, Internet traffic data might tell you which account was sharing files, but not who was seated at the computer. In fact, if the account holder has an unsecured wireless router, good luck finding the computer that did the sharing. So if Virgin is agreeing to cut off someone's Internet access administratively, without access to the courts or some independent arbitrator, it's teeing itself up for a beatdown in the press and Parliament, because mistakes will be made -- that's inevitable -- and Internet service is becoming almost as vital to some users as electricity. McGuire again: "It's like they want to give the consumer all the convenience of DRM-free files but they really, really don't trust the consumer."
Caveat No. 3 is that the DRM-free files could still be watermarked or otherwise outfitted with the name of the person whose Virgin account was used to obtain them. Unwitting (and careless) users with wireless routers could find their names on songs that pop up on Limewire. In light of the potential administrative penalties noted in the previous paragraph, this could prove problematic.
I don't mean to drown the announcement in cold water, and I don't begrudge Universal's interest in protecting its copyrights. On the contrary, it's great to see the company trying to combat piracy by supporting a compelling legitimate service (or at least potentially compelling, depending on the price). I'm just unnerved by the prospect of ISPs becoming not just copyright watchdogs but also the muscle to enforce them.
One final McGuire thought. Universal's move comes 10 years after Shawn Fanning introduced the pioneering Napster song-swapping network, which the company's later CEO, Hank Barry, tried to transform into a legitimate service licensed by the labels. But Napster was never able to line up all of the majors (there were five at the time), particularly not for the radical idea of enabling music fans to download an unlimited amount of music for a flat fee. Noting Universal and Virgin's agreement to do that very thing, McGuire said, "This is about eight years too late."