Media Forum: Can Sky vie for iTunes' turf?

future. Back in July 2007, it had the sheer effrontery to pick a fight
with iTunes, arguing that its flat, 79p- a-track fee approach to life
was not in Universal's long-term interests.

In the end, it decided to continue its relationship with iTunes on an ad
hoc basis but it hasn't renewed its formal long-term contract, thus
giving it leeway to explore other relationships.

Such as the one announced last week, which saw Universal form a joint
venture company with BSkyB to launch a download service that may, in
time, rival iTunes. It's not exactly a me-too, though. For a start, it
will be underpinned by a far less restrictive mindset, offering
downloads compatible with mobile phones as well as iPods.

But more importantly, it will feature a new (or newish) business model.
In a word: subscription. Napster tried to reinvent itself on a
subscription basis a few years back but Sky's involvement could - and
should - take the subscription proposition into a different league.

Sky, after all, has a peerless track record in building and maintaining
customer relations and this will, presumably, be fundamental in
developing the new service. There will be plenty of scope for
cross-promotion too - airtime and promotional opportunities on the
Sky-owned TV channels plus the ability to drive traffic directly from
the Sky online portal and via its broadband access operations.

Matt Jagger, the managing director of Naked Ventures, maintains that
this is terrific news for anyone with the best interests of the music
industry at heart. "This is the empire striking back," he asserts. "The
major labels allowed themselves to be excluded from iTunes - they are
not shareholders. That's not good. And this promises to be a better
distribution system than iTunes. For the music industry to set up its
own purely online business to rival iTunes was never going to work. This
is an entirely different proposition."

Paul Richards, a media analyst at Numis, says caution is needed at this
stage. He adds: "We need to see more detail before we can say more but
you can never underestimate Sky. It has a superb record in customer
relations, has always delivered a class product and starts from a very
strong position. When Sky announced it was looking at broadband, for
instance, there was all sorts of speculation from analysts about what it
might do. It turned out to be a far more ambitious project than anyone
had predicted. Never discount Sky's record when it comes to
innovation."

However, Jean-Paul Edwards, the executive director, futures, at Manning
Gottlieb OMD, is considerably more sceptical. He says: "You could argue
that moving from a fee-per-track to a subscription system could
commoditise music even further. And most people under 40 don't see any
problem in downloading music, so it might end up cannibalising a
proportion of the audience that's still buying CDs. For the major
labels, newspapers are now their biggest distributors, followed by
supermarkets. Sky is now effectively competing with Asda, where the
price of CDs is continuing to fall. So, its pricing policy will be
interesting, especially as it's now inevitable that rivals such as BT
will want to launch similar services."

Andy Wasef, the emerging platforms director at Mediaedge:cia, agrees
with some of that - he's somewhat sceptical about the subscription model
too. He concludes: "It might be because of the vast number of sources of
free-to-stream music available online, or the thought of another monthly
commitment - on top of Sky subscription, broadband, phone contract and
other domestic bills - but whatever the reason, I think Sky may need to
look at a conventional track download model too."

- Got a view? E-mail us at campaign@haymarket.com

YES - Matt Jagger, managing director, Naked Ventures

"In Sky, Universal is going with a company that already has a presence
in 8.9 million homes. I think it really has to bring the other music
giants on board too. But I can't see any risk for Sky here either. I
think this is great news."

MAYBE - Paul Richards, media analyst, Numis

"It will have to attract the other major music companies but, from Sky's
point of view, the risks are relatively small. In general, you can never
underestimate Sky."

NO - Jean-Paul Edwards, executive director, futures, MG OMD

"Sky and Universal will have to do something good to rival iTunes. Sky
won't be the only media owner looking at this. An interesting experiment
but I can't see it changing things in a major way."

MAYBE - Andy Wasef, emerging platforms director, Mediaedge:cia

"It's interesting, given this week's announcements from ISPs (on
fighting music piracy), but this venture will need all the record labels
on board and a dollop of luck if it's to make any inroads into Apple's
default position in music."