Early proponents of broadband services overlooked the need to
consider why consumers might want it - the critical issue of
content. As music industry giants finally get on board, Daniel
Thomas looks at the prospects for demand for fast Internet access
finally taking off
The launch of the first legal Internet music download service
involving major record labels has led industry experts to call for
greater effort in telling consumers that broadband is about more
than simply high speed technology.
Services such as sport and music, previously thought of as
peripheral, will be vital to the success of broadband, according to
Sandip Sarda, chairman-elect of the Broadband Content Coalition
(BCC), a new industry-based lobby group.
"If broadband Britain is to become a mass-market reality, whether
delivered via ADSL or 3G [third generation]-enabled devices, the
availability and ability to distribute content has to be key," he
said. "Expecting consumers to fork out hefty monthly subscriptions
for a fast Internet connection alone is not enough."
Telecoms companies missed a trick when they marketed broadband
simply as high speed access technology, according to Sarda. "The
man on the street is not interested in the broadband pipe itself,
but what it can give him," he said.
"The Far East approach to broadband shows it is a service people
want and need - in only three years [Japanese telecoms firm] NTT
DoCoMo has persuaded more than 50% of the country's population to
sign up to [high speed service] i-Mode by focusing all its efforts
on delivering decent content."
Making sure broadband strategies are centred on content is one
thing, but who understands what content the man on the street is
prepared to pay for? "Sport is always something people will pay for
and music is going to pick up," said Sarda. "Being able to download
music will help 3G to take off because streaming audio is much
easier than streaming video."
Paid-for sports content will receive its first major test when the
World Cup begins. Football fans will be able to view highlights
from every game on the official Fifa World Cup Web site for a
one-off price of £13.66, following a deal that was thrashed out
last month between Fifa, the game's governing body, troubled German
media giant Kirch, and Internet services group Yahoo.
"The World Cup will undoubtedly create an upsurge in interest in
Web coverage," said Sarda. "If people feel they are getting value
out of these services they will keep coming back."
A host of English Premiership clubs, including Manchester United
and Tottenham Hotspur, also offer paid-for online highlights, and
have the size of fan-base to make it viable.
Many music fans are also very loyal to their favourite artists and
are prepared to pay for premium services, such as fan clubs and
exclusive tracks. It would seem a natural progression, therefore,
that they would pay to download music from the Internet.
However, one major stumbling block has prevented this vision
becoming a reality - the free availability of music on file-sharing
peer-to-peer Internet services such as Napster and Scour Exchange.
These services have enjoyed wild popularity among music fans - so
much so that they have affected overall music sales, said global
industry body the International Federation of the Phonographic
Industry.
Earlier this month the federation, the global industry body, said
worldwide sales of recorded music fell by 5% to £23.4bn last year,
the first time sales have fallen since 1983. It believes that the
popularity of file-sharing services has encouraged younger fans to
believe that they can get their music online for free.
The music industry's initial response to the file-sharing services
was to use its financial muscle, in the form of numerous lawsuits,
to force them out of business.
The move has had some limited success. Napster's operations were
halted last year after a US federal court stopped it offering
pirated music. The service was on the verge of filing for
bankruptcy two weeks ago, after talks with German media giant
Bertelsmann, which wanted to take a majority share, collapsed.
However, the $8m (£5.3m) deal was revived at the last minute,
meaning Napster could continue - as a paid-for service.
However, even if Napster does disappear there are still many
similar services across the Internet which are harder to regulate
because they do not rely on central servers to co-ordinate search
requests.
The challenge that the multibillion pound music industry faces is
to take advantage of the popularity of these services, without
losing control of its music.
Many record companies have accepted that getting into bed with the
enemy is the only way they will be able to do this. That
Bertelsmann, owner of BMG, one of the top five record labels, was
prepared to invest in Napster is an indication of this new
approach.
Sony Music Entertainment, another of the top five labels, recently
announced its intention to use file-sharing technology. The system
was developed by Scour Exchange to promote some artists in the US,
but Scour went bankrupt last year after it was sued by the
Recording Industry Association of America. The service has been
revamped to include multiple layers of security and digital rights
management, according to CenterSpan Communications, which bought
Scour's assets last year.
Sony said legitimate file-swapping can only help the music
industry. "We have always embraced new technology that furthers our
artists' reach and CenterSpan's delivery network will allow music
fans to share the music that they love with their friends,
legitimately," the company said in a statement.
Although the majority of legal file sharing and downloading Web
sites are based in the US, moves are afoot to bring similar
services to Europe.
Internet service provider Wanadoo, which owns Freeserve, last week
signed a deal with digital music distributor On Demand Distribution
- known as OD2 - to offer an online music subscription service to
its 5.75 million customers in France and the UK. The service, to be
launched this summer, will offer music from artists signed to
labels such as BMG, Telstar and Ministry of Sound.
But with so many free file-sharing services still around, why
should consumers pay to download music?
"This is the first time that the major corporate brands are getting
behind the [European] digital music market," said Ed Averdieck,
director of marketing at OD2. "We can offer access to exclusive
tracks and the centralised servers guarantee quality, at a time
when the quality of the pirate services is increasingly
compromised."
A legitimate alternative to the illegal file-sharing services is
"badly needed", said Averdieck. "The music industry cannot stop
consumer interest in downloading tracks but what it can do is to
create revenue streams from the services," he said. "The pirates
have had it all their own way for too long but now it is the record
companies' turn."
Being able to download music quickly and easily will drive demand
for broadband services, according to Averdieck. "Freeserve will be
marketing its broadband services with a big music hat on," he said.
"Add this to its recent deal with NTL [which will see broadband and
cable TV sold as one package] and the potential for growth is easy
to see."
While it is clear that consumers are going to keep using the
Internet as a source for music, it remains to be seen whether they
will be prepared to pay for it. The music industry - and any
company that wants to exploit the potential in broadband - will be
watching closely to see whether the paid-for content model can
work.
Further information
www.od2.com