Virgin, Universal on Cusp of New Media Business Model

U.K. cable TV operator Virgin Media and music company Universal are touting their new partnership in a music downloading service as a first because it allows unlimited downloads for a fixed fee. (Microsoft has allowed unlimited streaming, but that has less consumer appeal.) It may be positioned as a way to combat piracy -- people who get as much as they want have fewer reasons to purloin -- but the real achievement may be stumbling toward a payment model that could work in a modern media age.

The most high profile problem in online media for creators and publishers alike has been making money amid the changes in how people consume media. Generally the debate has fallen into four distinct camps:

  • Charge for everything separately, whether as individual music tracks or a subscription to a site like the Wall Street Journal or Financial Times.
  • Give everything away in hopes of driving traffic and, ultimately, making money off advertising revenue, also known as the Google or New York Times model.
  • Create a "freemium," ala Chris Anderson, in which you give away some things and then charge for premium versions of a product or service.
  • Give things away online and try to sell something else in the process, also known as the "I started a blog and, Lord, I hope I get a book contract so I make something out of all this work" approach.
The music industry has largely gone with the first model for a number of reasons, including that someone actually pays something for a song, which then means the music label can then calculate the appropriate royalties for artists, composers, and so on.

Clearly this has worked for Apple and some other sites, but people still grouse about the need to pay each and every time. But what the music industry has forgotten is another model that it uses for radio play. Performing rights organizations, such as American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Inc. (BMI), charge radio stations a set royalty to use music. They then distribute the money to their members via an approach that is supposed to take into account the relative popularity of different songs. The more popular your body of work, the more shares you effectively get for the final divvy.

In the case of downloading, it's possible to do something that radio could never accomplish: get a complete and accurate list of song usage. Universal is effectively acting as its own ASCAP, getting a fee from the "station" -- Virgin Media -- and presumably using the user demand information to appropriately credit payments. Now imagine such a scheme on a bigger level. All labels and even independent musicians could license their work and get a cut of the proceeds. Not everyone will make a reasonable wage this way, because not everyone's music will be popular.

So what's the incentive for the musicians or composers? Why not give them a way of marketing to the people who do download their work? Big or small, they could make some work available, getting a share of the money brought in, and then reach those people who might be interested in additional material that isn't on the download lists. Think of it as a "cheapium" instead of a "freemium". The impetus to get pirated tracks drops for most people (though some simply won't pay because they don't want to), so the overall pot of available money goes up. Lesser known musicians will still have to find additional ways to supplement their incomes, but that is no different than it is today.

Radio image via stock.xchng user CraigPJ, site standard license.