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Posted by Mark Mulligan on December 7, 2010
Sky’s much vaunted music service Sky Songs in the UK has announced that it is closing its virtual doors a little over one year after launch. As I’ve been saying for some time, digital music is at an impasse and the end of Sky Songs illustrates the point. There was nothing fundamentally wrong with Sky Songs, but there was nothing spectacularly right about it either. It was a cookie-cutter premium subscription service with a few nice twists but one that fundamentally played by the record label licenses' standard rule book and consequently lacked differentiation in the marketplace.
However good Sky might be at marketing premium subscriptions to mass-market customers, if the product is a dud, it’s just not going to fly. At launch, I stated that to succeed Sky needed to leverage its differentiated assets (i.e., integrate into TV hardware and bundle with TV packages). It didn’t. Instead it left Sky Songs tied with chains to the PC as a premium rental service whilst Spotify pushed on to 10 million users.
I have to admit I thought Sky was playing a smart long game where it would leverage those assets and make serious inroads into the mainstream. I wonder how much of its failure to do so is down to its business objectives and how much is down to what it could secure licenses for at what it deemed financially viable rates.
I remain convinced that ISPs will be a crucial asset to the long-term future of music product strategy. But, they’re going to need real differentiation to do so. That means unlimited MP3 at affordable wholesale rates, so that they can hide a significant portion of the end retail price from customers.
Some major labels of course aren’t ready for unlimited MP3, but they will be. Whether they recognize it or not, unlimited MP3 is an inevitability. Those labels currently in denial may need a couple more years of declining revenue and stagnant digital sales to make them realize. But eventually they will, and failures such as that of Sky Songs will continue to provide compelling evidence to further prove the point.