This Virgin/Universal collaboration is not the first of its kind. In 2008, Danish ISP company, TDC, teamed up with EMI, SONY/BMG, and Warner Music to provide unlimited free music downloads at no extra cost to their broadband and mobile ISP services. Launched in April, TDC's music service gave customers access to over 1 million music tracks for download. As protection against piracy, these downloaded tracks were DRM protected and expired 30 days after the cancellation of the internet subscription.

In contrast, the Virgin Media service will provide MP3 downloads that are unfettered with any protective encryption, allowing customers to keep the MP3 regardless of the tenure of subscription and to be able to play the MP3s on any device.

As part of the deal with Universal, Virgin will be committed to policing their ISP service for piracy activity, especially any peer-to-peer (P2P) file-sharing. The point of the unlimited downloads was to lure customers away from file sharing networks, the idea being that if customers could legitimately download to their heart's content through their service, they would not need to resort to piracy networks. To this end, Virgin plans to implement its graduated response system, an adoption of the French "three strikes" regime. In consultation with BPI (Britain's music trade body), Virgin's plan would the internet connection of any repeat file-sharing offenders. Virgin's three-strike approach differs slightly from the conventional, however, as a permanent suspension/disconnection is considered disproportionate punishment, according to chief executive Neil Berkett.

Virgin is also very serious about including education as a part of their approach to anti-piracy. Last year, Virgin issued to its ISP customers regarding their participation in illegal file-sharing.  With their new service, Virgin will continue to educate their customers about online piracy and to raise awareness of legal alternatives.

The success of the service's anti-piracy goal will ultimately depend on whether Virgin will be able to get other record labels on board. Customers engaging in illegal downloading would only stop if they had access to all the songs they would normally search for through P2P networks. A catalogue limited to only a small subset of what is available in mainstream music, regardless of the unlimited access, may not be enough incentive for habitual downloaders to do the right/legal thing.

Collaborating with Universal, one of the major pillars of the music industry, is a large step forward in their goal. While still in negotiations with other labels, an issue that may pose a problem for Virgin is in showing these record labels that the gains from this service will supplement other digital music sales and not simply steal customers away from other services such as iTunes.

Although many details have yet to be released, Virgin's approach seems to be an excellent adaptation to past incarnations and has the potential to solve many of the piracy issues of the music industry. It is essential for the music industry to embrace the development of the file-sharing and downloading culture and it is great to see the industry innovating new ways to capture the attention of music consumers.

There has been a lot of buzz lately over approaches combining the role of ISPs with digital music sales. In light of the abysmal state of CD sales in North America, it is no secret that the Canadian music industry is itching for a revolutionary model to bring the industry out of its slump. The success of Virgin/Universal's plans to launch their service in the UK may be a stepping stone for such a service to also develop in Canada.

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Although the EU has enacted the - an effort to standardize copyright laws with WIPO - each EU member maintains its own copyright laws. With distinct laws and licensing societies in each country, it becomes expensive and onerous for retailers to negotiate copyright terms for each country within the EU. The result is that many retailers are limiting sales of media, both online and in traditional formats, to the country that they are based in because of the complexity of multiple and varying domestic copyright laws and the fees that have to be paid to each country's licensing society.

The restriction of national territorial licensing is also felt by the consumer. Where businesses face increased expenses to provide their products and services, the consumer often bears the brunt of these costs. With some larger businesses such as Apple's iTunes, they are able to facilitate separate online retail systems for consumers in each country. However, the complexity of national copyright systems and the varying copyright fees in each country is reflected in the differing prices consumers pay in different countries (e.g. U2's The Best of 1980-1990 sells for 15,99 € in Germany and 9,99 € in France)

For smaller businesses, however, pan-European access is simply not feasible. Thus, to avoid selling abroad and dealing with potential legal complications with the consumer's domestic copyright rules, online retailers often restrict their customer base by requiring customers to use a credit card issued in the country that the retailers are based (e.g, try purchasing anything from and it will require a French credit card)

Reding and Kuvena's proposal intends to relieve the consumer from the limits of the current fragmented system. One of the main priorities in the proposal is to ensure that consumers' access to online content is not restricted by where a company or website is based.  On their - designed to educate consumers regarding online sales in the EU - Reding iterates that "National borders should no longer complicate European consumers' lives when they go online to buy a book or download a song...we need to ensure that there is a single market for consumers as well as businesses on the web." Reding and Kuvena propose that this consumer liberation is found in the proposal to create cross-border copyright licenses that would allow consumers in any EU state to purchase copyrighted digital content from any other EU state on standardized terms. These standardized terms would also clearly delineate the rights of use for the consumer across the board.

Although the details for implementation are yet to be finalized, if the European Parliament approves their proposal, this could be a significant and exciting step forward for both businesses and consumers in Europe. Retailers would be saved the costs of negotiating copyright deals complying with the widely varying domestic laws of each country and would only have to pay licensing fees to one central office instead of to each country's licensing societies. Not only would these savings be passed on to the consumer, the consumer would also enjoy the added ease of purchasing digital content from anywhere in the EU with any credit card. A standardized pan-European copyright regime would also bring confidence and peace of mind to consumers and retailers who no longer have to worry about potential conflicting domestic copyright laws for sales or use of digital content.

As the EU contemplates this next step, it also begs to ask: What about a pan-North American copyright proposal? Although North America is certainly much less fragmented than the EU, with the large amount of cross-border interaction there may perhaps be a movement brewing for a pan-North American copyright regime. It may even be argued that with only three parties, a pan-North American copyright licensing regime for online sales would be more feasible than the EU's. Some may scoff at the idea of integration, but the same naysayers also saw the implementation of NAFTA. While the future of such a proposal may not be in our near future, the copyright world is eagerly awaiting the EU's upcoming decision.

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You've probably heard the expression "the long tail" used by Web 2.0 cognoscenti.  Despite the largely uncritical acceptance the idea received a few years ago, research shows that for artists the "long tail" is the "wrong tale".  But it may inform a way to leverage past marketing investment in "niche" recordings traded on illegal p2p networks but currently not licensed.

It Actually Is About the Hits After All: Enter the Wrong Tale

A few years ago--between Internet crashes--the "long tail" theory surfaced in the technology press.  The theory maintains that hit-driven businesses are obsolete.  What artists should really focus on was not a few things that sold a lot, but a lot of things that sold a little-the "long tail."  Sales would be distributed proportionately in the "long tail" because the Internet allowed niche consumers to buy small quantities of lots of things generating significant revenues for retailers.    

How rightsholders can produce the "more" and cover their margins out of the "less" only troubled rightsholders-particularly with companies like Google pushing the theory before the Crash.  Proponents never thought retailers might run out of things to sell.  (In 2006, this "less is more" theory was spun into a 288 page book called "The Long Tail: Why the Future of Business is Selling Less of More", and was marketed in the UK under the subtitle "Why Endless Choice is Creating Unlimited Demand.") 

The "long tail" theory is now being analyzed critically, starting last year with the comprehensive study of Professor Anita Elberse of the Harvard Business School (" She concluded:

"[T]he [long] tail represents a rapidly increasing number of titles that sell very rarely or never. Rather than bulking up, the tail is becoming much longer and flatter...[T]his is the truth of the long tail.  [Rather than benefiting niche marketers,] digital channels may be further strengthening the position of a select group of winners [,i.e., making online channels even more of a hit-driven business than offline retail]." (My emphasis.)

Another study by Will Page, Chief Economist of PRS for Music (the UK songwriter collecting society), these results and found that for PRS writers, "20% of tracks in our sample...sold at least one copy, and hence, 80% of the tracks sold nothing at all.... you're looking at a 80/0.38% rule [as opposed to the 80/20 rule or Pareto principle] for all the inventory on the digital shelf."  (My emphasis.)

No one can afford to produce competitive new titles for the "long tail" as the production and marketing expense exceed projected revenues.  Few rightsholders can afford the clearance costs for digital exploitation of back catalog, either.  Professor Elberse again identified the problem in her research: "Music companies, for instance, often decline to make old content available online because clearing the rights is too cumbersome [and expensive]." 

Hit driven marketing drives demand.  The problem is that the larger the demand, the more users steal the hits--using "" like Limewire--that they discover through licensed companies like iTunes.  Let's be honest-it's not hard to compete with "free," it's hard to compete with stealing.

Black markets defy measurement, but the explanation for the "wrong tale" phenomenon of zero sold may be simple-the big marketing budgets that drive big hits also drive users to illegal p2p services where they not only download the current hits but also the older back catalog that is unavailable on licensed services.  Downloading current hits is expected, but it is the back catalog losses that are potentially revealing. As Eric Garland (CEO of Big Champagne) , "File sharing communities are the domain of the ["rarities", the] unreleased, the so-called out of print, live tracks, odds and ends"--most of are not available through legitimate channels.

The "long tail" may be discredited, but it stimulates discussion about leveraging back catalog-which is in demand on illegal p2p services. 

Licensing and Monetizing the Wrong Tale

Will Page and Eric Garland have a new study that likely confirms that illegal trades vastly outnumber licensed digital sales.  (Billboard's has a good story on this study).

The problem with measuring black market competition is that most black market content is simply not available in a licensed environment either because it isn't cleared or artists don't know the recordings exist, especially live recordings. 

If artists can't stop illegal uses of their works, they may be able to at least claim ownership to these rarities and make them available commercially (assuming reasonable  quality).  It may be worth developing "best practices" for commercializing these rarities.  Artists, unions, songwriters, producers, record companies and music publishers should hash this out. 

Some key issues:

--claiming but not gaming.  Help artists, songwriters, labels and publishers claim their rights in rarities found on p2p networks, then offer them for sale through legitimate channels; and

--for previously signed artists, pay catalog artists an industry standard rate (and songwriters the statutory rate) for deep catalog tracks not previously cleared for digital so that the recordings (including "out of print") could be offered for sale with minimal clearance cost.

This approach isn't a panacea for piracy, but it could compete with one of the attractions for p2p users.  It is not without risk, but so is doing nothing.  Doing nothing gets to the end of the tail very quickly.

Opinions expressed are those of the author and should not be attributed to anyone else.  Copyright 2009 Christian L. Castle.  All Rights Reserved. 

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