Is there a commercial case for ISP music services?

Introduction

Analysis of the commercial case for ISP music services, including on-demand streaming and download to own based on reached with existing music service providers and technology platform vendors

Scope

*Market landscape for digital music services and the competitive outlook

*Economic analysis of commecial case for digital music services based on best practice platform strategy

*Key insights from over 20 interviews with music platform vendors, ISPs, and digital music service providers

Highlights

With the right platform strategy, there is a commercial case for ISPs to leverage their existing customer relationships and drive digital music services in the 79% of internet users un touched by existing digital music services

Music services can also help ISPs reduce the cost of subscriber churn

Reasons to Purchase

*Best practice strategy for deployment of digital music services by ISPs

*Insight from existing digital music providers including costs of service operation

*An analysis of the competitive landscape for the launch of digital music services


Report Highlights
With the right platform strategy, there is a commercial case for ISPs to leverage their existing customer relationships and drive digital music services in the 79% of internet users un touched by existing digital music services
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SUMMARY 1
Impact 1
Ovum View 1
Key Messages 2
There is a case for ISP music services 2
Digital music services can also reduce churn 2
A defined execution framework is required 2
ISPs are a new distribution channel for subscription-based music services 2
Challenges facing the ISP industry in the UK 2
Broadband access is a mature market 2
Complex relationships with media owners 3
ISPs hold some strategic high ground 3
ISPs should try to grab a share of digital entertainment revenues 3
The digital music market landscape 4
New consumption choices for the consumer 4
Digital retail: download-to-own 4
Ad-supported and subscription web streaming 4
Illegal file sharing 5
Multi-platform music - unified services on the TV, phone and PC 5
The strategic opportunity and challenges for the delivery of digital music services by ISPs 6
Catalysts for examining digital music 6
Challenges 6
iTunes dominates retail 6
Disruptive application service providers are providing low-cost streaming music services for digital natives 7
ISPs are regionally focused in a business that rewards scale 7
The opportunity 7
The ISP digital music business case 8
A model for the cost base of ISP digital music 8
Assumptions for the commercial model 8
Service adoption assumptions 8
Platform and operational cost assumptions 9
Direct and indirect revenue assumptions 9
Service strategies for ISP digital music services 10
Strategy1: Unlimited streaming with a high-volume download allowance 10
Strategy 2: low cost unlimited streaming with additional retail 11
The future case for ISP music services 12
DRM free, high volume, download-to-own subscription services 12
Commercial model simulation assumes best-practice 13
Six best practices for digital music services 13
Offset operating margin risk 13
Strong user experience and a robust service platform is vital 13
Differentiate the music service experience 14
Exploit multiple sources of direct and indirect value 14
Target both service user and bill payer 14
Explore partnerships with branded music service providers 14
The potential size of the ISP digital music market in the UK 15
ISP digital music market could top £100m by 2013 15
Potential value of music services for a Tier 1 ISP 16
Reduction in churn 16
Implications for ISP music services 16
APPENDIX 17
Ask the analyst 17
Definitions 17
Methodology 17
Disclaimer 17
List of Figures
Figure 1: Cumulative net earnings analysis- Premium ISP digital music subscription services 10
Figure 2: Cumulative net earnings analysis- Premium hybrid ISP digital music subscription & retail services 12
Figure 3: Potential UK ISP digital music market size: Low, Medium & High scenarios 15

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