The main problem with these services is that they can’t offer the depth of catalog that would scale. Add to that the fact that they generally aren’t very hassle-free and user friendly (you can’t just create a queue of downloads and walk away, for instance) and you’ve got a pretty hard sell.

Both Guvera and Free All Music have been in the US for the last 10 moths or so and their traffic stats don’t seem to offer much encouragement for ad-supported downloads. According to Wolfram Alpha, Free All Music has 7600 daily visitors generating 18,000 daily page views. Not very impressive. But Guvera fares even worse with 5300 daily visitors, however those users generate about 32,000 daily page views.

By comparison, paid services generate significantly more traffic. Napster has 250,000 daily visitors, about the same as streaming subscription service Mog with 260,000. Both services dwarf the other new entry into the subscription streaming service space, Rdio, which lags way behind with a mere 48,000 daily visitors. Spotify, which hasn’t even launched in the US, has 950,000 daily visitors, grossly outpacing all of the others, including the ad-supported sites, combined. As Glenn Peoples points out in Billboard this week, Spotify’s user experience makes the difference.

There are so many services out there now and so many ways to get free music by download or streaming that the Guvera’s and Free All Music’s of the world have to struggle to get users. And without traffic advertisers won’t buy in. Judging from the numbers it won’t be long before they join SpiralFrog, Ruckus and Qtrax in the ad-supported music graveyard.

In the midst of this, Limewire continues to insist that they are determined to work with the recording industry on their new music service, Spoon, despite having fired a third of its work force in the wake of being ordered by a federal court to shut down. I don’t know if this is cynicism or sheer fantasy.

Either way Limewire owner Mark Gorton will have an easier time holding on to his millions than making Spoon fly.

© 2010, Wayne Rosso. All rights reserved.

But something that I am definitely clear about is my assessment of the Virgin Media/Universal Music service and its potential. At first blush, one would be inclined to celebrate this as a great innovation and a huge step into the future. The media was all frothy about it. After all, the media usually likes to go out there and scratch the surface. But when I started to drill down a bit, I found some nagging, even troubling, details.

First of all, let’s do the math. According to Virgin Media, the 10-15 GBP per month will give you unlimited streaming and mp3 downloads from Universal’s catalog. Fine. But how much will the service be when the other 3 majors are signed on? They’ll certainly want the same amount of dough that Universal is getting. So this will effectively bring the price up to 25-40 GBP a month. That’s a significant price barrier. Many say that 10 GBP is too much. But let’s move on.

So let’s assume that you’ll have a service that is minimally 25 GBP per month, a tough sell by any means. What’s the value? How many itunes does the average user purchase every month? I would suggest certainly not more than 10-15, or the equivalent of 1 CD a month. So what’s to keep someone from subscribing to the service for a month, filling out their entire library with let’s say 3000 tracks, then dropping the subscription and and just purchasing the hit singles they want a la carte on itunes? Nothing. The truth is that the average consumer would actually be overpaying!

This service will only be valuable to extremely heavy music consumers. And when it comes to that type of customer, Spotify represents a much better value at 10 Euros a month (less than 8.5 GBP). In fact,  it is a better value for  casual consumers as well. Spotify offers what no record label sponsored service can: a lush user experience. The labels still don’t get it. It’s not just about their content. Users want a rich experience. It’s all about search and discovery. Spotify has that experience. The labels have consistently failed to deliver on that level. Look to the upcoming Vevo project and you’ll see. Who gives a shit about it. Vevo is just a music video channel on YouTube. So what? Doesn’t really show a lot of creativity on the part of Universal and Sony.  The Virgin Media/UMG service just smells way too corporate. And it will be. Third party services have to be extremely creative in order to compete and the arrogance of major labels makes them think that all they need to do is offer their content. Build it and they will come. Not necessarily. And I’m willing to bet that they’re incapable of building a compelling user experience with an organic, grass roots, music lover’s feel.

Virgin Busts Downloader

Now the troubling part. As part of the trade off, Virgin Media has agreed to use packet sniffing technology to police downloading. Now I ask you, do you want to give up your privacy in order to download all the overpriced music you want? It just doesn’t square. Another thing I’m not sure about is how would Virgin know if you’re illegally downloading something? Can they tell the difference between downloading a bit torrent of a Maria Callas recording that’s in the public domain and one that’s not? If any of you out there can bring some clarity to this, please do so in the comments section. I know that if I were a Virgin Media customer, I’d be on the phone to BT right now to switch my service. It’s a very slippery slope and if Virgin thinks that sucking up to UMG will get them anywhere they’re nuts. I’m sure that they’re also trying to brown-nose the government as well, but you don’t see the other UK ISP’s rushing to duplicate the model. If they did, that could then lead to every ISP snooping on their users and acting as a private police force for record labels. It just doesn’t sit well. The great Peter Kafka made an interesting comment in his ATD post today regarding  the US  music industry saying  ” [individual user] lawsuits are supposed to be relics of the past, replaced by a new strategy whereby music labels convince Internet service providers to help them police piracy. But while the industry floated the concept six months ago, it has yet to get a single cable company or telco to sign on. And even if they do, there’s not a whole lot of incentive for the likes of Comcast (CMCSA) or AT&T (T) to really crack down on music pirates, who don’t take up much bandwidth and don’t steal anything the pipe guys care about”.

And what about competition? Now that an ISP is doing direct deals with the majors, how does this effect the Spotify’s, iTunes, and Passionato’s of the world? Could Virgin make life difficult for these services? What would the EU say about that? I guarantee that the French and Spanish would bitch like crazy. And I don’t see that going over well in the US either. Consumer groups in the US like Public Interest would go ballistic.

What’s interesting is that the market has changed and this model will work, that is if it was 2004. Now, I don’t think so much. The industry, as usual, missed the window of opportunity and is again way behind the curve. The fact it that downloads matter less and less these days with the advent of inventive new streaming models, especially Spotify’s mobile app. In my opinion, the service will get a lukewarm reception at best. There will be an initial surge of interest and then it will die down substantially. Virgin will have done its best to actually lose customers, sending them into the arms of non-meddling competitors. They’ll learn that looking backward will have cost them more than they could ever make from some crappy major label sponsored subscription service. The only ones who win are the record companies. Don’t forget the major label mantra….”Heads, I win. Tails, you lose”.

© 2009, Wayne Rosso. All rights reserved.