Taking the world by storm with an announcement while all eyes were already on the UK for the launch of its Digital Britain report, Virgin Media and Universal Music Group set out plans for what amounts to a “world first” musical buffet for consumers. There has already been a great deal of analysis following the unveiling of the new service which is intended to launch later in 2009. Already hailed as a positive step in a new direction, the plans represent a dramatic shift where latest business models have left off. The Virgin Media/Universal Music Group partnership will give users unlimited access to the whole catalog of Universal for a monthly fee. The Financial Times’ tech blog cheered the move, “Creative thinking ahead of Digital Britain” while Business Week’s technology section notes that “Virgin Gets Tough on File-Sharing.”

How to address a pirate

What has happened is nothing short of the beginning of a new era. Virgin Media has made it clear that the service is designed to bring about a rapid and permanent change in the way consumers buy and listen to music. Forrester Research Vice President Mark Mulligan said, “There’s nothing else like this out there. Both parties have brought everything they have to offer to the table.” The companies’ agreement, which does not use Digital Rights Management or DRM, seeks to address a lack of availability for legitimate and consumer-friendly online music sources while aiming squarely at illegal downloading and piracy currently afflicting the content industry.

Help yourself

Policy makers have been quick to applaud what is widely seen as an innovative and new business model driven solution. The “all you can eat” monthly service is likely to be watched carefully by many beyond the UK, especially policy makers who have no doubt been on the receiving end of calls to help address internet piracy. The UK’s Minister for Communications, Technology and Broadcasting, Stephen Carter lauded the commercial efforts to address what is no doubt a major policy headache elsewhere in the EU. “Government has a role in creating the right legal and regulatory framework for rights and copyright. However, the market will flourish through innovative commercial agreements between companies, and agreements such as this will help significantly in reducing any demand for piracy,” said Lord Carter.

More carrot, less stick?

Commentators were quick to look at the fundamentals of the new service that the companies aim at a growing demand for online music. Naturally, the piracy issue is the proverbial elephant in the room but is something that Virgin Media is sanguine about. Disincentives for illegal downloading are part of the plan and make part of the “learning process” that this venture represents. Neil Berkett, CEO at Virgin Media, was quick to clarify that such last resort disincentives for persistent offenders would not result in a permanent disconnection to the internet, something that represents a “disproportionate penalty.” Perhaps the biggest change with this new offering is that music is being used as a service rather than a product due to changes in consumer habits that have not gone unnoticed by a company like Virgin. “You require commercial solutions to be able to change consumer behaviour…and show some thought leadership in this space. Change the business model! If customers don’t like the current business model, change it. Don’t ignore it. But we have always believed that to change consumer behaviour you require more carrot and less stick.”