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Sky to Launch Music Streaming/Download Service as the Money Moves Elsewhere

itunes ad spoofIn the digital music arena, it often seems like there is iTunes, and then there is everybody else. (A spoof of an iTunes ad pictured left.) While Apple cornered the market early by dropping the iPod on the world and then shrewdly tethering it to its iTunes money machine, many a competitor has attempted to grab a piece of the MP3 action, some through paid subscription services, some through download sales. Now Sky wants to do both and grab its slice of the iTunes-dominated market, but in focusing so singularly on music delivery, it joins a roster of media companies that may be missing music's next profitable leap forward.

Launching in the U.K. on October 19, Sky Songs will let users access more than four million DRM-free digital tracks, offering a download-to-own, iTunes-style option or advertising-free streaming via a subscription, a la Spotify and Rhapsody. The music will be sourced from four major labels (EMI, Sony, Universal, and Warner) and a slew of indie imprints, including the Beggars Group.

Users can stream unlimited tracks for a monthly subscription of about $10 or download DRM-free albums to own for the same price (individual tracks cost about a buck, offering no apparent advantage over iTunes). Or, for those who prefer a hybridization of the two options, users can get unlimited downloads, plus download one album per month to own for around $13 per month. But while the hybrid option offers a pricing scheme that deviates from what we've previously seen from other services, it feels like we've heard this song before. Which begs the question: how can services like Skytunes compete with iTunes?

music on the computerThe easy answer: They won't. That's not to say there's no room for music subscription services, though the field gets more crowded by the day—Virgin Media has also announced it will launch a U.K.-based subscription service later this year, and Rhapsody, Spotify, and others are still in the mix. But even the record companies are backing away from digital music sales as their sole revenue streams. Spending on physical music formats will fall by half by 2013 to $11.3 billion. Meanwhile, digital sales will double to nearly $15 billion, but that still leaves a shortfall of between $3-4 billion. Music is selling, but it is becoming increasingly less profitable to be the seller.

As such, even the major labels are looking elsewhere for revenue. Last week Warner Music Group struck a deal with Outrigger to sell ads across various digital platforms. An eMarketer study sees the online music-video ad spend jumping by as much as $500 million across the music business, and online music video sales leaping from $850 million this year to $3 billion in 2012. The music business sees online branded content, not the selling or streaming of individual tracks, as the next big money maker for the industry. There's simply more value in Ashley Tisdale's four million facebook and twitter fans than there is in however-many listeners Sky Songs can get on the line for a subscription (or for 99-cent song downloads).

In this circular scheme, content feeds advertising, which feeds content, and those strong branding messages from music's elite will turn the next big profits for those churning out the content. Subscription services like the one Sky envisions will have to do more than just deliver audio downloads to remain relevant to consumers and the labels producing branded music videos and other creative content. But the advent of so many audio-centric services makes one wonder if they're listening.

[Digital Spy, AdWeek]

[iTunes ad spoof by Martin Krzywinski; Man with headphones by Fernando de Sousa Via Creative Commons]