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Sky and Universal v iTunes and file-sharers

• Rory Cellan-Jones
• 22 Jul 08, 16:45 GMT

I spent half an hour this morning in the rather impressive office of a CEO. It was different from the usual set-up - there was a guitar in one corner, a keyboard in another, and the office's owner told me that Amy Winehouse had been sitting where I was just a while back, belting out a few songs for him.

The office belonged to Lucian Grainge, the chairman and chief executive of Universal Music Group International. Also present was Mike Darcey, chief operating officer of BskyB, who confessed that his own office on Sky's charmless industrial estate in Osterley was rather less impressive.

Still, it's Mr Darcy whose company is the real powerhouse in the deal that the satellite broadcaster has just signed with Universal to launch a new music service. For years, record industry moguls have been telling Internet Service Providers (and don't forget Sky is now one of Britain's fastest growing ISPs) that they can have a lucrative stake in the music business - and presumably get to meet the likes of Amy Winehouse - if they only do something to crack down on illegal file-sharing.

Now Sky has won the reward - access to Universal's huge catalaogue - without apparently paying the price. Its joint venture with the music label is being touted by the two firms as "a world first" - a susbscription service with all-you-can-eat streaming plus a set number of DRM-free downloads. But Mr Darcey was being very coy about whether Sky would return Universal's favour by sending its broadband customers letters warning them of the error of their file-sharing ways - as Virgin Media has done. They were "talking to governement and the music industry about the way forward" was all he would say.

Still, it's clear that this, like many other new music services, has two targets - the file-sharers and iTunes. BskyB reckons it can succeed in denting Apple's dominance where so many others have failed. As Mike Darcey points out, his company is in one in three UK households, through its TV business, and has plenty of experience in running subscription services. What's more it's got far more marketing muscle than any of the existing music subscription services - so Sky's nine million customers can expect to be bombarded with offers.

But there are big questions yet to be answered. We don't know what price Universal/Sky customers will be asked to pay for their music, and we are still not clear exactly when the service will launch. By the time it's here, Nokia's "Comes With Music" (in which Universal is also a partner) may well have launched, offering another eye-catching way of getting hold of music legally without iTunes.

As for the file-sharers, the argument that all they've just been waiting for a nice new legal service to come along is wearing a bit thin. The digital music business seems now to have achieved some sort of equilibirum. Many of its customers - especially the younger ones - have fallen into a pattern of getting most of their music by file-sharing, while buying the odd track from iTunes. Disturbing that equilibrium is going to be tough - but BskyB and Universal have a better chance than most.

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