A deal between Universal Music and Neuf-Cegetel, a French Internet Service Provider (ISP), allows the ISP’s customers to have unlimited access to songs in the Universal catalogue. At no extra-cost, Neuf’s broadband customers can listen, download and transfer all songs from one of the musical genres included in the label’s catalogue. The service is only accessible to continuing customers and is not compatible with Apple’s iPod. However, despite these limitations, and possible competition and antitrust concerns, the deal marks an interesting new development in digital content distribution.

 

On August 20, the ISP Neuf Cegetel (which bought AOL France from Time Warner last year ) announced the launch of Neuf Music, a service created in collaboration with Universal Music France and reserved for its broadband customers. Customers of Neuf’s triple-play service (which includes internet broadband, phone and television and costs €29.99 a month) can access Neuf Music at no extra cost. The platform allows for unlimited downloads from one of nine musical genres in the Universal Music catalogue. These genres are: traditional French, Pop, Rock, Disco/Funk, World, Electro/dance, Rap/RnB, Jazz/Blues and Classical.

 

All Neuf’s broadband customers, whether they are on triple-play or not, can also choose to pay an extra €4.99 per month to get unlimited downloads of all 150,000 songs and 3,000 videos in the Universal Music catalogue.

The music is not sold for permanent ownership but made available to the users as long as they remain customers of the ISP. Users have to renew their licenses by connecting to the platform at least once a month. These terms and conditions are enforced by digital rights management (DRM) technology, the use of which imposes various restrictions for users.

 

DRMs and associated restrictions

DRM technology refers to access control technologies used by content producers and distributors to limit usage of digital media or devices. Neuf and Universal use DRMs to ensure that only existing customers of the ISP can access the music service. DRMs also ensure that files cannot be transferred onto more than 3 computers and 3 digital players. According to 01net. they also make it impossible to burn Neuf Music’s songs on a CD.

 

The fact that Neuf and Universal have chosen Microsoft’s DRM technology entails additional restrictions for users. Windows DRMs are only compatible with Windows software, meaning that broadband customers on Mac or Linux operating systems cannot use Neuf Music. More importantly, Neuf Music files cannot be played on Apple’s iPod which is by far the most popular digital player in France. Many iPod owners will therefore need to buy another player if they want to listen to their Neuf music on the go.

 

These DRM-related limitations will prove unpopular with many of Neuf’s customers who will join the ranks of frustrated music enthusiasts calling for their withdrawal. Apple and the record label EMI have already launched a DRM-free service on the iTunes platform. Universal Music has announced earlier this month that it would also experiment the sale of DRM-free music in the USA, though not on iTunes.

 

However, even if Universal’s DRM-free experiment is successful it is unlikely to be extended to subscription-based services such as Neuf Music. Indeed, the business of renting music is much more dependent on DRMs than that of selling songs one a one-off basis. Content producers need DRMs to condition access to music with continuing subscription.

 

Though not revolutionary on the DRM front, the Universal the deal between Universal and Neuf still represents an interesting development in the world of digital distribution. It also raises competition concerns given the close business ties between the companies.

 

Antitrust and competition issues

The six month exclusivity agreement between Universal and Neuf is the first of its kind in France and presents advantages for both parties.

 

The deal allows Universal to explore new revenue streams in the digital era. As Marketwatch puts it “the new offer is another example of attempts by Universal … to wring revenues from digital music in the face of widespread piracy.” It is also an opportunity to do so without having to rely and ultimately depend on Apple’s platform.

 

For Neuf Cegetel this offer can help secure and expand its customer base. As high-speed internet becomes the norm, exclusive content could give the competitive edge in the ISP market. Tellingly, Orange, the market leader, felt compelled to hastily announce a similar, yet unspecified, service scheduled for 2008.

 

Neuf undeniably got a head start in this race for content by securing an exclusive agreement with the largest music company in the world. Arguably, this innovative deal has been facilitated by the corporate ties of both businesses with Vivendi, a French media conglomerate. Vivendi owns 100% of Universal Music and owns 56% of SFR, a mobile phone operator, which in turn owns 40.5% of Neuf Cegetel. The deal thus gives Vivendi the opportunity to create synergies between its Universal and Neuf businesses.

 

Such closeness between Neuf and Universal might actually put the deal under the scrutiny of competition authorities in France and in Europe. Fernando Barrio, a law lecturer at the London Metropolitan University, argues in his blog that “this [deal] would make an interesting case for analysing some competition and antitrust issues… to determine whether Vivendi is using its shareholding power to make Universal Music and Neuf Cegetel enter into an exclusive agreement that has as its object or effect the distortion of competition…” MarketWatch points that “in July, the European Commission cleared SFR's purchase of the French fixed-line and broadband businesses of Swedish telecommunications firm Tele2 AB under the condition that Vivendi guaranteed all broadband operators access to audiovisual content in the same way as prior to the acquisition.” However, Barrio also argues that “it would not be fair [for European competition authorities] to target only [the Universal – Neuf] deal because the whole “legal” music and video download business needs a deep (or deeper than until now) revision by the European Commission.”

 

Mending fences between content providers and ISPs?

It will be interesting to see what happens at the end of the exclusive agreement. Will Neuf Music manage to attract other labels, thus making its music service more appealing to customers? Will Universal Music offer its catalogue to other ISPs, thus generating more sources of income?

 

Content producers and ISPs worldwide will watch these developments with interest as they might signal a new stage in what has so far been a tumultuous relationship. Traditionally, content producers have accused ISPs of turning a blind eye on piracy as the lure of free (and mostly illegal) content convinced customers to upgrade to broadband. The deal between Universal and Neuf might be the blueprint for a mutually beneficial relationship between content providers and ISPs. Of course, determining whose content would be on whose network will certainly create new battlefields.

 

SOURCES

Press Release

- Neuf Cegetel adds unlimited legal music downloads to its 100% Neuf Box service. Neuf Cegetel, August 20, 2007.

MEDIA

English

- (via hyperbot) Jethro Mullen, French broadband provider Neuf Cegetel to offer unlimited music downloads. MarketWatch, August 20, 2007.

French

- Neuf Music : le téléchargement illimité compris dans l'abonnement. Ratiatum.com, 17 août 2007.
- Karine Solovieff, La musique illimitée de Neuf soumise à restrictions. 01net., 20 août 2007.
- Estelle Dumout, Neuf Cegetel choisit Universal Music pour ses offres de téléchargement illimité. ZDNet France, 20 août 2007.
- La rédaction BFM, Pascal Nègre (Universal) : « Certains FAI continuent à favoriser la piraterie ». 01net. , 21 août 2007.

COMMENT
- Fernando Barrio, Free and ilimited music downloads with your ISP in France. Electromate, August 20, 2007.

 

 

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