Could ISPs’ Music Label Agreement Hurt iTunes, eMusic & Co?

Online music retailer eMusic‘s CEO David Pakman is fearful of July’s memorandum of understanding, in which ISPs agreed to reduce piracy on their nets and instead tempt users to legal alternatives.

His is a rather complexly-put argument so, in translation: Pakman is upset, he says, that, in the agreement, music labels incentivise ISPs by pledging to license their repertoires so ISPs can build their own new music services, something that Playlouder and 7Digital are pitching them to facilitate and that could actually take traffic from the likes if iTunes Store and, well, eMusic: “You’re penalising the good guys, not the bad guys.”

The FT story even hints at net neutrality issues. But all this is very hypothetical – Sky is nowhere near to launching the music service it announced last month, and it’s all but unthinkable the ISPs would block traffic to rival services like iTunes or Pakman’s.

There is, however, a real possibility that new retailers launched by the ISPs, which will be tied to subscription fees and situated more conveniently on the network, will naturally cannibalise sales from those rivals – but then, that sits with the labels’ aim of dethroning iTunes as the 800lb gorilla, with whom they have found it hard to renegotiate better terms. The upshot of the agreement is likely to not so much penalise existing good guys as lead to the existence of more good guys. Still, we shouldn’t worry too much – whilst eMusic is the leading music retailer after iTunes in the US, here in Europe it has a far lower profile.

Register now to hear the ISP agreement debated by leading industry players at our EconMusic conference, September 23, at London’s Natural History Museum. Act now to get our back-to-work rate…