Market Watch

We7 Partners with ISP Karoo to Launch Karoo Music


Display Driver IC Forecast


We7, the ad-funded online music service, has signed its first ISP deal with Hull-based Karoo to launch Karoo music, allowing users to stream music and buy songs and albums as MP3 downloads.

Karoo Music's users can either stream free music on demand or use We7's "Internet Radio Plus" service and also invites members to upgrade to two paid subscriptions. Priced at £4.99 and £9.99 a month respectively, the Premium subscription removes the ads and gains exclusive content, and Premium+ subscribers gains both online and offline mobile access to the service.

The We7 service has over 6.5 million songs available with over 3 million monthly users. It also recently launched an Irish site (We7.ie) with the two subscriptions priced at €4.99 and €9.99 a month.

Analysis
We7 has partnered a small regional ISP - Karoo is the consumer ISP brand of the Kcom Group, (KC) the incumbent telco for Hull - for its first ISP partnership. In Q3 2010 IHS Screen Digest ranked KC as the 7th largest ISP with a market share of 1.3 per cent, although unusually in the UK it does not compete against the national incumbent BT.

Karoo Music is effectively a co-promotional deal, with identical content, pricing, and mobile access options to the core We7 service. This sort of deal is likely to become increasingly important for We7 as it tries to establish mind-share in the face of better know services like Spotify and Last.fm. As things stand, the Peter Gabriel-backed company's current offers are limited in comparison to the better know services:

  • Last.fm's subscription offers ad-free personalised radio on both the PC and other devices including mobile phones, and Sonos music players for £3.00 per month, where We7's £4.99 tier is restricted to the PC. As IHS Screen Digest has observed many times, device access key to driving consumers to pay for digital content.
  •  Spotify offers on-demand access to a wider range of tracks ~10m, compared to We7's 6.5m, on a wider range of devices both mobile and in-home, for the same monthly price: £9.99.

Consequently we expect the We7 subscription will struggle to gain significant traction, unless the deal with KC is replicated with far larger players and more aggressive pricing. In the UK ISPs launching their own music service don't have a great track record. Virgin Media first announced such a service in June 2009, although to date the Virgin Media Music Store is only available on mobile devices with Virgin Media struggling to gain rights from the major labels for an online service. Similarly, BSkyB's Sky Songs closed less than two years after launch having attracted less than 10,000 subscribers. Beyond that subscription music services have also not partnered with ISPs in the UK as they have in Europe. Crucially these services were basically add ons to the companies' existing pay TV and broadband offers rather than bundled in with other product.

By contrast, ISPs in Europe have had more success with their music services both with partnerships such as Telia in Sweden's deal with Spotify and the popular Play service from TDC in Denmark which is bundled with broadband and mobile subscriptions, which is used by over 15 per cent of TDC customers - TDC announced in November 2010 that users have now consumed over 250m tracks since the service launched in 2008.

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